In our previous post, we discussed how safety technology and vehicle manufacturing/materials are changing insurers' claims experience. Here, we discuss how the motor industry is being disrupted by customer behaviours such as consumers' driving and ownership habits, how big the impact is, and share a view of how this may impact the motor insurance market.
Firstly, the numbers shaping transport
Interestingly, the number of miles driven overall for Great Britain is increasing while car ownership in London has gone downhill (see chart below) and ownership in more rural areas has remained largely unchanged.
Focusing on London, from the chart above, we can see a 1% decline each year in the number of miles driven per vehicle. Similarly, although the population has increased by 1.25 million in the last 10 years, car registration has only increased by 86,000 in London, which represents a nearly 4% decline in the percentage of registered vehicles to the London population.
Trying to unpack the root cause or the alternative form of transportation is difficult, but if we look at some related data, we can assume the change can be associated with day-to-day travel vs. recreational travel. Unemployment in the UK is at its lowest since the early 1970's, and people are therefore either not commuting to work as much due to agile ways of working, or choosing different methods to get to work.
What about public transportation? The graph below shows that although the London population has been increasing, the number of journeys taken on the city's public transport service is falling.
Although there is no data from ride-sharing organisations such as Uber, looking at the change in the number of licensed taxis and private hire vehicles over time gives us an understanding of the significance of why public transport trips are declining.
So what does this mean for insurers?
Firstly, with ownership models and consumer behaviours varying significantly between urban and rural centres, insurers should be reconfirming their target audiences and ensuring rural communities and their needs are front-and-centre.
Secondly, the changes in the mode of transport used raises questions on the future of car insurance from a perspective other than that of autonomous vehicles. Given the increase in use of private hire vehicles and ride sharing and decrease in car ownership, could the barriers between personal and small-to-medium commercial policies become redundant in the future environment? Modular and flexible products appear to be the most adaptable way forward for insurers amongst the disruption, which by no means has reached its peak.
What are your thoughts? Do you think this poses an opportunity or threat to insurers? Is focusing on insuring the gig-economy the way to go? We'd love to hear from you.
You can read more about the sharing economy's impacts on emerging insurance models in our joint report with Lloyd's of London, which surveyed 8,000 consumers globally . Our US colleagues also have an interesting report on the sharing economy's cross-industry impacts.
Much has been discussed about how the fast-growing web of consumer-to-consumer transactions that is the largest component of the sharing economy presents new opportunities for the insurance industry. The consensus view among insurers is that this potential market is large, growing quickly, under-developed yet tricky to insure with traditional products as it blurs the boundaries between personal and commercial lines.