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August 22, 2016

The Shift to Frictionless Insurance

Summary:

As we move away from owning things, and toward renting or sharing, insurance must form part of the experience bundle.

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Loic Le Meur, who many will know from Le Web Conference and his new startup, Leade.rs,, had a great interview with Alex Dayon, the president and chief product officer at salesforce.com, about how owning a car is almost obsolete. It got me thinking about our shift to utility-based living and what it means for insurance.

In a land where an Englishman’s home is his castle, the car is often seen as the next most expensive asset a person will purchase, so the move away from ownership is great.  And the car is just the start. Now, start to add bundles such as insurance, maintenance and fuel. These sorts of schemes give the best of both worlds because you get to choose what model you try. Do you want a weekend utility, something bigger for holidays away or something smaller for whizzing around town? These new levels of flexibility will absolutely become the norm.

See also: Connected Vehicles Can Improve Claims  

Many of us are used to utility today — prestige car hire, AirBnB, vacation rentals, handbagspets and so much more! The sharing economy is continuously expanding. The key changes here for me are the added convenience because of technology (think about calling a taxi 10 years ago vs. calling one today with an app) and then business models that have changed to deliver micro experiences.

Cuvva is doing the same in insurance with policies available by the hour. While that’s a brilliant idea, I’d almost argue we can get too granular sometimes. We need to be clear on what the pivot point is — it’s just different for different people in different circumstances. If you have ever been to IKEA or something like it, you often find vans in the parking lot that you can rent for an hour because you have bought more than your car can hold.

See also: Beat Brain Drain: Boost Your Talent Pool  

These sorts of schemes change the entire competitive landscape. The winners here will be those companies that provide frictionless experiences that are both relevant and convenient.

Of course, frictionless won’t be for everyone. Your choice will depend greatly on where you live (inner city, suburbs or rural areas). Some look at moving away from ownership as another bastion of losing control. That said, think about how many more hours a day you’d get back to do enjoyable or more meaningful stuff. Time is the most precious entity — period. This is the new generation; experiences far outweigh things, which, coincidentally, makes us all happier, too!

As the old saying from John Paul Getty goes, “If it appreciates, own it. If it depreciates, rent it!”

As we move further and further in this newly accepted world, insurance will form part of the experience bundle, whether you knew it was there or not. The important thing is being reassured you have it and that you have it at the right level.

As I picked up a rental car in Dublin Airport, I got a hard sell about reducing the €1,500 standard excess with better insurance for just €20 per day. While I understand why companies do this, it kind of makes me sad and gives insurance a bad name. How many take out this extra cover? Now is the time for carriers to focus on the partnership opportunities that come with renting and to come up with better approaches.

No matter what, I’m looking forward to trying lots of different cars without the hassle of owning any through new apps and business models that allow me to try things I would never be able to own.

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About the Author

Nigel Walsh joined Deloitte in 2016 as Partner in the Insurance Consulting team. His key focus areas include technology transformation, digital and insurtech. Prior to Deloitte, Walsh served as Vice President and Head of UK Insurance for seven years. Walsh has been actively engaged with clients across multiple lines of business as they embrace transformation.

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