Picture this – you’re heading out after work to meet a friend for a drink. You get out your phone and enter your destination. You select the most convenient option. Your phone tells you to take a three minute walk to a pick up point, where a shuttle pod draws up beside you within seconds. You jump in and choose a seat; the centralised system ensures that each pod is as full as possible while making sure that no one has to stand. Removing the need for a driver has created even more space too.
The pod knows exactly where you need to go and stops automatically outside the pub. 10 minutes later your friend jumps out of an Uber (which likewise has no need for a human at the helm). He’s late – nothing to do with traffic, which is rarely an issue these days – he just got caught up leaving work. As you greet each other a BMW purrs past with a well-to-do looking driver at the wheel. You know she must be wealthy because she owns a nice car and – more importantly – she can afford the insurance to drive it herself.
According to self-proclaimed “car guy” Lukas Neckermann, who spoke at our latest Wrisk investor event, this reality isn’t as far-fetched – or even as far away – as you might think.
Default car is dead
“Zero emissions. Zero accidents. Zero ownership” – that is Lukas’s mantra as he describes a “mobility revolution” that’s already well underway.
Lukas differentiates between two types of driving – utility mobility (getting from A to B) and driving for pleasure. The former is “a nightmare”, as increasing urbanisation results in gridlock. In London, Lukas notes, we lose two working weeks a year to congestion. Which is why car ownership is declining as growing numbers of urban dwellers seek alternative solutions (CityMapper, Uber and ZipCar to name a few).
“Default car is dead,” says Lukas. “The idea that you automatically reach into your pocket, grab your car keys and say ‘hey, where have I gotta go?’ In cities, at least, that’s over.” Why, he argues, should we waste powerful brain energy on sitting in traffic jams?
The UK is already leading the charge for innovation in this area. With British universities and industry devoting significant resources towards the development of autonomous vehicles, London now boasts one of the world’s first pod-based autonomous shuttle services, currently being trialled in Greenwich.
Partnerships and possibilities
Amidst all this change Lukas identifies the potential for new business models such as mobility as a service, where – like a mobile phone contract – you pay a flat rate for all travel around your city. In the future, car manufacturers may find themselves setting KPIs based not on how many cars they sell, but how many miles people travel, he asserts.
And while Lukas believes there will always be a place for driving for pleasure, this will not be enough to sustain the industry as we know it, so incumbents must evolve. In fact – as Lukas notes – many OEMs already recognise this and have subsequently redesignated themselves “mobility companies”.
Partnerships with fledgling businesses – like those fostered by BMW through their Innovation Lab – are also crucial, Lukas asserts; “There’s a reason OEMs work together with startups – it’s because startups bring a culture, bring energy, drive, ideas and creativity… OEMs need to and must partner with companies like Wrisk because there are some things they can’t do internally. That’s not a critique – that’s just a fact.”
What’s all of this got to do with insurance?
So what impact is the mobility revolution likely to have on the insurance industry? Well, for starters Lukas predicts fewer insured vehicles. This doesn’t just mean fewer vehicle insurance policies – it also means fewer entry points for cross-selling other types of insurance (such as contents and buildings) to existing customers. And it means a greater separation between the primary insurer and the end customer; “if you don’t have a car, you don’t know who’s insuring the Uber you’re sitting in,” Lukas observes.
Greater levels of autonomy also bring additional layers of complexity. While autonomous features such as adaptive cruise control already exist in most new vehicles, drivers still have to keep their hands on the wheel. The legal framework to support fully autonomous vehicles on the road doesn’t yet exist, “so,” Lukas asks, “should we foster innovation, or stick to the letter of the existing law?”
As we move to “hands off”, “eyes off”, “brain off” and eventually “human off” – as Lukas puts it – things become increasingly tricky. With no human driver, should we insure the owner of the vehicle (or fleet of vehicles)? Or the manufacturer? If we insure the manufacturer, does that mean we’re holding the company that developed or assembled the hardware responsible in the event of an accident? Or the business that developed the software? What if there’s a cyber attack and a vehicle’s software system is hacked – where do we apportion responsibility then?
A new kind of insurance
Lukas predicts an inflection point at which robots prove far better drivers than humans, so insurers begin to penalise those who want to drive a car for themselves, until many people find themselves priced out of driving their own vehicle at all. Perhaps the answer, he ventures, will be to develop a new kind of insurance altogether where we insure a trip, or indeed the individual making that trip, rather than a “driver”.
Ultimately, he concludes, there will be countless new products that come to market as a result of the smart mobility revolution, which “will keep insurance lawyers very busy for a long time”. One thing’s for sure – it’s going to be an interesting ride.