Insurers selling cars – why not?!

Tesla, the California-based electric car manufacturer, has recently begun selling its own automobile insurance, allowing drivers in the Golden State to purchase a vehicle and insurance together as a package.

Insurance companies can choose to view this move, like most innovative ideas, either as a threat — “They’re removing potential customers from the market” – or an opportunity – “What can we learn from this bold move?”

Here at Cookhouse Labs (CHL), we see it as a wonderful opportunity for insurers to join the game by selling cars, along with insurance. Why not?

Insurance companies, as part of the financial services industry, have the capital to explore this option. Typically, insurers invest the money paid by their clients as premiums so it reaps the largest financial reward possible. However, with markets plummeting as fears of COVID-19 spread worldwide and interest rates at historic lows, it’s time to think innovatively. Why shouldn’t an insurance company create its own business as a way of maximizing its profit?

Think about it. An insurance company could purchase vehicles from the manufacturer and sell them complete with insurance coverage as a package. For the consumer, it simplifies the purchase – there’s — no need to hunt around for auto insurers and compare their rates. Coverage is simply part of the deal.

As the insurer, you can add other perks, too, such as offering a telematics tariff by monitoring driving behaviour in exchange for lower rates. For young drivers, who generally pay high premiums, you could create an enticing special package to reduce costs.

Perks selling cars

Not only is this an innovative approach to auto insurance, it is one that puts the customer first. Most drivers will be happy to forego the inconvenience of shopping around for insurance before they put their vehicle on the road. If you lock in the insurance with the product, you’ll attract new customers and make it easy to retain them – and likely for much longer than a typical one-year policy. After all, recruiting customers is the hard part; with proper attention and service, retention shouldn’t be difficult.

This is an idea new to the insurance industry, but not a radical one. The cellular communications industry jumped on this idea years ago, once they realized that consumers found it much easier to buy their mobile devices at the same place where they obtained their data/calling plans. It’s almost a given today.

At Cookhouse Labs, we view this approach as an opportunity for insurers to retain their place in the value chain while becoming more attractive to customers.

During our Season of Innovation at CHL, we’re delighted to share with you our thoughts about innovation in the insurance industry. Solutions like these are the product of collaboration among our members, and you, too, can share in the intellectual riches. Get in touch with us at cookhouselabs.com to learn more

Insurers Aren’t Prepared for the Future of Transportation – Learnings & Wrap Up

“Insurers are not prepared to seamlessly integrate with the future of transportation.”

This was one astounding conclusion that our project team came to at the end of our 4-week sprint. Through 16 days, 11 participants, 5 companies, and 4 partnerships, we inferred that the auto insurance industry needs to move quickly to adapt to the shifting change in risk.

And although the project team had originally determined 2050 as a placeholder date for the mass adoption of fully autonomous vehicles, through the course of the sprint, two problems became apparent:

  • The anticipated date of 2050 is in fact, too far out
  • Insurers are not ready for this disruption

Our Proposed Solution

To tackle both of these problems, the team created a portfolio solution with the following three elements:

  • Discovery and Awareness Portal
  • Adaptive Risk Model
  • Transportation Short Leasing/UBI Application

The ultimate goal of these three elements is to provide a comprehensive solution for auto insurers while providing a user-friendly experience for the average driver. 

1. Discovery & Awareness Portal

This portal will address the safety concerns of the customer by providing a manufacturer agnostic resource where customers can learn and experience what it’s like to be in an autonomous vehicle. 

2. Adaptive Risk Model

This risk model will take into account the transition period (or the “messy middle” environment) where customers will be driving vehicles that have some autonomous features, but are not yet fully autonomous. 

3. Transportation Short Leasing/UBI Application

 This application is aimed towards consumers who do not own a vehicle, but still require transportation. This is intended to be more financially appealing than taxis and this type of broker for autonomous transportation is projected to become more relevant over time. 

Next steps for the Autonomous Vehicle Project Team

In addition to the above deliverables, the team produced a business case that outlined how the sustainable business model, which was presented at the team’s final presentation. The final valuation of all of these products was a whopping $150 MM.

Immediately following the presentation was a next steps session where the audience and project team discussed how to bring the proposed MVPs to market. The following priorities were identified to be further defined in 2018:

  • Getting buy-in from regulators for these new insurance models
  • Creating partnerships with manufacturers
  • Communicating the value of autonomous vehicles to consumers
  • Creating insurance for pay-per-ride insurance
  • Creating and refining the steps to aggregate information 
  • Designing an operational plan (how to make the $$)
  • Bringing e-call (automated emergency calling) to Canada
  • Collaborating with private and public sectors to improve safety in the transition period
  • Creating data privacy guidelines
  • Standardizing AV guidelines
  • Creating a risk model 

Want to get in on the action?

Although our initial project sprint has ended for the Autonomous Vehicle team, it’s not too late to become involved with the next steps of this project! Make sure you’re a part of our next phase by becoming a member of Cookhouse Lab in 2018! Our introductory membership prices are ending in Q1 of 2018, so the time is now.  

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