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.
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