Insuring the Future of Mobility
As the COVID-19 pandemic rampaged across the world, many industries came out transformed in order to appeal to new business and customer needs.
The transportation industry is one of these, having seen many sudden changes in recent years. A lockdown-heavy 2020 led to a 13.2% decrease in total estimated driving in the U.S.—from 3.3 trillion vehicle-miles traveled in 2019 to 2.83 trillion in 2020—according to the Federal Highway Administration. But an increased focus on touchless technologies has also led to an increased investment in autonomous vehicles.
In order to decipher the ongoing and future trends in transportation, Leader’s Edge spoke with Tom Troy, president and CEO at CSAA Insurance Group.
As a AAA insurer, CSAA Insurance Group has always been focused on transportation and, more specifically, on the evolution of transportation. It’s in our DNA to facilitate innovation and to be proactive in the evolution process, instead of reacting to changes in the industry. We feel that we’re now on the verge of another transformation in the way that we think about mobility.
There are many new and transformative technologies that we think are going to drive this change. Primarily, we’re focused on the potential fleets of autonomous vehicles that use the existing advanced driver-assistant systems (DAS)—such as lane assist, automatic braking, and the various sensors in a car—to develop an automated driving system (ADS). Many firms, such as car manufacturers (or OEMs) and rideshare companies, have plans to develop and use autonomous vehicles in the near future. When they do, will these firms continue to sell vehicles to individuals, or should they manage a fleet of their own vehicles to take people where they want to go? If the second scenario, some of the mobility exposures that are now insured in a personalized context might be insured in a commercial context in the future.
We don’t know exactly how autonomous vehicles will impact mobility, but we think it’s wiser to develop products that work in such a world, instead of waiting to find out.
Nothing is different in the personal lines context; but, when it comes to commercial lines, we have to underwrite the rideshare operation at a macro level because we have less control over the drivers on the platform.
Now, some of the advantages of the rideshare space are that we get a more precise understanding of the exposure. In personal lines, the exposure is underwritten around the quality of the driver, the type of vehicle, and where it’s garaged. However, when working with rideshare companies, we are given the actual mileage for each driver on a monthly basis. This way, we can accurately assess our exposure based on the actual amount of time that a driver spends on the road, and then charge the appropriate rate.
With our rideshare partners willing to share this kind of data we can also assess what that exposure means from a rate standpoint and be more accurate with our pricing. So, we feel very positive about our ability to accurately price the risk.
There are certainly some aspects we’ve had to think differently about. For example, we had to change the way we bill the customer—Lyft, in this case. We bill them every month based on actual miles driven in the previous month, but we don’t know what that number is until the month is over. It’s a very unusual situation that we’ve had to adjust to.
A more interesting intersection of customer and company is in the claims space. Because Lyft drivers can file claims from the rideshare app, we’ve had to integrate our claims operations. For example, Lyft has a claims operation staff with claims professionals, and we rely on them to do the first notice of loss and to verify that the driver was driving for Lyft at the time of the reported accident.
It’s very unique for us to rely on a partner to do an initial assessment of the claim. This level of integration—and I’ve done a lot of commercial insurance over my career—is somewhat unheard of in the industry, but all carriers who are involved in the rideshare space need to implement it in order to work in this new environment.
I think the jury is still out on that. There is going to be a lot of experimentation from all sorts of players. For example, Tesla has moved into the insurance game, while General Motors recently announced OnStar Insurance—so a lot of car manufacturers are becoming more active in the insurance business. It will also depend on the interaction with platforms like Uber and Lyft. Because it’s still so early in the process of vehicle automation, we can’t say exactly what those products will look like in the future; but we can all agree that they would be best served by working with the insurance industry.
Something else to keep in mind: For a long time, we’re going to live in a world where there are digital vehicles—those that don’t have a driver and, maybe, without a steering wheel—and analog vehicles, driven by a human being. These types of vehicles will need to coexist on the roads, but there are still going to be accidents due to human error. So, despite the technological improvements, there will still be a strong need for the traditional coverages and claims that we know today.
We think about transportation as part of a broader term: mobility. That, of course, includes the mobility of people, but it also includes the mobility of things. One thing that was clear during the pandemic was that there was great need and interest in having things delivered at home, from Walmart to DoorDash. During the pandemic, people who had never before experienced online grocery delivery began to have groceries—and medicines—delivered to their homes; similarly, grocery stores and other shops realized that there was strong consumer demand for delivery services.
As we emerge from the pandemic and stores reopen, people will remain interested in at-home delivery services. So, under the Mobilitas brand, we’ve already launched a coverage built for last-mile delivery fleet owners. We think that last-mile delivery services are going to continue to grow and, ultimately, we think that some autonomous vehicles—and certainly electric vehicles—will be used in those cases.
We think this is all part of this greater transformation in the mobility of people, and goods and services.