This article is by Dan Bratshpis, CEO and Co-Founder INSHUR, and it looks at the evolving on-demand car insurance sector;
The future is on-demand. Incumbent insurers need to adapt their models to become more flexible and embed insurance products into the platforms used by drivers. If they don’t, more nimble insurance players with complementary technologies will enter the market and satiate the seismic demand.
The global on-demand economy has created the most profound economic shift in four decades and, according to PwC research, it is expected to surpass $335 billion USD by 2025. This economy requires fast, efficient, comprehensive commercial auto insurance that emulates their ‘tap-and-drive’ user experience with on-demand economy apps like Uber, Lyft, Amazon Flex and DoorDash.
Our research found that a significant majority of on-demand drivers in the US (73%) say they are driving longer hours than a year before – with 44% saying they are now driving twice the number of hours than last year. Yet, there’s still slow progression towards building suitable commercial auto insurance products and services for the drivers fuelling this economy.
On-demand driver insurance policies require specialist handling and access to multiple data sets in order to support and protect drivers and their passengers or goods. Traditional commercial auto policies aren’t designed for the flexible coverage required by on-demand drivers who choose when and where to drive.
Embedded Insurance, Technology and the On-Demand Driver
Technology and Insurance are two expertises that need to listen to each other. In the case of embedded commercial auto insurance deployed into technology platforms like Uber and Amazon, it’s important to understand what this entails.
On-demand platforms provide insurance companies with a novel opportunity. The amount of data they produce creates an opportunity for insurance companies to assess risk in different ways and create new pricing models for potentially better results.
To take advantage of this data, technology such as AI and ML (machine learning) can help to crunch through the data derived from drivers’ apps as well as carefully manage personal identifiable information (PII) and financial information required by insurers to underwrite fair and comprehensive coverage. Data from the platform (such as delivery or trip data), from claims and other proprietary datasets relevant to the on-demand driver such as speed, incidents, driving ability and safety, also ensures that coverage is comprehensive and adaptable to the on-demand drivers’ choices between transportation or courier.
That being said, AI and ML should be used primarily as an augmented assistant rather than a replacement for insurance expertise, such as the processing of ID verification and optimisation of claims workflows without having to refill the forms. AI can also help to track anomalies, trends in fraud and identify pricing factors not spotted before which can then be analyzed by the actuarial team, allowing them to apply their experience to adjust prices and underwriting criteria, as well as remove any biases.
By processing hundreds of proprietary data points it empowers insurance experts to underwrite policies and instills platform partners (such as Uber and Amazon) and capacity partners with the confidence that insurance providers can consistently deliver quality, personalized insurance products and services at good pricing and at the same time profitable loss ratios.
Embedded insurance also makes a huge difference to the financial wellbeing of on-demand drivers as insurers can develop fair pricing products for each individual based on a wealth of information.
The commercial auto insurance industry is realizing the benefits of embedded insurance that many consumers have been enjoying for years through popular items such as concert tickets, travel, health and car hire. Consumers are digitally smart and demand personalized products, especially as younger generations enter the job market.
In fact, our research found that Millennial and older Gen Z drivers are leading the pack with on-demand driving in the US, with the largest age group being 35-44 year olds (37% of total), followed by 25-34 year olds (30%). When it comes to Gen Z drivers, women dominate the market at 65%, though the numbers swing back in favor of men in older age groups, bar 45-54 year olds where 52% are women. Fascinatingly, young women are entering the on-demand economy at an unprecedented rate and changing the face of driving – especially in delivery – with 65% of drivers aged 18-24 being female.
Given these facts, it’s clear that on-demand drivers are pushing for innovation. Embedded insurance offers drivers the same powers experienced with embedded finance in retail, including making claims via the apps they use such as Uber and Amazon.
However, for embedded insurance to work effectively for on-demand drivers, there needs to be mutual respect between technology and insurance. But technology should be used as an enabler as we will always need smart and talented people to solve the problems for on-demand drivers.
And for insurance providers to flourish, they need to start offering drivers a seamless, frictionless and personalized purchasing experience which quickly matches them to the appropriate coverage for the type of driving they do (transportation or courier, for example) to match their lifestyles, factoring in a myriad of data points including duration and location.
Embedded insurance produces a symbiotic relationship between the on-demand driver, the insurer and the platform: each benefits from the involvement of the others, ultimately developing deeply personalized underwriting coupled with accurate pricing models that lead to an amazing customer experience that fosters loyalty.
The insurers we are working with at INSHUR are implementing our embedded solutions and developing exciting products. We work closely with our platform partners to meet on-demand drivers’ needs, particularly since 2020 when buying behaviors shifted significantly. Customers using on-demand apps now expect more seamless integrations of services from the platforms they used. Without on-demand commercial auto insurance, on-demand drivers cannot fulfill those customers’ needs – and that doesn’t bear the thought!
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