October 27, 2023
In September of last year, we shared insights on how shifts in mobility could impact automotive insurance over the coming ten years. Since then, notable advancements have underscored the ongoing development within the wider mobility ecosystem, which now includes autonomous vehicles (AVs) and electric vehicles (EVs):
- In August, the California Public Utilities Commission granted permission for Cruise, backed by General Motors, and Waymo, owned by Alphabet, to operate paid robo-taxi services in San Francisco around the clock, lifting prior restrictions. However, city officials have raised concerns about safety risks and the impact on emergency services.
- In July, major automakers including BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis announced a joint investment of approximately $1 billion to establish around 30,000 EV charging stations across the U.S., with the first stations projected to launch as early as summer 2024.
These developments signal an increasing regulatory support for AV and EV technologies, alongside a collaborative effort among automakers to tackle the crucial challenge of insufficient charging infrastructure as more EVs are expected on the roads in the coming years.
Further indications of rapid shifts in mobility include:
- Nearly half of U.S. states now permit autonomous trucks to operate, with major retailers incorporating these vehicles into their logistics operations.
- Automakers are transitioning production away from traditional internal combustion vehicles to meet rising consumer demand for EVs, bolstered by governmental incentives like tax credits. A McKinsey survey revealed that the proportion of potential buyers considering battery electric or plug-in hybrid vehicles rose from 33% to 42% between December 2021 and December 2022. In 2022, EVs made up 10.0% of global vehicle sales, driven by significant growth in China and Europe, although U.S. sales stood at 5.8%, below the global average.
Yet, some aspects remain static:
- Consumers still rarely purchase embedded auto insurance at the point of car sale. Although some manufacturers have incorporated insurance options into mobile applications, these typically direct users to external insurance providers rather than offering an integrated customer experience that could generate recurring revenue for manufacturers.
- There is still no clear understanding of how insurance liabilities will evolve with the increasing deployment of advanced driver assistance systems (level 2) and conditional automation technologies (level 3). Some automakers offer these technologies as standard, while others provide them as options.
Reflecting on our 2022 overview of the mobility landscape, it’s evident that the auto insurance sector is on the brink of significant transformation, driven by advancements in autonomous mobility and a growing transition to “over the air” software updates, some of which install automatically. These shifts indicate a need for new insurance products and present opportunities for disruption.
As the industry adapts to these changes, participants—including innovative new entrants, insurtech companies, and automakers eager to explore new opportunities—will have chances to develop state-of-the-art offerings, establish strategic partnerships, and enhance competition with established insurance carriers.
Insurance for auto vehicles, which has typically focused on individual driver risks, may need to pivot to encompass technology-related risks associated with autonomous vehicle fleets and possibly privately owned AVs, meaning the locus of insurance coverage will likely shift from drivers to the manufacturers and software firms responsible for the evolving autonomous technologies.
