Two anachronisms are evident in the language used to describe cars and car usage. People don’t ‘buy’ cars in the traditional sense. The Finance and Leasing Association reports that 93% of all new car transactions in the UK last year were financed.
The word “dealership” implies that you are there to make a deal, i.e., negotiate the best price. Car companies are increasingly moving to direct sales. Volkswagen initially developed this model for electric cars. Now, the car companies are selling directly to customers via their “agents”, which we used as dealers. It gives customers a wider selection of options, which does not require haggling skills.
Ford is well-known for making cars more affordable through its repeatable manufacturing process. General Motors’ innovation, which allowed cars to be bought on credit, made car access more accessible to the masses. There is a radical shift in how mobility services are provided, paid for, and bundled. Access to personal mobility is becoming something you can do on your own.
This shift is happening because many automotive brands have realized that customers don’t measure their automotive needs in years. They want the same flexibility as digital subscriptions like Netflix and HelloFresh. This flexibility extends beyond the car but also to all aspects of automotive, including services and insurance that are part of ‘ownership’.
To keep their competitive edge, incumbent brands need to respond quickly to newcomers like Tesla. It is important to add to the rich legacy of brands such as Land Rover, Ford, Ford, and Renault by creating a digital-led experience that removes many of the pitfalls of traditional ownership.
As it stands today, car insurance is one such pinch point. It is usually separate from the process of buying a car. Customers usually buy it grudgingly after the transaction and before delivery. They will need to estimate their year ahead. This could include the amount of mileage, type of driving (business or personal), and even their job status.
This will be more easily embedded in the transaction process in a flexible future. It will no longer be a question on the order screen asking if you would like fries with it. It won’t ask you to predict your motoring future or make general assumptions about your driving. It will learn as you drive.
Connectivity is facilitating this shift. Car makers and service providers can now interrogate cars via their sensors after leaving the showroom. This allows them to extract and interpret data for the customer’s benefit. This new flexibility is possible thanks to connectivity and digital interaction. Customers can change their cars faster than with traditional financing permits thanks to the subscription model offered by Jaguar Land Rover, Volvo, and Porsche. This allows car companies and other business entities to remote monitoring the fleet.
The company that owns the vehicle will have to assign it to the next customer if the first Range Rover driver decides to upgrade to a more recent model after six months.
Insurance is no different. Subscribers will be disappointed to learn that their insurer charges a fee for changing vehicles. Subscriptions are not compatible with the insurer’s business model. As they do everything else, insured drivers should be able update their policy easily via an app or automatically.
What if the next vehicle you choose isn’t a car?
Swapfiets, a micro-mobility subscription service in the Netherlands, offers bikes and electric bikes. Electric scooters and cargo bikes can also be used as car replacements for certain journeys. This trend will be followed by insurance, which should allow people to swap seamlessly.
Insurers face another challenge with autonomous driving. It will be difficult to separate the autonomous function from the vehicle’s process if they are not embedded in the process, whether the customer is driving for a few hours or six months.
This is because autonomy will be a decision made by the driver at least initially. Volkswagen is considering offering autonomous functions to customers’ cars as a pay per use service. For going hands-free on long vacation drives, it is expected to charge around EUR7 (US$8.30). Insurance must be able to adjust instantly and again seamlessly if that option is activated. It might become the norm that autonomous driving is the norm in the future. Insurance must adapt to your plans to control an exciting stretch of road.
This scenario gives embedded insurance brands an immediate advantage. Because they will know all the details, the one that calculates driver’s risk status and determines how it affects their decision-making is going to be the most affordable. The car’s sensors can quickly determine the cause of an accident and provide a reliable estimate of its cost. They can even automate the ordering and delivery of any necessary parts.
