The question is, will the shared economy kill the car insurance industry? Despite the emergence of new technologies, the industry still lacks a clear understanding of the commercial risks associated with such platforms. Moreover, many incumbents are struggling to adapt to the new environment and will end up floundering in the future. Here are some possible ways in which the shared economy could kill the car insurance industry. Read on to discover what these new innovations may entail for the industry.
First, IoT has the potential to eliminate two of the industry’s major competitive advantages: underwriting and customer access. Insurers have long relied on these two to keep their customers. These two factors are no longer as important as they once were, so they need to transform themselves in ways that provide value to consumers. Blockchain is a promising technology to address these issues. For insurers, the shared economy could be an opportunity to reinvent their businesses.
Second, ride sharing is changing the risk profile of drivers. Once a rider activates the platform’s app, they shift from being a personal driver to a service provider. This shift in vehicle usage can lead to an increase in insurance premiums of up to 25 percent. For example, an Uber driver killed a six-year-old in San Francisco last year and didn’t have any insurance coverage at the time. Thankfully, Uber expanded its insurance coverage to include all drivers available for fares.