The future of mobility and its impact on the automobile insurance industry

• DOI: http://doi.org/10.1111/rmir.12140
• Published date: 01 March 2020
• Date: 01 March 2020
• Author: Nadine Gatzert,Katrin Osterrieder

Risk Manag Insur Rev. 2020;23:31–51. wileyonlinelibrary.com/journal/rmir

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Received: 13 March 2019

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Accepted: 17 February 2010

DOI: 10.1111/rmir.12140

FEATURE ARTICLE

The future of mobility and its impact on the

automobile insurance industry

Nadine Gatzert |Katrin Osterrieder

School of Business, Economics and Society,

Friedrich‐Alexander University

Erlangen‐Nürnberg (FAU),

Nürnberg, Germany

Correspondence

Nadine Gatzert and Katrin Osterrieder,

School of Business, Economics and Society,

Friedrich‐Alexander University

Erlangen‐Nürnberg (FAU),

Lange Gasse 20, D‐90403

Nürnberg, Germany.

Email: nadine.gatzert@fau.de (N. G.) and

katrin.osterrieder@fau.de (K. O.)

Abstract

Among the trends impacting most industries are new

mobility concepts, digitalization, urbanization, rising

environmental awareness, and demographic change.

The automobile insurance industry, in particular, is

strongly affected by new mobility concepts, including

autonomous, shared, and electric vehicles, which are

expected to increasingly impact the risk exposure

and insurance demand in the future. Identifying and

assessing the resulting risk and opportunity land-

scape from these trends thus becomes a major stra-

tegic challenge for insurers. The aim of this paper is

to analyze the trends that impact the field of mobility

and thus automobile insurers. Based on this, we

derive a set of strategic response measures for

insurers to enable them to be prepared for the future

of mobility.

1|INTRODUCTION

Digitalization, urbanization, rising environmental awareness, demographic change, and

new mobility concepts are among the major trends transforming most industries (CRO

Forum, 2018). In this context, automobile insurers especially face major strategic and emerging

risks arising from new mobility concepts, including autonomous, shared, and electric vehicles,

which are connected to each other and their environment. Monitoring the resulting risks,

which can be either new or modified, is becoming increasingly important (e.g., cyber risks as

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This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and

reproduction in any medium, provided the original work is properly cited.

© 2020 The Authors. Risk Management and Insurance Review published by Wiley Periodicals, Inc. on behalf of American Risk and

Insurance Association

related to new mobility concepts), but the innovative environment of future mobility concepts

can also create new business opportunities (Rao, 2016; Sheehan, Murphy, Ryan, Mullins, &

Hai, 2017). The aim of this paper is to provide a comprehensive overview of major future

mobility trends and their impact on the automobile insurance industry, based on an extensive

review of the academic and practitioner‐oriented literature and including from outside the

insurance industry, which has not been done previously, with the intent to provide insights into

future risks and opportunities for automobile insurers.

While there are several academic articles that review mobility desires, patterns, and auto-

mobile trends, they generally do not comprehensively address the future of mobility and its

specific consequences for the insurance industry at the same time. The academic research on the

motor insurance business often deals with the highly competitive market conditions, market

growth, and market profitability (e.g., Eling & Luhnen, 2008,2010; Maichel‐Guggemoos &

Wagner, 2018). Attention has also been given to the consequences of individual major mobility

“subtrends”or product designs with a focus on usage‐based insurance (e.g., Guillen & Perez‐

Marin, 2018; Kraft & Hering, 2017; Sheehan et al., 2017; Weidner, Vanella, & Zuchandke, 2015;

Wu, 2019). For instance, Sheehan et al. (2017) apply a Bayesian network to examine the potential

consequences of autonomous driving for the motor insurance business and the changing risk

landscape based on the five levels of automation defined by the Society of Automotive Engineers

(SAE). Weidner et al. (2015) use a forecast model to study the (future) motor insurance demand

in Germany based on the expected vehicle stock and conclude by identifying the direct and

indirect effects on future motor insurance market potentials. Furthermore, Matley, Gandhi, Yoo,

Jarmuz, and Peterson (2016) provide a categorization of consequences for the automobile in-

surance industry regarding customers, products and distribution, but without explicitly distin-

guishing between the responsible trends.

In this paper, we aim to contribute to the previous literature by comprehensively analyzing

future developments in the field of mobility with special focus on the insurance‐relevant

new mobility concepts such as autonomous vehicles, electric vehicles, and shared mobility.

We derive a “mobility ecosystem”of trends along with implications and strategic response

measures from the perspective of automobile insurers. One main result is that a future in-

surance product design should take into account a potentially transformed risk landscape as

well as a shift from private to commercial customers, along with the increasing importance

of the point of sale (of a vehicle) within automobile insurance distribution models.

The remainder of this paper is structured as follows. Section 2identifies automobile

insurance‐relevant trends. Section 3analyzes potential consequences and strategic measures

from the automobile insurance industry's perspective and Section 4summarizes the results.

2|MAJOR TRENDS AND THE FUTURE OF MOBILITY

In what follows, we review the academic and practitioner‐oriented literature based on a Web

of Science search using the keywords “future”AND “mobility”, as well as Google Scholar and

Google searches.

1

Overall, this led to 76 articles that serve as the basis for the identification of

1

We thus follow, for example, Milakis, Van Armen, and Van Wee (2017). Google and Google Scholar results are

incorporated in order to analyze all unreleased academic or practitioner‐oriented reports. As there has been little

academic research on the overall future of the automobile insurance industry, we also analyze recent industry reports

and studies.

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GATZERT AND OSTERRIEDER