Tag Archives: turo

Gradually and Then Suddenly…

Excerpted from MSA’s Q1-2018 Outlook Report (June 2018)

The insurance industry has been compared to the proverbial frog in the pot of ever hotter water. While things appear on the surface comparable to what they were like 10 years ago, perhaps with some nuanced variations, there appears to be little in the way of differences. Yes, mergers continue happening at the carrier level, and direct insurers are slowly gaining market share, but the band plays on. Industry associations continue holding conventions, insurers, reinsurers and brokers continue their traditions and year-end pilgrimages to London, Monte Carlo, Baden-Baden, NICC and the Aon Rendezvous, and the various other stations still welcome a familiar crowd. But signs that fundamental changes are afoot are becoming ever harder to ignore.

In Ernest Hemingway’s 1926 novel, “The Sun Also Rises,” there’s a snippet of dialogue that seems apropos:

How did you go bankrupt?” Bill asked.

“Two ways,” Mike said. “Gradually and then suddenly.”

The primary driver of the change is technology. The less noticeable catalyst, but no less important, is changes in regulatory mindsets. Let’s tackle both.

The two most influential market conduct regulators in Canada are readying themselves for technological disruption of the industries they oversee.

Quebec’s regulator, the AMF, has publicly expressed that it is “open for business” in terms of insurtech/ fintech under CEO Louis Morisset and Superintendent of Solvency Patrick Déry.

FSCO has recently moved to be more flexible within the tight bounds of its mandate, and its successor, FSRA, will be a modern independent agency purposely built for adaptability; it emerges from its cocoon under the guidance of a professional board and the stewardship of its CEO, Mark White, in April 2019.

FSRA and the AMF are positioning themselves to allow experimentation via regulatory sandboxes, whereby players can test initiatives in the field. This sandbox methodology is modeled after the Ontario Security Commission’s LaunchPad initiative.

See also: Global Trend Map No. 19: N. America (Part 1)  

You may not have noticed it, but the regulatory ground in two of Canada’s largest provinces has shifted, and the stage is being set for ever-faster innovation in the Canadian insurtech space. In fact, in conversations with Guy Fraker, chief innovation officer at California-based Insurance Thought Leadership and emcee for the InsurTech North Conference in Gatineau in October, he advises that Canada is being looked at as a regulatory innovation hub by the global insurtech community.

Even under the old FSCO regime, Canada’s largest insurer, Intact, pulled off what might be a master stroke in July 2016 when it issued a fleet policy to Uber, providing coverage to tens of thousands of Uber drivers when engaged in Uber activities. So, in one fell swoop, a single insurer swept up tens of thousands of drivers. Intact pulled another coup by partnering with Turo in Canada. Turo is a peer-to-peer car-sharing marketplace that is busy disrupting the sleepy and sloppy car rental industry. This again gives Intact access to thousands of drivers with the stroke of a pen. Further, Intact may be able to leverage the access it has to those drivers to provide full auto coverage and even residential coverages. When these risks are gone, they’re lost to the rest of the market. Striking deals with the likes of Uber and Turo changes the game. In the U.S., Turo partners with Liberty Mutual, and with Allianz in Germany. Uber partners with Allstate, Farmers, James River and Progressive in the U.S. Aviva has pulled off a similar deal in Canada with Uber’s nemesis, Lyft.

Further afield, B3i, the industry blockchain initiative has been established with the support of 15 large insurers/reinsurers. It is just starting up, but its mission is to remove friction from insurer/reinsurer transactions and risk transfer. When friction goes, so will costs. It is starting out slowly, but things may change suddenly – reshaping whole segments of the market. In addition to the original 15, the initiative has been joined by 23 industry testers.

In the U.S., The Institutes (the educational body behind the CPCU designation) launched a similar blockchain consortium called RiskBlock, which currently counts 18 members:

  • American Agricultural Insurance
  • American Family Insurance
  • Chubb
  • Erie Insurance
  • Farmers Insurance
  • The Hanover Insurance Group
  • Horace Mann Educators
  • Liberty Mutual Insurance
  • Marsh
  • Munich Reinsurance America
  • Nationwide Insurance
  • Ohio Mutual Insurance Group
  • Penn National Insurance
  • RCM&D
  • RenaissanceRe
  • State Automobile Mutual Insurance
  • United Educators
  • USAA

There is talk of establishing a Canadian insurance blockchain consortium, as well. You can hear from leaders of B3i, RiskBlock and parties involved in the Canadian initiative at the NICC in October.

Even further afield, if one was to look for an industry that makes the insurance sector look futuristic, one need not look further than the global supply chain shipping industry, with antiquated bills of lading, layers of intermediation and massive administrative overheads. Well, that industry is getting a serious wakeup call thanks to determination and drive of the world’s largest shipping company, Maersk. The company is taking its industry by the scruff of the neck and pulling it into the future whether it likes it or not – long-standing tradition, relationships and methods notwithstanding.

First, in March 2017, Maersk teamed up with IBM to utilize blockchain technology for cross-border supply chain management. Using blockchain to work with a network of shippers, freight forwarders, ocean carriers, ports and customs authorities, the intent is to digitize (read automate/disintermediate) global trade.

More recently (May 28, 2018) and closer to home, Maersk announced that it has deployed the first blockchain platform for marine insurance called insurwave in a joint venture between Guardtime, a software security provider, and EY. The platform is being used by Willis Towers Watson, MS Amlin and XL Catlin (got your attention?). Microsoft Azure is providing the blockchain technology using ACORD standards. Inefficiencies, beware! Microsoft and Guardtime intend to extend insurwave to the global logistics, marine cargo, energy and aviation sectors.

See also: How Insurance and Blockchain Fit  

Insurers that find themselves locked out of these types of large-scale initiatives will be left out in the cold.

We’re witnessing “SUDDENLY,” and we’d better get used to it.

Sharing Economy: Playing Out in Canada

According to a new study from the Insurance Institute of Canada (IIC), the sharing economy presents both an opportunity and a threat to the insurance industry. In the U.S., the sharing economy has already created 17 companies valued at $1 billion or more, including Uber and Airbnb. Some 27% of the U.S. population participate in this type of consumption. Now, with millions of Canadians who use the sharing economy seeking unconventional coverage as a result, innovative startups are threatening Canadian insurers.

See also: Opportunities in the Sharing Economy  

Opportunity – Widespread Use

Forty-five percent of Canadians report being interested in sharing underutilized assets to generate income. In Montreal alone, Uber provides roughly 300,000 rides per month. This means that new types of insurance policies are needed to support the emerging car-sharing and home-sharing industries. For example, because the sharing economy often includes short-term asset sharing, there is an opportunity for insurance companies to provide unconventional coverage options.

Some insurers are already creating products to satisfy this demand. For instance, Aviva Canada has a policy for ride-sharing drivers, and Square One Insurance developed a product specifically for Airbnb hosts.

Threat – New Competition

All of this new opportunity is fueling the creation of nimble and mobile-friendly insurtech startups such as Prvni Klubova, Lemonade, and Metromile. These companies provide insurance in innovative ways using mobile and AI-driven technology. Companies like these three are potential threats to traditional insurers in Canada. In fact, Lemonade has already gained more than $59 million in funding and is quickly becoming a major player in the industry.

According to a recent study, nearly half of traditional insurance companies are concerned that as much as 20% of their businesses could be lost to new insurtech players. If insurers fail to adapt to new competition, these fears could become reality. And insurance carriers are not the only companies experiencing disruption. Insurance brokers also face competition from new platforms such as Friendsurance.

The Solution

There are two options for traditional insurers to consider when it comes to dealing with swift insurtech startups — compete or partner. Competition has been attempted by a number of traditional insurers, such as Economical Insurance, who launched Sonnet Insurance, an online-only insurance provider. However, due to the rapid pace of emerging technologies, head-on competition presents many challenges. Launching an insurtech solution from the ground up is resource-intensive, especially for companies who are not as familiar with a technological terrain.

See also: Sharing Economy: The Concept of Trust  

Partnering can be a more productive endeavor. Many traditional insurers have recognized this and have already formed key partnerships. For example, Intact and Aviva Canada have partnered with Uber. Intact is also a partner with Turo and an investor in Metromile. Additionally, Northbridge has partnered with RideCo, a Waterloo-based ride-sharing startup. Through this partnership, ride-share drivers can receive as much as $1 million in third-party liability coverage.

Final thoughts

Sharing economy valuation is projected to top $335 billion by 2025. Its impact on the Canadian insurance market will only continue to grow. While many Canadians will benefit from the expansion of the sharing economy, traditional insurance companies will need to adapt in order to keep up with new competition from insurtech newcomers. As a result, we are likely to see more partnerships between traditional insurers and insurtech companies in the years to come.

Is Ownership a Thing of the Past?

Ask a millennial who has just bought a car, “How much did you pay for it?” and the typical answer would be something like, “about $300 a month.”

The same scenario will play out with other purchases such as a home, an expensive computer and virtually any other big-ticket consumer purchase.

There is nothing wrong with putting the monthly cost (access) of a product ahead of the final price (ownership), because, in the mind of today’s consumers, ownership is increasingly the exception to the rule.

Less Emphasis on Ownership

In one of my previous articles, I summarized this point with the following:

“Rather than worrying about status, ownership and hierarchy, think about the benefits of access, collaboration, trust and sharing.”

In fact, most millennials, (born 1985 and later) are in the accumulation and the consumption stage of their lives but are giving very little credence to ownership. For millennials, ownership signals responsibility and maintenance; two terms that this consumer group has very little interest in. Owning something is not convenient.

Although this new attitude may signal a disruption to the status quo (baby boomers), this new idea of access over ownership can easily be embraced by manufacturers, marketers, retailers and, most importantly, insurers.

Things that we rent, lease or share, also require a manufacturer, marketer, retailer and insurance policy. Rather than own – we share.

Let’s dig a little deeper.

See also: Navigating Through Tough Times With The Aid Of Employee Ownership  

The Sharing Economy

There are many prominent examples of this shift from ownership to access. Consider the two sharing economy platforms that started it all: Airbnb and Uber.

Airbnb was founded in 2008 when three determined entrepreneurs realized the need for more guest accommodations that could be booked online. Their approach to the hospitality industry started with a blow-up mattress but is now valued at $30 billion. The Airbnb story is a groundbreaking example of the sharing economy and how it disrupted the status quo.

Uber, which got its start about the same time as Airbnb, set out to resolve a perceived transportation need. And what a ride it has been! Created as an online method to hire a car and driver in large metropolitan areas, the company created an online platform that connects riders with drivers through an innovative on-demand mobile application. The simple, yet brilliant, strategy has garnered more than one billion users.

What Was That About Ownership?

And what does all of this have to do with ownership? Everything!

These two platforms own nothing. They don’t own homes or cars. Yet Airbnb has more than two million properties worldwide, and Uber has more than one million vehicles on its platform.

Access: But Wait, There’s More!

What if you need to get an expensive evening gown but plan to use it rarely? Check out Rent the Runway where you can access what you may not be able to afford to own. You can rent a $3,000 gown for $75.

What happens when you must travel out of state to attend a funeral and can’t afford the high costs of a kennel? Welcome to Dog Vacay. This platform provides a list of people in your area who love dogs and will charge less than a kennel.

What if you want to impress someone by pulling up to their home or office in an expensive sports car? No problem. Turo can match you with the owner closest to you who will rent that sleek, fast-moving ride by the hour or by the day.

Your in-laws just called and said they would be joining you for the weekend. Your schedule is hectic, and your apartment a disaster. You check out TaskRabbit to gain access to someone in your neighborhood who can’t wait to clean your apartment so your in-laws won’t think you’re a slob.

By now, you should be getting the picture that consumers are sharing their consumption needs and services without considering ownership, and the price tag that comes with it.

The Impact on the Insurance Industry

Insurance professionals must adapt as millennials kick over the economic tables. Carriers must respond by creating products to manage the sharing risks or, at the very least, offer endorsements for personal and commercial products currently in the marketplace.

Questions must be answered. Like…

  • If I rent my expensive tuxedo on a sharing site, does the platform provide coverage, does my renter’s policy provide coverage or is my tuxedo now considered business personal property, meaning I have to get commercial coverage?
  • If I decide to board a neighbor’s dog through a sharing site, does the sharing site provide liability, or will my homeowner’s policy cover a dog bite from a neighbor’s dog when I’m charging that neighbor a boarding fee?
  • I know I can get a landlord’s policy to cover a home I’m renting, but will coverage apply for daily rentals? What if I’m renting the home I live in while I’m on vacation? Will my HO3 cover when I’m renting my residence for a week or two?

Although insurers have begun to respond to the home-sharing and ride-sharing scenarios, what about all the other products and services that are now being shared rather than purchased?

See also: How to Lead Change (Part 2)  

Agents need to ask all current and prospective clients about the reality of renting their assets, to determine if a coverage issue is on the horizon.

Agents must let insurers know what’s changed in the marketplace and how they can transfer these new risks in an efficient and affordable manner.

If you have not become familiar or heard much about the new sharing economy, shouldn’t it be your responsibility as a trusted adviser to uncover and point out the risks that are unfamiliar and likely not disclosed in a traditional client/broker conversation?

Educating clients must be a top priority heading into 2017 and beyond.

What Implications From Car Sharing?

Although ride sharing and home sharing are the mainstays of the sharing economy, a new field is rapidly presenting challenges and opportunities. This is the rise of car sharing.

Car sharing refers to an online marketplace where travelers can connect with a community of local car owners and rent any car they want, wherever they want it.

Two Types of Car Sharing

1. Fleet car sharing

This is where businesses such as car2go or communauto purchase and insure a large fleet of vehicles. These may be based in one location or free-floating. There are even companies that specialize in car sharing at airports.

2. Peer-to-peer (P2P) car sharing

The second type of car sharing is where individual car owners rent their personal vehicles to private individuals.

They do this using a peer-to-peer company that acts as a broker and insurer. Currently, two of the largest players in the peer-to-peer car sharing industry are Turo and GetAround.

See also: What to Learn From Sharing Economy  

How does it work?

Once car owners have registered their cars with Turo (for instance), they can use an app on their smartphone to notify potential clients that their vehicle is available for hire at a set location and for a set period.

For example, the owners can drive to work in the morning and park their cars; while they are at work, a renter can pick up a car to run a few errands and then return it before the end of the workday.

Turo Offers Significant Benefits

Based on U.S. statistics in 2015, Turo anticipates that Canadian drivers can expect to earn approximately CAN$500 per month. Of course, individual earnings will vary depending on the value of the vehicle and how often it is available.

In the U.S., one authority claims that car sharers can earn anywhere between $600 and $1000 a month, depending on the type of car. Might not get much for this:

Screen Shot 2016-11-29 at 6.03.17 PM

But this:

Screen Shot 2016-11-29 at 6.03.52 PM

Oh, baby!

Turo also offers insurance packages for its participants. According to its website, Turo provides “protection against physical damage up to its actual cash value, for collision and most ‘comprehensive’ causes, including theft.” Turo also promises that participants will be covered by $1 million in liability insurance.

The Love-Love-Love Relationship of Car Sharing

Car Owners Love It

This marketplace allows car owners to earn extra money to help offset the cost of owning a vehicle. And because technology has made it possible to connect people with little or no advance notice, we are seeing a growing number of car owners capitalizing on the trend and using their vehicles to generate extra income.

Consumers Love It

Consumers without cars also love car sharing. Whether they live locally or are traveling for business or pleasure, car-sharing is an attractive option because it’s a great alternative to typical rental companies. In some cases, it even allows people to forgo car ownership altogether because they can simply rent a vehicle whenever they need it.

Pete Moraga, the spokesperson for the Insurance Information Network of California, says, “You’re seeing it primarily in college cities because it works very well for a college campus where students just need cars to do errands and not for the full day.”

Further, recent research found that car sharing services are now available in more than 33 countries and account for almost 5 million users. Not bad… and the growth continues.

See also: The Sharing Economy and Accountability

Environmentalists Love It

Those who care deeply about our environment love car sharing because it means fewer vehicles on the road, less money invested in non-renewable resources and a reduction in the carbon footprint on the environment.

Unique Challenges for Insurers

So what does this mean for the insurance industry? A lot.

Not surprisingly, car insurance companies haven’t quite fallen in love with this new world of car sharing as they are finding that it poses some interesting challenges.

Here are several problems that could affect basic coverage for clients:

  1. LIVERY – Will clients’ personal policies cover their cars if they rent out their vehicles? Most P2P companies understand the need for commercial auto insurance, but it’s always best to confirm that the coverage is adequate.
  2. WHO IS DRIVING? Vehicles that are involved in car sharing are exposed to a greater risk of accidents because they are being driven by drivers who are unfamiliar with the vehicles. Add bad weather and heavy traffic, and owners are putting their vehicles at serious risk. The concern for insurers is whether the client’s premiums are accurately reflecting the increased risk involved.
  3. LIABILITY – This is one of the most significant issues for personal auto insurers. Who pays if the car is involved in an accident while participating in car-sharing? Some car-sharing companies are facing this challenge by offering primary coverage in the event of an accident; some are offering comprehensive and collision coverage; and some are even offering third-party liability coverage.
  4. TRANSITION – Who is going to pay for damages if there is a dispute about when an accident happened? Did it happen when the owner was using it, or when the renter was? To help alleviate the confusion, some P2P companies are developing data recorders and phone apps to track mileage, time and who is driving the vehicle.
  5. DEPRECIATION – Who will cover the cost of depreciation if a car-sharing driver wrecks a vehicle? Will it be the P2P company’s insurance plan or the car owner’s?
  6. EXCLUSIONS – Most insurance policies contain exclusions that will deny coverage if a person has an accident while driving a lent or rented vehicle.

Some of these questions have simple answers, but many will not.

Ron Burns, vice president at Guarantee Company of North America, said this concerning this issue, “Unless we have some changes in the actual policy wordings, there are going to be a lot of insurers who stand up and say we won’t pay for that loss.”

Intact Offers Insurance to Car Sharers

In response to these concerns, Turo has partnered with Intact to offer commercial auto insurance specifically for car owners who are participating in car sharing.

How does it work?

While the vehicle is being delivered to the renter and during the rental period, the vehicle is covered by Turo’s commercial insurance. When the vehicle is not being delivered or rented, the owner is protected as usual under her Intact personal auto insurance policy.

All car owners who are planning to participate in peer-to-peer car rental through a company such as Turo MUST inform their insurance broker to ensure that their coverage is sufficient and accurate.

Does Turo Insurance Replace Personal Auto Insurance?

No. Car owners need to make sure that they have personal auto insurance, as well. In fact, to even list their car on the Turo marketplace, they need to investigate insurance plans with any of the following carriers:

Do Car Sharers Need Separate Insurance Plans?

Yes. The Turo insurance card does not satisfy state or provincial “financial responsibility” requirements and cannot be used to register a personal vehicle.

Do Insurance Providers Need to Change Their Strategy?

Yes. With more car sharing startups entering the marketplace, and the relative ease with which savvy car owners can use their assets to generate income, it is clear that the sharing economy is poised for significant growth.

See also: Sharing Economy: The Concept of Trust  

Insurance carriers need to ask themselves some honest questions as they boldly face this new customer climate:

  • How can we adequately face the new challenges in this sharing economy?
  • Should we create a unique policy just for car sharers?
  • Should we offer them a commercial policy, an excess policy or a base limit?
  • How can we stay innovative and capture the changing marketplace?

At a minimum, insurance carriers have a responsibility to engage with and educate policy-holders on many of the issues associated with car sharing.

Car sharing may not be the biggest concern in the minds of insurance carriers, but it should at least be on their radar.

The Uberization of Insurance

Our nomination for word of the year is, by far, “uberization.”

This term is used to describe the growing deluge of companies that offer on-demand services from cars to homes to labor, and much more. Many commentators view this economic transformation as a revolution that will see our entire economy shift from one of consumption, to one of access.

And we think they’re correct.

The Rise of On-Demand

The key to an “uberized” economy is where on-demand services meet crowdsourced labor solutions. You see it everywhere. Even traditional businesses are learning new tricks from an avalanche of high-profile acquisitions. Whether it’s Expedia’s purchase of Homeaway, GM’s buyout of Sidecar or Ford’s investment in Lyft, this shift is becoming more undeniable.

On-Demand for Insurance

Now, on-demand services are coming to the insurance industry, the most risk-averse industry, by its very nature. The insurance industry has become more nimble–mostly out of necessity, but that’s a story for another day.

See also: How On-Demand Economy Can Prosper  

Insurance carriers are learning quickly that they need to adapt to the demand of, well, on-demand services. And the integration of the gig economy is the next step in the business evolution of the traditional insurance sector.

Tough Questions for the Insurance Industry

What does the “uber of insurance” mean? What opportunities and challenges does it bring to the industry? The gig economy, sharing economy, 1099 economy, on-demand economy or whatever you want to call it isn’t going away, and consumer participation continues to grow.

Earners, consumers and the old guard of the supply chain are eager to find ways to diversify and optimize business solutions.

How do you satisfy the demand for on-demand data gathering? Claims handling and processing? How does the insurance industry gather the data it needs effectively, efficiently and accurately?

Uber, Lyft, and Airbnb have not only demonstrated that they fill a need in the marketplace, but often they do it better than the traditional options – as uncomfortable a thought as that may be for the old guard in the supply chain.

Can this model work for the insurance industry? It can, and this is how.

Hug Your Smartphone, Save a Tree

Mobile technology is your new best friend when it comes to data gathering for claims handling and processing. The insurance industry is traditionally paper-intensive. Paper is no longer a security blanket, but a wet blanket weighing down processes and impeding efficiency.

Candy Crush and Capturing Data

It’s easy to marvel at the innovation of smartphones from the most addictive apps to the most useful. I won’t get into my Candy Crush addiction; I’m seeking professional help.

The point is to make smartphones work for you and your business processes. Today, smartphones are essential to the daily lives of most of us, providing communication, connectivity, schedules, entertainment and even our wallets. Think about how you can leverage people’s familiarity and affinity for their smartphones by merging it with your smart application development and deployment.

Capturing data has never been easier than point and click…Oops, I mean a finger swipe.

Now more than ever data can be captured, optimized and automatically entered into your data systems and processes. This new process can facilitate the seamless flow of data into business processes without risking it getting stuck to the bottom of someone’s shoe, misfiled, misplaced or eaten by the proverbial dog.

For the notepad next to your computer: seamless data integration at the point of data capture.

It sounds like a dream, doesn’t it?

Sharing Is Caring

First referred to as the sharing economy or the gig economy, the “uberization” of the workforce didn’t originate with Uber. But I’m still voting for “uberization” for word of the year. Merriam-Webster is next on my contact list.

People have always done odd jobs that fit their skill set, hobby, or need. Uber, Turo, Airbnb and WeGoLook through mobile technology have taken this tried-and-true individual entrepreneurship spirit not only to the next level, but to a measurable impact on the economy. Just consider recent sharing economy industry projections made by PwC. I won’t spoil it for you, but you’ll soon be acquainted with the word “mega trend.”

See also: Uber’s Thinking Can Reinvent the Agent  

Crowdsourced labor solutions not only provide diversified earning opportunities, but they also provide options to workers, consumers and businesses alike. Remember our talk about being nimble?

All parties can scale up or down as they choose. They can also select where and how they participate in the gig economy and leverage it to provide for their financial or business goals.

As these on-demand solutions grow, expand and diversify, companies and consumers will have the opportunity to test and identify the best solutions for them, all with a swipe of their smartphone.

Free Market for Solutions

Some will argue the gig economy is the free market at its best, others will argue it’s at its worst. Like anything, it comes back to how individuals and companies strategically apply these solutions to their business challenges.

In the insurance industry, data gathering and claims processing will always resolve around how you can do it faster and better and with fewer mistakes. As the saying goes, “time is money.”

With the help of technology, the reach of smartphones and crowd labor — insurance companies can standardize and streamline data gathering, claims processing and other simple tasks while controlling costs.

For instance, why dispatch an employee across the metro, county, state or even country, incurring all the related expenses, time delays to gather data and take pictures when you can dispatch someone who’s already there?

Not only do you save time travel, and employee productivity, but thanks to the near-universal familiarity with smartphones and standardized mobile apps, you don’t have to train workers.

What if there was an Uber of Insurance? It’s not really a matter of “if” anymore, but of “when” and “how.” The when is now, and the how is through the growing relevance of the insurtech disruption.