Automotive Trends in 2018

2017 was a dynamic year for the automotive insurance industry, from (two) changes to the Ogden rate, to an increase in Insurance Premium Tax — it’s certainly been a lively 12 months for the sector. Bolstered by the partial reversal of the Ogden rate in September, 2018 is expected to be considerably more positive, with a predicted strong upturn in profits for insurers following the implementation of legislation in the next few months.

However, it’s crucial that automotive insurers don’t rest on their laurels; 2017 also revealed the rapid pace at which the industry is changing. With fast-moving advances in technology, there has been a perceptive shift in consumer attitudes and practices, disrupting the traditional automotive insurance model.

As we head into 2018, we take a look at the forthcoming trends set to alter the landscape of automotive insurance.

Usage-based insurance & telematics
As we move into an era dominated by data and analytics, the availability of Usage-Based Insurance (UBI) is set to soar, as insurers adapt to customer demand. In 2016, the number of UBI policyholders grew by 32% to 14 million* globally, and has continued to increase year upon year. With the installation of a little black box, or data sent directly to the insurer from a connected car or mobile app, insurers can assess how you drive, where you drive and when you drive, and adjust premiums accordingly.

Both insurers and consumers are starting to realise the benefits of telematics-led insurance. Customers’ premiums are based on actual driving habits, rather than more general factors such as age or location, and insurers can offer more personalised services whilst reducing costs with the availability of more accurate premiums.

One-size-fits-all insurance models may find themselves inadequately equipped to deal with the emerging preference for UBI, as it steadily gains traction in the coming years. It’s expected that more innovative insurers will boost their UBI portfolios with the introduction of more Pay As You Drive (PAYD) programmes and Pay How You Drive (PHYD) programmes, subsequently branching out into Manage How You Drive (MHYD).

Car-sharing
Once seen as a symbol of status, there are whispers that car ownership no longer quite holds the prestige that it once did — that ‘car peak’ has been reached. A myriad of factors — the sharing economy, costs of running a car and technological innovation — have meant that the millennial generation have adopted a more fluid, flexible approach to driving.

In 2018, it has become ever easier to travel by car without owning one, the most obvious method being through hail-a-ride apps such as Uber and Lyft. For those who do drive but infrequently, car-pooling sites are on the rise as increasing costs and decreasing space make absolute car ownership unsuited to their lifestyles. Far from being detrimental to automotive insurers, this opens a whole new market and is an opportunity to introduce improved, flexible and innovative insurance to eager consumers.  

Autonomous vehicles
A 2018 prediction summary couldn’t be complete without touching upon autonomous vehicles. The UK Government’s Autumn 2017 Budget announced financial support and investment in autonomous cars, cementing their inevitable presence on the UK’s roads in the not-so-far future. With the Automated and Electric Bill 2017-2019 currently moving through Parliament, the onus is on insurers to ensure that they’re prepared for the eventual regulations regarding liability in accidents involving automated vehicles.

*https://www.ptolemus.com/ubi-study/