Auto insurers are basking in a false sense of security, seemingly oblivious to the impending decline in market size and the threat of new entrants. The sector is ripe for disruption: the value of insurers’ proprietary data and traditional expertise is diminishing, and other players are emerging with the data, analytics, and customer access needed to attack the value chain. In light of the combined threat of these dynamics, incremental change is not an option. Insurers must adapt.
The Boston Consulting Group and Morgan Stanley Research conducted 45 interviews with senior executives of insurers, OEMs, and technology providers around the world. In addition, we surveyed drivers and auto insurance customers in 11 countries. Finally, we modeled the impact of technology change and shared vehicles on the industry from 2015 through 2040.
Although specific dynamics will vary by market, our research yielded several key conclusions:
Insurers must respond quickly to defend their turf against these combined threats. We recommend a fundamental rethinking of all aspects of the operating model—including product and business mix, underwriting capabilities, distribution channels, cost structure, and acquisition strategy. Broadly, we see three nonexclusive strategic plays:
The relevant strategic choices and timing of execution will depend on each insurer’s size and business mix. For example, multinational insurers are in a better position to form partnerships with disruptors such as OEMs and tech giants. Insurers with a younger, more urban customer base should consider diversifying even more rapidly. There is no standardized approach, and the path to the future state is unlikely to be linear.
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