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Embedding is the future of motor insurance

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Consumer behaviour is changing; from music to movies to asset ownership, the buzzword these days is subscription. Driven largely by the millennial and Gen Z generations, the emphasis is now on access to, rather than ownership of, assets.

This fundamental paradigm shift has companies scrambling to transform their business models from the traditional way they sell products and provide their services, and the insurance industry is not excluded from this “revolution”. That’s according to Herman Schoeman, CEO of Guardrisk.

In recent years, “embedded” insurance has been a major driver of innovation in the insurance sector. This has mainly happened with point-of-sale bundling, where a manufacturer, retailer or other service provider offers the consumer insurance cover as part of the deal. This has allowed brands to boost their revenue while leveraging and growing their relationships with customers.

Embedded insurance has been particularly prevalent in the local motor industry, where many major manufacturers (OEMs) as well as a large number of motor retail groups have been offering their own branded insurance products to their customers for some time now. The success of these offerings (and the significant revenue boosts they have delivered) has been based not only on the brand loyalty of the customer but also on the inherent knowledge of the products and the ability to shape insurance cover accordingly.

The next step in this evolution is based on the trend towards acquiring access to wheels through subscription models vs buying a vehicle to own.

Internationally, traditional rivals are even teaming up to capitalize on the subscription trend; two major brands recently joined forces to offer “innovative mobility” solutions in major cities in Europe and the Americas, offering car sharing, ride-hailing and charging, as well as access to e-scooters, e-mopeds and e-bikes.

While the local market may not yet be ready for the international model of integrated vehicle subscription services, there has, for some time, been a shift towards South African drivers entering into instalment and other types of contracts through which they are able to upgrade their vehicles (before the contract ends) without ever taking ownership.

“With motor manufacturers moving towards providing mobility as a service, rather than simply making vehicles to sell, insurers need to step up and create products and structures that enable insurance to be embedded in the mobility offering,” says Schoeman.

“This effectively shifts the insurance customer from being the vehicle owner to dealers, finance providers and OEMs, and insurers will need to create and tailor their products accordingly.”