On May 27, 2020 (after 130 years), General Electric ceased producing light bulbs entirely, ceding its lighting business to intelligent home startup Savant Systems. All the other big lighting companies have also been navigating a changing market and industry. Government requirements for lower energy bulbs have driven the majority of incandescent bulb manufacturing companies out of business. LED lights not only consume considerably less energy, but they also last much longer; thus, bulb sales will decline over time.
Another 125-year-old industry participant, Philips Lighting, chose to create Philips Hue, a connected lighting solution, rather than exit the market. Home automation systems have given birth to intelligent lighting such as smart bulbs, which are digitally powered lights that can adapt to a consumer’s lifestyle. Many are controllable via home networks and cell phone applications. Philips also decided to create a new brand, Signify, dedicated to sustainable and energy-efficient lights.
Auto insurers will have to make decisions like these. Auto insurance, founded on a policy transaction, is likewise a 120-year-old “settled” business. Will insurers continue to offer conventional insurance in old methods until forced to abandon them, or will they adopt emerging trends, new technology, new services, and perhaps a new mobility ecosystem approach? Will they transform themselves to become suppliers of next-generation mobility consumer experiences?
Changes in the Demographics Buying Auto Insurance
We developed two-generational “super segments” by merging two distinct age groups, Gen Z and millennials, and Gen X and boomers, to simplify analysis inside the Mobility Survey. As anticipated, Gen X and Boomer segments are more engaged than their younger counterparts in purchasing or influencing the purchase of home services, insurance, and financial goods. Individual life insurance and optional benefits were the only exceptions. All groups purchased at the same rate and Amazon account use, where Gen Z and millennials had a slight advantage.
Personal lines P&C insurance (car and home/renters), employer-sponsored health insurance, investments, and annuities are strongholds for the older supergroup. These product lines are excellent candidates for the 30- to 60-year-old “ideal range” for financial and insurance products. They are at a particular age with the most significant economic and insurance planning needs because they’re still amassing possessions and wealth that need them to be protected. In addition, a new demand for protection of these buyers’ persons is coming through with the rise of non-owner SR22 insurance.
In 2021, millennials will surpass and start to outnumber the older supergroup. The influence of the youthful super sector will increase four years later, when the first individuals of the Gen Z cohort reach 30, catapulting this future group to purchasing domination. Domestic service providers, insurance companies, and financial instrument suppliers that have not changed their business strategies, services, and customer experience processes to suit the requirements of this emerging “sweet spot” buyer market will be pushed and abandoned. The insurance business must adjust to this development class of new consumers.
Advancing Vehicle Safety Technology
Nearly 60% of Gen Z and millennials and half of Gen X and Boomers buy or lease a car with at least one kind of modern safety or convenience equipment. Because of low risks, these innovations were anticipated to lower car insurance rates. However, insurers’ experiences so far have not been in line with this assumption. The expense of maintaining or upgrading these more complex vehicles equipped with advanced technology outweighs the savings gained from reduced frequency.
A few of these devices have shown advantages, but the impact on premiums has been modest. NAMIC, for example, discovered that digital traction control saves a consumer just $8 on their yearly premium. Furthermore, those who invest for lane change warning, motorist attentiveness monitoring, lane departure, night vision, or basic parking support systems save hardly anything.
Is it conceivable that the effect of this technology will ultimately outweigh the expense of repair and maintenance? Yes, in theory. The more significant the proportion of high-tech vehicles on the road, especially potential self-driving cars, the lower the likelihood of traffic accidents. Of fact, there are a variety of unknown conditions associated with COVID-19 and automobile usage. Will a sizable proportion of the workforce quit commuting? Will commuters who utilize public transportation start driving to avoid exposure? Will autonomous cars, for example, usher in a whole new commuting scenario?
Looking at these patterns together, car insurers are experiencing a light bulb moment. Many of these tendencies are expected to increase as we rethink our work lives as we transition to the house due to COVID-19. Can car insurers adjust for changes in market prices, channel types, and product offerings by delivering the appropriate kind of reform to the market? Can they create their potential distribution networks?