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Thursday, 26 July 2018 20:08

An Evolving Auto Industry Requires New Coverage Options

Written by Kishore Ponnavolu, Property Casualty 360

Index

 

We now live in a world of renting, leasing, subscribing and sharing of services and products, rather than flat-out ownership being the norm.

From meal kits and clothing to fresh razors and tackle boxes for fishermen, there are subscription services for just about everything. In fact, 15 percent of online shoppers have subscribed to an e-commerce service over the past year, with 46 percent of respondents subscribed to an online media streaming service, according to a recent McKinsey report.

 

For the consumer, the appeal of subscriptions is about receiving a seamless end-to-end experience. Individuals are willing to subscribe only where automated purchasing gives them tangible benefits, including affordability and personalization, according to McKinsey. So, in addition to clothes and food, what other industries can consumers turn to for great subscription experiences?

 

The Leasing Trend

 

The shift in consumer behavior toward retail and e-commerce experiences has made its way to the automotive industry with an uptick in leasing over the past few years. Nearly one-third of millennials chose lease options over car purchasing, with the demographic composing 12 percent of all leases in the U.S., according to Edmunds Lease Market Report released in 2017. Some reasons for the increase include:

 

• New technology: Manufacturers have enhanced the technology in cars, from self-parking and lane-departure prevention capabilities to entertainment features. Much like mobile phones, consumers demand the latest technology, which is outpacing each year’s car models.

 

• Depreciation: 1 percent of buyers owe more than their cars are worth, according to 2018 Edmunds Midyear Automotive Market Trends Report. As depreciation accelerates, a car can become less and less of a valuable asset.

 

• Unexpected expenses: 92 percent of millennial car owners consider additional car costs prior to ownership, yet many are still surprised at the costs of maintenance (64 percent) and car insurance (68 percent), according to a nationwide survey conducted by Harris Poll on behalf of NerdWallet in 2016.

 

• Financial concerns: For many millennials, the thought of purchasing a car is exciting, yet extremely stressful. In fact, 62 percent of millennials feel overwhelmed by financial decisions, compared to 48 percent of Generation X and 29 percent of boomers, according to MetLife’s 2018 Employee Benefit Trend Study.


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