The recent announcement of General Motors’ return to auto insurance with the launch of its usage-based insurance program, OnStar Insurance---delivered with American Family Insurance---didn’t come as a surprise in most circles.
Back in 2007, GM discontinued a venture into auto insurance due to the financial climate---the Great Recession---and doubts of whether auto insurance customers would actually purchase coverage from original equipment manufacturers (OEMs.)
However, following the COVID-19 pandemic, auto insurance customers are showing increasing interest in getting products and services that fit their needs such as pay-per-mile and pay-as-you-drive, giving GM, as well as Tesla, Ford and Lincoln, the confidence to give auto insurance another stab.
This puts traditional auto insurers in a precarious position. On the one hand, OEMs can exceed expectations regarding certain aspects of the auto insurance customer experience, such as underwriting, with a “pay as you drive” model, and accident detection and management, gaining access to real-time alerts and treatment, to create a seamless customer experience.
On the other, auto insurers that partner with OEMs will likely have to pick up the tab and bear the financial burden of the policies while losing the frontline relationship with their customers as these will be owned and managed by the OEMs. This poses a real challenge to the future of auto insurance as we know it.
So, what will this new auto insurance experience look like, and where does this leave traditional auto insurers?
In the age of the Internet, customers expect a seamless experience from all of the vendors and service providers in their lives. Based on the success of Amazon’s and other platform-based business models, OEMs see an opportunity to streamline the auto purchasing experience by joining what were formerly two separate steps in the process, vehicle purchasing and the provision of an auto-insurance offering, with all its implications.
As mentioned, this is made possible with in-car telematics technology that will be able to assign each driver a price based on how they drive, where all the vehicle’s data is already automatically available for a quick registration.
In addition, OEMs will likely attempt to leverage in-car data to personalize customer experiences, similarly to how...