Driving Forward: Navigating Embedded Insurance for the Mobility Sector

Disruption within the auto insurance industry is nothing new. As discussed in our last blog post, a paradigm shift is already underway with the rise of embedded insurance. EY estimates that by 2028, more than 30% of all insurance transactions will likely occur through embedded channels.¹ But rapidly evolving mobility trends, advancements in connected technology, and rising customer expectations are contributing to increased volatility.

The Connected Revolution and Mobility

Per the McKinsey Center for Future Mobility, connected cars are expected to account for 90% of all new U.S. vehicle sales by 2025.² Advancements in connected car technology are not only reshaping insurance products and distribution but also redefining consumer relationships and expectations. Original equipment manufacturers (OEMs) like Tesla and Toyota now embed insurance directly into new car purchases. According to the 2024 Embedded Car Insurance Study by Polly³, 81% of Millennials and Gen Z desire the option to purchase auto insurance as part of their car buying experience. In fact, 83% of these cohorts reported that they bought some type of embedded insurance with a recent purchase.

The rise of autonomous, connected, electric and shared (ACES) mobility options is projected to reach 40% of the automotive market share by 2030, per Capgemini research.⁴ Urban adoption of multi-modal, micro-mobility, and shared modes of transportation is forecast to double from 29% in 2023 to 58% in 2025. Although consumers aren’t ready to replace their personal vehicles quite yet, 42% of policyholders expect a single policy that covers them regardless of transportation modes. With the growing interest in incorporating new mobility options, insurers will eventually need to pivot from covering assets to protecting mobility journeys (“mobility-as-a-service”), necessitating stronger partnerships and greater collaboration with trusted ecosystem partners.

Embedded Insurance Is Shaping the Future of Mobility

Embedding insurance products directly into mobility services, including vehicle sales, ridesharing, car rentals, bike-sharing, and even public transportation systems, offers numerous benefits to consumers and service providers alike. Instead of requiring customers to purchase separate insurance policies, coverage is automatically included as part of the service, providing immediate and comprehensive protection.

Real-World Examples

Tesla’s Integrated Coverage: Tesla cars come with built-in insurance features. The software adjusts rates based on driving habits and vehicle health. It’s insurance as dynamic as the electric vehicles (EVs) themselves. As of YE 2023, Tesla Insurance had close to $500 million in written premiums, a 115% year-over-year increase.⁵

Toyota and Toggle: Toyota Auto Insurance, underwritten by Toggle, a digital and embedded insurance company that is part of Farmers Insurance, provides coverage for rideshare drivers and even non-Toyota vehicles in customers’ households.⁶ Managing Director of Toyota Insurance Services Europe, John Laing explains why he feels that embedded auto insurance will continue to rise: “As customers move from ‘ownership’ to ‘usership’, their expectations are starting to change – with an increasing focus on ‘ease of use’ and ‘value’ that make embedded insurance products very appealing.”⁷

Carvana and Root: The e-commerce platform Carvana and insurtech carrier Root entered into an exclusive partnership in 2021 to develop integrated auto insurance solutions for Carvana’s online car buying platform, with Carvana investing approximately $126 million in Root. Per Root President and Chief Technology Officer Matt Bonakdarpour: “Meeting customers where they are in their moment of need is far more efficient and delightful for the customer than having them come to an insurance website to get a quote and a bind.”⁸

Uber and INSHUR: INSHUR’s partnership with ride-sharing service Uber, formed in 2018, embeds insurance directly into Uber’s platform, providing on-demand drivers with streamlined, personalized insurance coverage that adapts to driving schedules.

Turo and Liberty Mutual: Turo, a peer-to-peer car-sharing platform, collaborates with Liberty Mutual to offer embedded insurance for its users. Renters receive comprehensive coverage for the duration of their rental, ensuring peace of mind and compliance with legal requirements. This partnership not only enhances convenience for Turo users but also strengthens the relationship between Turo and its customers.

Trov and Waymo: Waymo, a subsidiary of Alphabet Inc., Google’s parent company, develops self-driving technology and autonomous vehicles. Their fully autonomous rideshare robo-taxi services are currently offered in San Francisco, Los Angeles, and Phoenix. Trov, an on-demand mobility insurance solutions provider acquired by Travelers Insurance in 2022, provides on-demand insurance coverage for Waymo's passengers, included at the point of purchase. Tailored to the unique needs of autonomous vehicle passengers, the protection covers damaged or lost property, trip interruption benefits, and potential medical expense reimbursement to Waymo riders during their trips.

Autonomy and Liberty Mutual: Autonomy, the largest EV subscription company in the U.S., has partnered with Liberty Mutual to offer integrated, month-to-month auto insurance as part of its subscription service. This partnership allows Autonomy subscribers to receive comprehensive insurance coverage along with their EV subscription. This arrangement streamlines the mobility experience, allowing consumers to manage their car subscription and insurance needs seamlessly through one platform. As explained by Scott Painter, founder and CEO of Autonomy: “For the first time, consumers can pay for car insurance on a month-to-month basis through an Autonomy subscription on their smartphone. Integrating auto insurance into our month-to-month subscription bundle solves yet another consumer pain point in the mobility experience.”⁹

Bird and Marsh: Bird, a leading electric scooter-sharing company, partnered with Marsh to provide embedded insurance for its e-scooter riders. By integrating insurance directly into their platform, Bird ensures that riders are automatically covered during their trips without needing to purchase separate policies. This embedded insurance covers various aspects of the ride, including accident and liability coverage, promoting the adoption of micro-mobility solutions.

Driving Mobility Forward

As technology continues to advance and the mobility sector evolves, the direct integration of insurance products into mobility services will become increasingly common, offering enhanced convenience, personalized coverage, and new revenue opportunities for all stakeholders. Embedded insurance will be a transformative force driving mobility forward.

In its April 2024 report ‘Navigating unknowns: Auto insurance questions in a new mobility era’, McKinsey offers the following guidance: “In this dynamic landscape, the imperative for auto insurers, OEMs, and mobility players is not merely adaptation but strategic agility, collaborative innovation, and a proactive engagement with regulators to navigate the complex currents of change and secure a thriving future.”¹⁰

Delivering More

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Sources

1. EY – https://www.ey.com/en_us/insurance/how-insurers-and-new-entrants-can-take-advantage-of-embedded-ins
2. McKinsey – https://www.mckinsey.com/industries/financial-services/our-insights/connected-revolution-the-future-of-us-auto-insurance
3. Polly – https://www.polly.co/embedded-car-insurance-study-2024?hsCtaTracking=b4b6a0b2-55b5-4b66-b3b2-1f03e716d5a1%7C049c7798-c791-4f2e-9ce1-1a726fae6b47
4. Capgemini – https://www.capgemini.com/insights/research-library/insurance-top-trends-2024/
5. Coverager – https://coverager.com/tesla-insurance-ends-2023-with-nearly-500m-in-written-premiums/#:~:text=Tesla-,Tesla%20Insurance%20ends%202023%20with%20nearly%20%24500M%20in%20written,%2C%20a%20115%25%20YoY%20increase.
6. Insurance Journal – https://www.insurancejournal.com/news/national/2021/12/10/645133.htm#
7. InsurTech Digital – https://insurtechdigital.com/articles/the-rise-of-embedded-insurance
8. Carrier Management –https://www.carriermanagement.com/features/2024/06/04/262839.htm?bypass=e6240fe4522fe52eb56f1a8f3c8dd2ee
9. Fintech – https://fintech.global/2022/08/19/autonomy-and-liberty-mutual-launch-auto-insurance/
10. McKinsey – https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/navigating-unknowns-auto-insurance-questions-in-a-new-mobility-era#/