Early days to suggest this but already there are signs of auto OEM's  ambitions to offer insurance at point of sale/lease/renewal.

Tesla is 100% focussed on electric vehicles (EV) and the evolution to autonomous vehicles (AV) powered by the Tesla AutoPilot. It has more miles driven by its global EV parc with every vehicle uploading data continuously to Tesla- vehicle AND driver behavior. Tesla's machine learning capabilities harnessing the rich data on the vehicle and its surroundings to constantly improve Tesla advanced driver assistance systems (ADAS) .

The big auto OEMs are aware of this with VW committed to invest more than €35billion in EV and AV development as it transitions from internal combustion engine (ICE) vehicle manufacturing to EVs and AVs. Bosch, a major part of the supply chain for auto OEMs is developing EV and AV platforms and investing huge amounts in reskilling staff and development of EV & AV technology stacks.

Foxcon today is associated with manufacturing Apple iPhones and is also developing EV vehicle platforms and could be a major force in the market in its own right. 

GM, Toyota, Daimler, Jaguar & Land Rover, Kia and Nissan- all are on this march.

The Moody’s report notes that Tesla doesn’t pose a direct threat to incumbent auto insurers today because Tesla insurance is only available for Tesla cars. But it is a threat for the future.

Demand for battery-power electric vehicles is taking off, a graph in the report shows. In addition, if other smart EV makers join Tesla in entering the insurance business, incumbents could face serious competitive risks.

Even though factors like a high capital burden and thin underwriting margins have keep other “data-rich tech groups,” like Amazon and Google, out of the insurance business, car makers have already dipped their toes in insurance waters—with captives offering car finance and warranties, making auto insurance a next logical step.

In the UK incumbent insurers have invested heavily in digital transformation across the insurance customer experience even though most progress has been at the sales and distribution end as the Altus DigitalBar shows - annual measure of digital maturity across 19 criteria ( see below).

But look at the top rated auto insurer fr digital maturity.

It has extended digital transformation into claims eNOL and the claims journey.

Now look at BMW which leads the auto OEM pack with embedded insurance deivered with its technology partner Wrisk.

Again it is, as you would imagine, at the Quote & Buy, MTA and Renewal stages of the customer experience but impressive as well. VW, Mercedes and other lag behind BMW but it is early days. You can see the direciton of travel that Moody's describes.

Tesla does not offer insurance directly in the UK yet but partners with DLG. Its insurance initiative is restricted to certain US States and will gradually extend.

It does put the onus on incumbent carrers to innovate in product, in services and a complete customer journey. They have the ability to offer multi-make cover for households with more than one make of auto and multi-vehicle policies. They can offer UBI and embedded insurance products and build out complete auto ecosystems with partners in manufacturing, repair networks, roadside assistance organisations, vehicle and parts recycling organisations, third party investigation and claimsd management organisations and so on.

To do so they really have to escale the rigidity, complexity and time to innovate limitations of current core systems and collaborate the best insuretchs that can help them on their transformation strategies e.g. 

Admiral, the U.K.’s largest motor insurer, is set to use Advanced Driver Assistance Systemsii (ADAS) data in its pricing and underwriting through LexisNexis® Vehicle Build, developed by data, analytics and technology provider, LexisNexis® Risk Solutions. 

Motor insurers can partner with insurtechs and data aggregators like LexisNexis, Mitchell, CCC, Solera, Verisk to anticipate the competition from auto OEMs.

The interesting question Moody's poses is as to which organisation will monetise and profit from the data generated by vehicle technology stacks better. 

  • Auto OEM?
  • Data Aggregator? 
  • Auto Insurer?
  • Collaborative ecosystems?

One thing is for sure- if incumbent insurers are to compete they will need to partner with the very best technology partners to leapfrog the constraints of legacy systems and creaking claims management systems. Whilst they can build it it is wise to look at the new generation of technology partners offering 

  • Cloud native platforms rather tha  crowding on-prem offerings into a hosted solution
  • Micro-services based products
  • API rich and low code integration tools
  • Scalability from entry point transformatio  to full life-cycle business transformation
  •  Subscription based licensing
  • All on one current constanty updated version software - No to costly upgrades
  • Faster GoToMarket and constant innovation and iteration via No-Code/Low-Code toolsets
  • And proven scalability

Further Reading

Measure digital Maturity via Altus DigitalBar

Motor: ADAS Features Become Part of the Risk Pricing Equation

Creating value, finding focus and choosing the right insurtech partners

Drop me a line for a free trial of the Sltus Digital Bar to mike.daly@altus.co.uk