Behavioural insurance in the German Automotive Market
Abstract: The automotive insurance market is undergoing fundamental changes with the advent of novel Insurance Technology (InsurTec), mobility initiatives such as autonomous vehicles, car sharing and subscription models for new cars, and the emergence of new forms of insurance such as short-term cover, pay per use and advanced analytics, which can encourage drivers to improve their driving behaviour. The traditional forms of insurance and information exchange are being augmented or replaced by behavioural insurance that uses telematics and Artificial Intelligence (AI) to analyse and interpret the wealth of big data that is generated from car driving behaviour. This case study discusses the changes and innovations in HUK-COBURG’s operations and business model, including risk profiling, evaluation of driver behaviour, data analytics, ethical considerations of behavioural insurance, the business case for telematics and HUK’s implementation philosophy for new technology and AI. The main conclusions are that incumbent insurance firms must respond to new competitors, market changes and AI technology by embracing digital transformation and developing new forms of insurance that exploit big data and AI capabilities. In behavioural risk the nature of the product is changing from a static product to a dynamic relationship where value is co-created between the customer and the insurance firm. The implementation challenges are outlined, and the new skills required in areas such as data science, digital and organisational transformation, and analytics capabilities are described.
Keywords: Telematics, behavioural insurance, Artificial Intelligence (AI), risk modelling, data science, analytics, digital transformation
Short Bio: Professor Holland has worked at the interface of business and digital technology throughout his academic career. He leads on data science at the School of Business and Economics at Loughborough University, and is co-Director of TECHNGI, a novel University – industry partnership to investigate Artificial Intelligence (AI) in next-generation services. Professor Holland’s main research interests are digital marketing strategy, Artificial Intelligence (AI), financial services, and data analytics. He has published over 70 research articles in leading journals and international conferences, including Strategic Management Journal, Decision Support Systems, Industrial Marketing Management, Organization Science, Sloan Management Review International Journal of Electronic Commerce, and the Journal of Business Research. He has extensive consultancy experience with a wide range of blue-chip organisations in telecommunications, technology, banking, insurance, grocery and e-commerce. Professor Holland has also held senior advisory roles in Government and regulatory authorities, including the Competition and Markets Authority (CMA) in the UK and the European Insurance and Occupational Pensions Authority (EIOPA), Frankfurt.