The ACES (autonomy, connectivity, electrification, sharing) framework, once a far-flung vision for the future of how people and goods will move, has increasingly become realized over the past five years. Yet, while the industry has advanced across each of these four pillars, significant challenges, gaps and opportunities remain. Several sub-sectors worth exploring include the second-order impacts of vehicle electrification, reinvention of the vehicle purchase experience, and new data-enabled logistics software for trucking fleets. The innovations taking place in each of these areas have the potential to significantly impact insurance broadly, from new distribution channels to novel datasets for risk assessment to opportunities for adjacent product creation. Partnerships with startups in these spaces could enable insurance companies to further unlock new growth and profitability opportunities.
Industry evolution
Over the past five years, the mobility industry and how people and goods are moved have experienced widespread change. While autonomous robotaxis have not replaced personal vehicles as many had forecasted, the industry has made dramatic leaps forward across all four dimensions of the ACES framework:
- Autonomy – The autonomous vehicle segment has consolidated around a few notable winners, with Cruise and Waymo beginning early services in California and Arizona, while OEMs like Daimler have received recent approval to deploy Level 3 (conditional driving automation) technologies at scale.
- Connectivity – Connectivity has become pervasive across nearly all new vehicles manufactured. Companies like Avanta Ventures’ portfolio companies Motorq and Car IQ are currently leveraging real-time, in-vehicle data to enable multiple commercial use cases, from insurance to fueling to payments.
- Electrification – With initiatives across federal and state governments to shift from internal combustion engines (ICE) to electric vehicles (EVs), most OEMs have also committed to phasing out ICE vehicles within the next ten years.
- Sharing – Despite a pause in growth during the pandemic, ride-hailing has become ubiquitous and an integral part of the transportation system, with over 40M trips taken per day. Other sharing models and form factors, such as micro-mobility and car-sharing, have also matured, with companies such as Getaround and Bird becoming publicly traded entities.
Despite these impressive developments, however, the industry remains in the early stages of its evolution toward the overarching ACES vision. There remain significant challenges and opportunities within the broader sector, all of which have the ability to meaningfully impact how personal and commercial insurance evolves.
Second-order impacts of electrification
By 2030, more than 30M EVs are expected to operate on U.S. roads – a substantial increase over the 3M EVs in operation today – with sales of electric vehicles accounting for the majority of new vehicle purchases. Such growth will not only require substantial investment in charging infrastructure, but also unlock and lead to new opportunities across energy usage, fleet operations and servicing, amongst other areas. One example is the electrical grid, where aging distribution infrastructure is ill-prepared to handle the highly concentrated energy requirements of EV charging. While longer-term capital expenditures will likely be required, startups are currently addressing these challenges by supporting new approaches to demand-balancing, vehicle-to-grid exchange and distributed energy production. For insurers, such energy management platforms that connect vehicles with the grid could unlock novel datasets that provide a window into vehicle garaging and home telematics to inform risk management and adjacent new product creation. Enel X and Neosurance, for example, recently partnered to test a novel home insurance and security product leveraging data from Enel X’s software platform. Similar opportunities and innovations will become increasingly evident as more EVs come online.
Reinventing the vehicle purchase experience
Despite recent advancements driven by COVID, the purchase experience, particularly for new vehicles, has remained doggedly unchanged for much of the past 50 years. With the exception of Tesla, new cars continue to be sold through dealerships that offer a lackluster consumer experience ripe with pushy salespeople, dreaded price haggling and confusing financing options. There remains considerable opportunity to improve the overall purchase experience, from customer discovery to financing and insurance purchase processes. These changes will only be further accelerated by the increasing number of new EV OEMs, such as Vinfast, Lucid and others, leveraging workarounds to circumvent franchise dealer regulations. As OEMs seek a more direct path to reaching and selling to consumers, new insurance distribution channels and partnerships will also likely emerge.
Core logistics software for trucking fleets
Over the course of the past three years, the pandemic-driven rise in e-commerce and labor shortages led to a logistics industry characterized by limited trucking capacity and exorbitant shipping rates. These conditions left shippers scrambling to not only locate capacity, but also invest in core technology systems to optimize their supply chains. Carriers, in contrast, enjoyed strong earnings growth and a wide array of profitable loads to select from, leaving little incentive to invest in technology and solutions for core operations. As the U.S. economy has begun to slow with a recession seemingly imminent, the pendulum is swinging back dramatically, with shipping rates declining more than 50% year over year. Lower revenue coupled with rising operations costs due to inflation are forcing trucking carriers to rapidly become more efficient to survive. The urgent carrier need for cost-effective and productive operations combined with historically low technology penetration rates in this vertical (for example, only one out of three small trucking fleets leverage any transportation management system at all) creates a unique tailwind for startup companies offering new solutions to help trucking fleets optimize their workflows. Adopting new software solutions by these trucking fleets also represents a unique opportunity for insurance carriers to expand within the commercial space to new product lines and offerings. Progressive and Motive’s recent partnership for fleet safety is a prime example.
Implications of the ACES vision for insurance companies
There are tectonic shifts occurring from novel home risk datasets derived from energy management platforms to distribution channels enabled by new vehicle purchase experiences to adjacent product opportunities enabled by trucking fleet software. These shifts have the potential to significantly impact the broader insurance markets. When executed successfully, partnerships with startup companies innovating within these spaces can enable insurance companies to meaningfully accelerate growth and profitability.
