The Pioneers: Millennials Push Personal Auto in New Directions

Google Compare may have exited the auto insurance marketplace, but the real disruptor remains: Generation Y.

Because millennials are tech-driven “digital natives,” many agents are concerned that they’re commoditizing personal auto insurance. But rather than viewing Gen Y as a threat, Cody Cook, vice president and product manager of personal auto at Erie Insurance—a millennial himself—sees a huge opportunity for independent agents.

“We are very much an advice-seeking generation,” Cook points out. “We use all the different tools at our disposal to try to learn everything about what we buy. The independent agent channel has a lot of strengths that line up against what the millennial generation is looking for.”

Millennials are making waves in the personal auto market with a variety of behaviors, from moving to more urban areas to opting out of purchasing vehicles altogether. Here are the top two personal auto coverage spaces millennials are transforming—and how you can take advantage of the evolution by offering the right products and services.

Ridesharing: Since releasing the industry’s first ridesharing product last spring, Erie has witnessed ongoing improvements in the regulatory and insurance environment around coverage for transportation network companies (TNCs) like Uber and Lyft.

“Just like anything else, as the market changes, the regulatory environment has to be more flexible around those changing environments,” Cook explains. “There are still a lot of laws that have been on the books for who knows how long that need to continue to evolve with the exposure.”

As a result, “I absolutely expect more companies to really take a look at their exposure and make a determination around how they want to either fill that gap or raise awareness appropriately,” says Karen Bailo, agency distribution business leader at Progressive, which recently announced its own ridesharing coverage in Texas: a policy endorsement that fills most of the coverage gaps between a TNC driver’s personal auto policy and the TNC’s commercial coverage.

Mercury has also created an endorsement for TNCs. “We’ve seen a number of other carriers jump in the same way,” says Brandt Minnich, vice president of marketing at Mercury. “In absence of filling that gap with a coverage mechanism for someone who is driving for Uber and Lyft, they’ve got a very broad exposure. This is where we’re working to make sure our agents are well educated on where those gaps fall between where the TNCs provide coverage and where they don’t.”

“More than any other time in my insurance career, it’s really critical for agents to understand where there’s coverage and where there’s not,” Cook agrees. “A lot of people think the personal auto policy is very standard across all carriers, but ridesharing pushes to the forefront that there are major differences—and that matters to the customer.”

“This is a really great opportunity for agents to leverage their value, to understand the coverage gaps ridesharing raises and offer solutions for their clients to fill that gap,” Bailo adds. “It’s a perfect opportunity for agents to step in and leverage their value of counsel and choice.”

What’s next? In the past, a black-and-white line separated personal and commercial auto exposures. But moving forward, “that’s going to continue to grey,” Cook says, citing developments like Uber’s recent venture into delivery services and the U.S. economy’s ongoing movement toward a remote workforce. “When people don’t have to do business in one particular location, you start to see different kinds of exposures where they’re on the clock but using their personal automobile.”

Usage-based insurance (UBI): Research from Willis Towers Watson suggests millennials are a better target for UBI because they’re more willing than older generations to trade personal information for an advantage, such as a price discount.

As millennials become a larger share of the insurance-buying market, “the UBI conversation has an opportunity to fill that need of what the millennials really want,” Cook says. “Companies are finding ways to meet their needs just like previous generations.”

Progressive’s Snapshot, perhaps the most mature UBI product currently on the market, is now available in 48 states plus Washington, D.C. Because insurance is regulated at the state level, Snapshot is currently not available in California and North Carolina. “Some agents remain skeptical,” Bailo says. “But this is really an under-leveraged, powerful product agents can bring to the marketplace that’s really distinctive.”

According to a new study from Willis Towers Watson, more than 60% of consumers are open to buying a UBI policy—and would change their driving behavior accordingly if it meant lower premiums. “There’s absolutely acceptance and growing adoption of programs that are usage-based in nature,” Bailo says. “The technology is getting even easier, more flexible and more adaptable.”

Progressive is already on it: The company has “even higher hopes for success in 2016” on the heels of introducing a smartphone application designed to replace the plug-in monitoring device entirely, Bailo says. The app will be “capable of meeting the data integrity standards that we’ve been looking for in the past several years,” she explains—eliminating the inconvenience and cost of installing and returning a separate device. Currently, drivers have the option to choose between the device or the mobile app.

As UBI technology improves, Cook anticipates continued growth in this type of insurance across many lines. “We’re starting to see smartphone technology have an impact on the cost of delivering these solutions, which will increase the proliferation,” he says. “There’s a great opportunity with telematics to engage the customer and give them some responsibility in managing their premiums.”

“As insurance companies and as agents, we’ve got to position ourselves to meet customer demands and customer needs,” Minnich agrees. “As the marketplace evolves and people’s preferences in how they live and how they get from point A to point B changes, we have to adapt accordingly.”

Jacquelyn Connelly is IA senior editor.