Here at Accenture, we’ve done a lot of thinking about autonomous vehicles and how their advance will impact the insurance industry—especially when insurers are no longer underwriting the driver but the vehicle itself.
But a more immediate issue that should be concerning our industry is the fact that more young people are shunning what was once a rite of passage to adulthood: car ownership.
According to a study by the U.S. PIRG Education Fund, the average number of miles driven by 16 to 34-year-olds dropped by 23 percent between 2001 and 2009, with Millennials taking fewer trips, shorter trips, and a larger share of trips by modes other than driving. Young Americans drive less than older Americans and use public transportation more, and often use multiple modes of travel during a typical day or week.
The rise of ride-sharing services like Uber and Lyft are another alternative to the expense of owning a vehicle—which can consume as much as 17 percent of household income. This could be seen as a waste, considering that for about 23 hours a day, our cars are sitting there unused. Cash-conscious Millennials recognize this and are shunning car ownership.
Instead, Millennials place more value on other forms of technology: A recent study by the Frog consulting group finds that 30 percent of current car owners of all ages would give up their car before giving up their smartphone—a number that Frog predicts will grow as smartphones become even more entrenched in our everyday lives.
Frog predicts that as more of the population moves to cities and services develop there, the need for car ownership will become increasingly obsolete, especially among younger people. And as the sharing economy expands, more people will transition to what they call car “n’ownership”—utilizing ridesharing, day or hour car rental as an alternative to that expensive vehicle that’s parked in a garage 95 percent of the time.
For both insurers and carmakers, this trend represents a big shift in business. For insurers, fewer car owners means fewer insurance policies sold.
However, some automakers are betting big and investing in what could very well be a game changer for today’s tech-loving consumers: the connected car. I’ll talk more about this in my next blog post.