- General Motors will launch insurance products this year, after a 12-year hiatus.
- This move will likely pose a threat to incumbents’ sales opportunities, so they should target partnerships with manufacturers to sell directly to their customers.
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General Motors (GM)—the largest US car manufacturer by market share in 2019—has announced plans to roll out auto insurance this year through its new OnStar Insurance Services business, per Business Insider.
GM will offer the insurance to its employees in Arizona in Q4 2020, before expanding the coverage to both GM and non-GM customers and owners of its vehicles in the next year. The policies will be underwritten by Homesite Insurance Group, which is an affiliate of American Family Insurance. GM will leverage the vast troves of data it collects through its subsidiary OnStar Connected Services—which collects data from connected vehicles’ OBD-II ports—to offer usage-based auto insurance.
GM’s new insurance offering follows the trend of car manufacturers harnessing their customer data to enter insurance and create new income streams. Innovative car manufacturers are tapping into their existing customer relationships and customer data to sell insurance as an add-on.
For example, Tesla launched auto insurance to its customers in California in 2019, and recently announced its intention to press on with a nationwide rollout in the US. Ford, meanwhile, offers three-day driveaway cover and annual insurance. Going forward, manufacturers will likely enter insurance with increasing regularity to drive new revenues.
Nontraditional players entering the market pose a threat to incumbents’ revenues—so the latter should partner with manufacturers in order to own the entire customer journey.
Car manufacturers have large pools of customers and data, while consumers are increasingly willing to buy insurance from them. Due to their large customer bases—GM sold nearly 2 million vehicles in the US in the first three quarters of 2020 alone—manufacturers don’t have the same acquisition costs and barriers that insurtech competitors face.
Additionally, manufacturers that use telematics devices have deep pools of customer data they can use to accurately price policies and offer lower prices. Moreover, auto policyholders are showing a growing interest in purchasing coverage from car manufacturers.
Car manufacturers’ entrance into auto insurance is another competitive threat to insurers, and incumbents can form partnerships with them to mitigate this risk. As car manufacturers increasingly roll out insurance, auto policyholders may opt to purchase policies directly with their manufacturers due to lower prices or purely for convenience purposes.
While incumbents might still underwrite the policies, they will lose the customer relationships and opportunities to interact and engage with their policyholders; this could result in lost cross-selling opportunities and revenue. However, insurers can benefit from manufacturers entering the space by striking partnerships with car manufacturers to sell insurance directly to their customers and to own the entire customer journey—similar to Metromile’s partnership with Ford.
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