Demand for fleet insurance may increase as mobility options evolve in Europe

Firms offering fleet insurance may see a boost to their business models, as demographics and technological advancements shift the automotive market away from personal ownership to other forms of mobility. Urbanisation – which stands at nearly 75% for Europe – is a major factor in this shift, according to strategy consultancy Roland Berger.

Fleet insurance has been one of the least profitable segments of the car insurance market, with some even seeing negative profitability. The segment is relatively small, representing around 10-15% of motor insurance portfolios, and its overall poor performance has seen an increasing number of providers exit the market. 

However, such a scenario was based on the car market as we have known it over the last few decades – one characterised by private ownership and consumerism in the automative sector. In recent years, the market has begun to take on an entirely new character, as the socio-economic and environmental costs of automobile proliferation become apparent.

In essence, people are now exploring a range of other mobility options. Increased awareness of mobility options such as carpooling and ride sharing has coincided with the revolution of automated vehicles, creating a scenario where urban mobility is being planned around a highly optimised, efficient model of transportation. Interestingly, the concept of personal ownership is nearly redundant in this new scenario.

New notions of mobility, in turn, might spell a way back into business for fleet insurance providers. New analysis from Roland Berger suggests that these changes in market dynamics will boost demand in the B2B segment – creating room for potentially profitable insurance business.

The report highlights four key factors that are most responsible for shaping trends in the industry. The first is overall urbanisation across Europe, which stands at an average of 73.4% – driven up by 90% in the Netherlands and 80% in the UK. The spatial constraints caused by increasingly populated cities have given rise to a new perspective on mobility, characterised by innovation and practicality and boosting business for Uber, Lyft and BlaBlaCar.

Secondly, the report argues that the priorities of the Millennial generation have shifted from a tendency to acquire to a preference for usage, making the concept of owning assets redundant altogether. Thirdly, original equipment manufacturers (OEMs) and major car corporations are looking to fend off new competitors in the automated vehicle domain, primarily by expanding their offerings to incorporate insurance packages.

As a result, OEMs are on the lookout for partnerships with fleet insurance providers, particularly as leasing becomes a more popular option than purchasing. Lastly, much like every other sector, the rapid advancement of technology will affect the type of vehicles itself, as well as the entire ecosystem around mobility.

“Motor fleet insurance has historically been unprofitable in Europe. Prices have declined over time and margins have had the last decimal percentage point squeezed out of them. As a result many insurance companies have exited the market entirely. However, changes in mobility consumption patterns and new technology are promising to put motor fleet insurance back on its feet, making it once again a profitable business,” stated the report.