Brokers could be in for a nasty surprise if the concept of bundling auto insurance with vehicle lease or purchases catches on in Canada, a Symposium West speaker warned last week.
An auto manufacturer is “not a traditional competitor” in the insurance industry, noted David Kerr, a Kitchener, Ont.-based technology consulting partner with Deloitte Canada. Kerr, the morning keynote speaker at Symposium West, was alluding to comments made this past spring by Tesla CEO Elon Musk about a new insurance offering on the horizon.
“It kind of comes at you from the side,” Kerr said of auto makers offering insurance. “Obviously it’s underwritten by someone, but the broker channel is now disrupted because someone is now acquiring insurance just as part of a transaction, like a banking transaction when you are getting a mortgage and you are getting credit insurance just as an add-on – do you want fries with that?”
If a vehicle manufacturer wanted to write auto insurance in Canada, it would need to have a subsidiary that is approved by the government to write insurance.
South of the border, Porsche Financial Services Inc. announced this past June that it will offer Illinois and Oregon motorists insurance through Atlanta-based Mile Auto Inc. Similar in concept, the “Care By Volvo” program lets motorists get their auto insurance from the manufacturer, but it is underwritten by Liberty Mutual. In Canada, Care By Volvo does not include insurance.
Musk was quoted this past June by Tech Crunch as saying that Tesla is in the process of completing a “small acquisition” that will help it release its own insurance product. Tesla is neither a broker nor a carrier in Canada. In Canada, InsureMyTesla, which allows motorists get an auto insurance quote from the Aviva website, is administered by Aviva Agency Services Inc. and written by Aviva Canada.
Tech Crunch reported in April that Musk said Tesla was about “a month” away from bringing its own insurance offering to market. Then, at Tesla’s annual shareholder meeting in June, Musk said Tesla is “pretty close to being able” to release its insurance product, Tech Crunch added.
When companies outside of insurance offer insurance along with their products, “all of a sudden you have disrupted someone who would normally sell that product,” Kerr said during Symposium West. “It’s something that is a bit nefarious and could be surprising if it starts to catch on.”
Symposium West, produced by the Insurance Institute of Canada, was held Aug. 22 at the Cambridge office of the Ontario Mutual Insurance Association and Farmers Re.
During the morning keynote, Kerr talked about disruption both from outside and inside the property and casualty insurance industry. One source is the insurtechs, which could be traditional software providers who cater to the insurance industry or brokers or carriers. There might be about 1,500 insurtechs in existence right now worldwide, said Kerr.
“It is a very active environment. It is an area that you really need to watch,” said Kerr.