COVID-19 could change car ownership and car insurance in SA forever
The global novel coronavirus outbreak could bring about dramatic changes in South African car owner’s behaviour that outlast the pandemic itself – in the process bringing about significant disruption for the car insurance sector.
New generation insurers with lean business models and more flexible products will be best placed to thrive in this new environment.
That’s according to Ernest North, co-founder at Naked Insurance, who predicts that many South African companies will be more open to flexible work-from-home arrangements following the relative ease with which large segments of their workforce have taken to remote work. The result could be fewer private cars on the road during commuting hours, along with a reduced need for insurance cover.
Data from vehicle tracking company TrackerSA – analysed by Lightstone – shows that vehicle tracking activity dropped by 20% already as the first social distancing measures were announced in early March. Following the lockdown on all non-essential economic activity, vehicle activity subsequently plummeted by 75% as South Africans did their part to flatten the curve.
Says North: “We can expect physical distancing measures to last for months beyond the end of the lockdown and people who can work from home may be encouraged to do so for a while yet. Once people are used to working from home and companies have made the technology investments to support a remote workforce, it remains to be seen if things will ever return to the way they were before we’d heard of Covid-19.”
One international study from Gartner, part of a series about Covid-19’s impact, showed almost a quarter of companies responding said they will move at least 20% of their on-site employees to remote work permanently. “Of course, not every company, job role or organisational culture is well suited to a paradigm of remote working, and there are likely to be those that can’t wait to have everyone under one roof at the office again,” says North.
“But if just a quarter of companies allow a quarter of their people to come in twice a week rather than every day, it could have a significant impact on car ownership, traffic and car insurance actuarial models. We could see some households question whether their insurance cover meets their needs when they rarely use one of the cars parked in the garage.”
The adoption of ride-hailing services such as Uber and Bolt is already raising questions about the future of car ownership and driving. Some professional couples in the large metros are finding that the costs of renting a car for occasional long trips and Ubering for shop runs or short commutes can be lower than car ownership (instalments, insurance, maintenance, petrol, depreciation).
But that debate may take on a new angle if more people start working from home. “The myth that everybody has to be in the office from 8-5 has been busted and many companies will embrace remote working in the future,” says North. “With connectivity and digital tools improving all the time, we could soon live in a world where people with traditional office jobs only drive every second or third day.”
“Perhaps what we’ll see in this environment is that people will trade more expensive and luxurious vehicles down for more cost-effective alternatives rather than completely getting rid of a second car,” says North. “But they’ll be looking for insurance that is reasonably priced for the amount of driving they do and the vehicle they own.”
“It has been clear since we were established that it can no longer be business as usual for car insurance,” he says. “Not only are driving habits changing, but people are also looking for more transparent pricing and flexible offerings.”
“In many dimensions of our lives, Covid-19 will change what we believe to be normal and desirable,” says North. “Having experienced the full power of some digital tools, consumers may not go back to their old behaviours. Services that are digitally enabled, allow consumers to save money and enjoy convenience are likely to be in demand during the pandemic and beyond.”