Creating a Two Sided Market in Insurance using Technology

Several people including me had big hopes on Pay-Per-Mile insurance. I even categorized this innovation as an Insurance 2.0  innovation and termed it as part of the next-gen insurance model. After all , Pay-Per Mile gives the ability for carriers to track your driving usage and you as the consumer are passed down the savings. Several agencies had research published   claiming that the miles driven could reduce by 10% and a savings of $270 could be achieved. Carriers like Progressive and vendors like On Star launched their products with a lot of fanfare only to find that consumers did not really opt-in for the plan.

The problem, in my opinion, for the limited success of the product is that the benefits to consumer in pay-per-mile insurance product are not clearly articulated and more so, not proven. Knowing that there is a big brother watching you and that your costs could go either-ways (up or down depending on the usage)  makes the consumers shy off going to a pay-per-use plan. Instead a better approach for carriers could be to provide a free value added service in return for the customer's allowing the carriers to track the usage patterns. Essentially creating a two sided market where one feeds the other

So here is an example of how this could be achieved. Refer to the diagram below.

In my sample next generation insurance company model below(refer diagram), I am creating a two-sided marketplace between the Commercial Auto (Tow Truck ) and the Personal Lines Auto (Consumers). Each side is feeding the other and also deriving value by joining this new entity. Consumers -Like the ability to have an efficient tow truck dispatch capability on their cell phones. The Tow Truck carriers would not mind sharing their location data when they are shown that they get new business referrals via this technology.