Bloomington-Normal may soon have another insurance company: Rivian.
It won’t be Rivian’s primary business, but the electric automaker is staffing up a Consumer Insurance Team. Rivian’s Head of Insurance already is a year on the job, and the company is hiring a sales manager in Normal to “set up and lead Rivian’s P&C insurance agency.” It’s also hiring actuarial data scientists in California who will “build industry-leading predictive insurance models” using all the data coming out of Rivian’s in-vehicle technology.
For now, Rivian isn’t talking publicly about what insurance products it plans to offer.
“Our insurance team is focused on the core Rivian belief that we want to provide the best possible end-to-end experience we can offer when a customer chooses Rivian,” said spokesperson Zach Dietmeier.
Rivian plans to make its electric trucks and SUVs in Normal. And it wouldn’t be the first automaker—or even the first EV company—to sell insurance, too.
Last year, Tesla started selling insurance to California vehicle owners through its partner, State National, a subsidiary of insurance giant Markel. Tesla did it, in part, to address one of the barriers to owning its vehicles: They were expensive to insure. Tesla says its insurance plans are cheaper.
“Tesla’s perspective was, 'We know our cars better than anyone else,’” said Roosevelt Mosley, a principal with Pinnacle Actuarial Resources in Bloomington. “‘We don’t think you traditional insurance companies really know what you’re doing. So we’re going to start our own insurance company because we think we can insure them for a cheaper price.’”
It’s unclear if Rivian will partner with a traditional insurer, too. Theoretically, it could pursue licenses to sell insurance itself, but that’s much harder.
“For these guys, that’s almost death by a thousand paper cuts, having to deal with private-passenger auto claims,” said Ellen Carney, principal analyst at Forrester Research. “The logical thing for Rivian to be doing would be an aggregator. They’d be a distribution point for insurance. Let someone else assume the risk, handle the claims, and they’ll just take a cut.”
That’s what Geico, for example, does with homeowners’ insurance, she said.
Traditional automakers have also tried this before. GM had its own auto insurance company, but it’s since been sold off. It now operates as National General Insurance. Toyota launched an independent insurance agency in 2016 for owners of its cars; partner companies are the underwriters, and it’s not yet available in every state.
One reason that automaker-owned insurance companies are not more dominant is that the industries are just very different, Mosley said. Auto manufacturing is built on certainty—how much parts and labor will cost. Insurance is all about uncertainty.
“The dynamics between a manufacturing operation that’s huge and an insurance operation that’s fairly small, and sometimes can be unprofitable, have created some of the reasons why some of these programs haven’t taken off like they were anticipated,” he said.
“You have to understand that the management philosophy behind a manufacturing company is different than perhaps an insurance company,” Mosley added. “And when you try to fold them under the same umbrella, it creates a natural tension."
USING DRIVER DATA
Rivian job postings offer some clues as to how its insurance program might look.
The “Rivian Insurance Agency Sales Manager” will “recruit, train, coach and manage Rivian-employed licensed sales agents and insurance customer care team” members. Apparently, Rivian will sell insurance “globally,” with at least some “insurance partners.”
Rivian’s battery-powered vehicles will feature a ton of connected-car and autonomous-driving technology. To that end, Rivian is hiring an “Actuarial Data Scientist” in San Jose, Calif., to help design and build “leading predictive insurance models based on a large vehicle data sets that include lidar, radar, ultrasonic sensors, high accuracy GPS and cameras.” They’d be tasked with modeling “driving behaviors and vehicle (movement) to solve business problems and deliver scalable pricing and claims solutions.”
The demand for Rivian insurance could depend on consumer appetite for telematics insurance—or usage-based insurance. Amid less driving and more cost-consciousness during the pandemic, a J.D. Power survey released this month found consumers are now more willing to consider telematics insurance and see more value in it. Historically, privacy and security concerns have been barriers, or the savings weren’t enough to bother with it.
Carney, from Forrester Research, stressed that consumer interest in telematics for private-passenger auto insurance still remains low. And if someone is buying a Rivian truck (starting at $69,000), how cost-conscious are they?
“Let’s put it this way. State Farm is probably not going to be losing a lot of sleep over this,” Carney said of Rivian’s insurance program.
The futures of auto insurers like Bloomington-based State Farm already are very much intertwined with the self-driving technology that will be a core part of Rivian’s vehicles. Both companies are involved with a group focused on the many questions facing Illinois policymakers in the coming years.
One of those questions is liability. If a self-driving truck crashes into a regular car, or another self-driving truck, or a person, who is to blame?
Liability is not necessarily why Tesla began offering insurance, Mosley said. But there are some obvious implications. An automaker deeply invested in self-driving technology, he said, could embed in the cost of the vehicle and your premiums a full layer of protection—your own personal liability, and the failure of a part, and any software issues with the self-driving.
“At that point, if Rivian insures the whole thing. It doesn’t matter who’s liable, because all roads lead back to Rivian,” he said. “But if Rivian is responsible for the technology … and another insurance company is responsible for the driver’s liability, now you’ve got this huge (legal) boxing match in terms of who’s liable and who’s not. There has been some discussion about consolidating that in one place, but I don’t think I’ve seen that happen anywhere yet.”
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