Resilience in the modern age is defined by digital innovation and the ability to comprehend cyber governance responsibilities, among other key business strategies. According to Edward Stroz, co-president of Aon Cyber Solutions, it is important to not consider risk only in terms of a device, but rather the cyber compromise and risk once connected to a network. To react to modern technological changes, organisations are considering the affordable risk and exposure in relation to the investment they are willing to take to protect themselves, their customers and their product or service.
Speaking at Aon’s Insight Series Conference 2019 in Melbourne, Lynn Finkel, Senior Vice-President of Risk Management and Insurance, discussed how Avis Budget Group is shifting its model from that of a traditional car rental service to one that offers on-demand mobility when and where customers want it. They are achieving this transition through technological innovation, strategic outsourcing and partnerships, and extending its own platform to meet the new customer standard for the modern age.
Avis Budget Group’s shift to a digital economy arose as technology changed its customers expectations and behaviours. In a mobile-first, on-demand economy customers expect to be able to get “wheels when they want them”, whether it’s a ride hail, e-scooter, shared car, shared ride or rental car. They want to access specific vehicles, at specific times, for a specific amount of time, with full control and transparency of the experience. Avis Budget Group knew it had to modernize its technology platform to meet the evolving needs of customers as well as open new potential lines of business.
Avis Budget Group’s approach to risk management
Avis Budget Group’s risk management is driven by a reliance on data and analytics.
In addition to managing the company’s risk, its risk management team is also responsible for selling a portfolio of insurance products to customers who rent its vehicles. Finkel’s team is responsible for structuring the products with carriers as well as the appropriate regulatory filings, as well as analysing the loss ratios to ensure the products are profitable and the appropriate limits are in place.
Finkel highlighted the importance of balancing outsourcing and insourcing; with a high volume of new claims each year, claims management is a major focus for her team. To assist with the volume of claims, in the US Avis Budget Group outsources their automotive and general liability claims to a third-party administrator and also workers compensation claims to another administrator. In the rest of the world, they outsource physical damage claims, both first and third parties.
Finkel highlighted how Avis Budet Group makes decisions regarding outsourcing and insourcing risk management, “We optimise insourcing and outsourcing. As a businesses, outsourcing partners don’t necessarily do certain tasks as well as ourinternal teams. We make those decisions by weighing up the complexity of the activity, financial impact on the business and the dependence on the organisation’s operations.”
Avis Budget Group’s internal team of lawyers and adjustors focuses primarily on large loss claims and circumstances that may be fraudulent. Finkel said, “Our pre-loss team is involved in major transactions like partnerships, acquisitions, and large vendor relationships. Involving the risk management team as part of the deal team is seen as highly beneficial, as they play an important role in structuring deals and partnerships with the appropriate level of risk. Avis Budget Group sees risk-sharing between parties as critical to the success of any deal or major partnership.”
Furthermore Finkel discussed how the company leverages two internal teams who focus either on first-party property damage or liability. “Outside actuaries do high-level analysis to evaluate risk transfer and the risk within the market. The operations team identify segments of revenue that are most profitable, so the expansion of these segments can be strategized,” she said.
Utilising artificial intelligence
Finkel addressed how these modern strategies are reshaping their vehicle damage identification requirements. In a new partnership with Israel-based AI company, Ravin, cameras capture many pictures of a vehicle as it exits a lot and when it returns to a lot. Ravin uses AI to assess the pictures and identify any changes in vehicle condition and evaluate damage at a level more accurate than traditional human evaluation, which was prone to complications and inconsistencies. This increase in accuracy correlates to a decrease in loss cost because of a more efficient – and more accurate – system of evaluation.
Finkel also commented on self-driving cars and how Avis Budget Group could adjust to their integration into modern transportation. First-party and at-fault claims could plummet, but somebody will always maintain, purchase, and sell autonomous vehicles. Liability will become product-based rather than auto-based, shifting to manufacturers and declining claims activity. Avis Budget Group has already received claims relating to Advanced Driver Assistance Systems features; a step along the continuum to autonomus vehciles.
Through the changing mobility landscape, automotive risk will decline. As businesses become more digitised, cyber risk will grow and become the largest risk factor. Businesses will continue to need to find ways to balance the significant benefits that derive from digitisation with the significant risks and costs associated with a world where likely everyone, and everything, will someday be connected.
The views and opinions expressed in this blog are those of the author(s) and do not necessarily reflect that of Aon. We make no representations (express or implied) as to accuracy, completeness, correctness or validity of any information in this blog and accept no responsibility or liability for any errors, omissions or misstatements of whatever nature and however caused.