Demand for last-mile delivery, parcel-courier delivery, rideshare services, and mobile delivery has exploded in the last two years. Even before the COVID-19 pandemic, Americans were latching onto the convenience of delivery services, whether it be for groceries, takeout, or household items. But in 2020, when the pandemic shut down in-person business for months on end, e-commerce deliveries rose at least 25%.

While more and more people return to public venues, the rapid growth and streamline of delivery models and fleet types has enabled the ease of delivery to seep into the American lifestyle.

This growth in the delivery industry is not expected to subside; nor are the increasingly high expectations of consumers. According to a 2021 Shopify study 49% of retail brands are investing in their delivery practices in 2022 and beyond to meet the 60% of consumers who expect same-, next-, or two-day delivery options.

Restaurants and other food service businesses are also looking into how to upscale their delivery options as over 40% across generations and up to 64% of millennials, say that purchasing takeout or delivery food is essential to their way of life.

Just as businesses have expanded their delivery options to meet this new demand, transportation insurers are looking at alternative ways to price their coverage. Traditional insurance pricing models doesn’t cut it anymore, as each delivery mode has distinct ways of operating. Insurance carriers are adapting their premium pricing structures to these different types of delivery.

Capturing Driver Behaviorto Price Coverage & Improve Safety

Transportation companies and other businesses and their fleets have been using technology to capture in-cab data for years to find drivers and improve safety.

In-cab technology plays a part in not only negotiating and reducing insurance cost by an effective means for fleets to monitor drivers, produce leaderboards and reduce incident and accident frequency.  Driver shortage and recruitment of new drivers will depend on the effective deployment of in cab technology solutions to effectively train up and retain quality drivers in the coming years.

In-cab data can be used to improve efficiency across a fleet by optimizing routes, reducing accidents, and provide targeted support to drivers that need it.

Now insurance carriers are looking to use the same information as part of the commercial insurance application process for all types of fleet – from utility vehicles, to telecom and municipal fleets.

Technology and driver behavior data can improve the accuracy of pricing based on much more than just a driver’s motor vehicle record (MVR) and credit score. The way of the future is taking into account driver behaviors such as rapid acceleration, hard braking, distracted driving, and cell phone usage.

But each delivery mode has distinct ways of operating, and insurance will soon provide different pricing models to match. Here’s how it’s likely to play out:

Last-Mile Delivery Keeps Growing

Insurance carriers are trying to keep up with how quickly the last mile delivery market is growing. In 2020, the last mile delivery market was valued at $108.1 billion globally and it’s expected to reach $200.4 billion by 2027.

Pricing models for this segment are moving heavily to usage-based insurance (UBI), with carriers charging per mile, per trip or per day. UBI allows companies to pay for the coverage they need while also keeping pace with their growth.

Carriers are also tying rates to the delivery on a revenue basis. As revenue increases, premiums increase. However, losses and claims will also have a major effect on insurance premiums of growing companies.

Parcel-Courier Delivery & Tech

Regional shopping centers and specialty stores now partner with local services for quick delivery. New insurance models for this segment will be tailored based on mileage, trip, route, or stops based on in-vehicle tech.

Rideshare Insurance

Uber, Lyft, and other rideshare companies have made it easy for people to use their personal vehicles for business. They even offer their own insurance to their drivers. But this insurance only covers the driver once they’ve accepted a ride request.

Insurance carriers are considering pricing by intervals to fill this gap. For example, one interval is when the driver is waiting to drive for hire, a period that carries reduced exposure; another interval starts when the passenger is in the vehicle. Leveraging technology to price accordingly, UBI may be one answer.

Mobility on Demand (MOD)

Shared mobility such as scooters and bikes are now playing a big role in last-mile delivery, an easy partnership due to the similar business models amongst the two industries. Developing a scalable insurance policy for mobility will likely include distinctions for short trips and different legs of a trip, all relying on data coming directly from the vehicle.

About the author: Lisa R. Paul, CPCU,  is Chief Strategy Officer for Transportation for global insurance brokerage Hub International. This article was authored and edited according to WT editorial standards and style. Opinions expressed may not reflect that of WT.