South Korea-based automaker Hyundai is moving into the car insurance business, joining a growing list of manufacturers including Tesla, Honda, and GM. The company recently filed a trademark application for “Hyundai Secure+,” signaling its intent to offer insurance services encompassing underwriting and administration of property and casualty insurance, with a focus on automobile coverage.
This move comes shortly after Hyundai, along with Kia, reached a
The economics of the insurance market are a significant factor. Insurance premiums have risen by over 40% since 2019, and insurers currently spend as much as 20% of their revenue on marketing, advertising, and agent commissions, according to industry observers. By internalizing insurance operations, automakers like Hyundai aim to reduce these costs and potentially share savings with dealerships.
“By bringing insurance in-house, auto companies can keep the marketing and commission costs down and/or share some of that with dealerships,” explained Guillermo Francisco Cornejo, a former Hyundai Capital executive. He further noted that traditional insurers have been slow to incorporate pricing adjustments driven by emerging technologies, such as autonomous driving features. “By moving a little faster, original equipment manufacturers can help reduce insurance costs and sell more cars without taking underwriting losses,” Cornejo said.
Hyundai’s strategy aligns with a broader trend within the automotive industry. Automakers are increasingly seeking to extend customer relationships beyond the initial vehicle sale, offering a comprehensive ecosystem of services including financing, warranties, and now, insurance. This approach allows manufacturers to streamline processes and maintain greater control over the customer experience.
Chad Watwood, an attorney with LawBike Motorcycle Injury Lawyers in Atlanta, highlighted this benefit, stating, “It enables them to streamline the dispute process and maintain control of the customer relationship.”
Tesla pioneered this model in 2019, introducing a data-driven insurance offering that leverages vehicle technology to determine rates based on driving behavior. Honda followed suit last year with the launch of Honda Insurance Solutions, integrating insurance products directly into its digital sales platforms.
While some automakers are establishing fully licensed insurance carriers, others are opting for partnerships with existing insurers. Ford, for example, collaborates with Alset Insurance Services to offer Ford Insure. Rivian’s insurance program is primarily underwritten by Nationwide and, in some cases, Cincinnati Insurance Company. Volvo Car Financial Services operates as an independent agency and digital platform, facilitating insurance shopping through its app and partnering with established insurers. Toyota has also adopted a partnership approach, providing coverage options at the point of purchase.
The common thread among these initiatives is the promise of improved customer convenience and lower insurance costs through the utilization of telematics, driver behavior analysis, and vehicle repairability data. Automakers believe these factors can provide a more accurate and equitable basis for premium calculations than traditional actuarial models.
However, the entry of automakers into the insurance market is not without its critics. Some industry professionals express concerns about added complexity and potential challenges for consumers. Ben Galbreath, a partner and insurance agent with Wallace & Turner Insurance in Springfield, Ohio, cautioned that this shift “has the potential to complicate things.”
Galbreath explained that as households insure multiple vehicles through different carriers, policies may become fragmented and complex, creating difficulties for consumers and traditional insurance providers, particularly when seeking umbrella coverage. Umbrella policies often require underlying auto coverage to meet specific criteria, which automaker-issued policies may not always satisfy.
Reinsurers, companies that provide insurance for insurance companies, are also expected to scrutinize this trend closely. Galbreath noted that they will need to assess new risk factors associated with automaker-issued policies before allowing umbrella coverage to be layered on top, potentially further complicating the availability of comprehensive coverage.
The move by Hyundai, and the broader industry trend, represents a significant disruption to the traditional auto insurance landscape. While the long-term implications remain to be seen, automakers are increasingly positioning themselves as comprehensive mobility providers, extending their reach beyond vehicle manufacturing and into the realm of financial services.
