Risk Insider: Jillian Slyfield

Vehicle Subscription Leases Bring Challenges for Insurance Industry

By: | September 21, 2018 • 3 min read
Jillian Slyfield serves as Digital Economy Practice Leader at Aon. In this role, Slyfield addresses digital disruption of traditional industries and the on-demand economy. Her focus areas are Alternative Mobility, The Future of Work and New Economy Digital Risk. She can be reached at [email protected]

The digital economy is changing the way consumers interact with the personal vehicle value chain. The stage is set with declining vehicle ownership, while access to mobility options is increasing.

The World Economic Forum anticipates $90 billion worth of operating profits will migrate from traditional to digital channels open for competition among Original Equipment Manufacturers (OEMs), dealers and third-party platforms.

One such option is vehicle subscription lease — this is the third option in the “buy,” “lease” or “subscribe to” vehicle decision you are now able to make during your visit to a dealership. Drive off the lot with a car and forget about oil changes, maintenance, wear-and-tear or the hassle of a claim should one occur.

Two Types of Vehicle Subscription Leases

Subscription leases come in two basic models: 1) a lease-like model and 2) a swap model. In the lease-like model, a subscriber gets access to a specific vehicle under a limited duration lease. In the swap model, a subscriber drives a car off the dealer lot and when they’re ready to drive something different, they open an app, select a vehicle and swap into that new car.

This can happen two days or two months after starting the lease.

As consumers, many of us covet the convenience of subscription. As insurance professionals, we also recognize the underlying challenges with insurance within the subscription agreement. Questions arise, such as:

  • Does coverage trigger when someone other than the subscriber drives the car?
  • When the dealership concierge is swapping the car, who is responsible for any resulting liability and physical damage?
  • How will a personal umbrella respond to a commercial primary layer?
  • Do Graves Amendment protections apply (whereby an owner of a vehicle who leases or rents the vehicle to another person is not held responsible for resulting liability)?

Those questions and many more are being asked by insurance underwriters, regulators and state governments. The result is a patchwork of state reactions to the business model, causing confusion, a lack of uniformity in insurance solutions and — in at least one case — the inability for a platform to operate because the state government has not yet determined how to treat the business model for insurance purposes.

As consumers, many of us covet the convenience of subscription. As insurance professionals, we also recognize the underlying challenges with insurance within the subscription agreement.

Insurance brokers and carriers are working together, often in conjunction with the insureds themselves, to create auto policies that have characteristics of both commercial and personal lines policies.

In the case of commercial lines solutions, the coverage needs to respond and feel like a personal policy in the way a subscriber utilizes the coverage and the concierge-level service at the time of loss. Subscribers drive these vehicles as a personal vehicle and therefore coverages such as “Drive other car” are critical to the success of the business model.

Conversely, personal lines carriers see an opportunity to create a product that can be delivered at the platform level, or risk being disintermediated in the personal vehicle value chain.

Although many dealerships and OEMs are referring to their subscription programs as pilots, many OEMs operating in the United States and around the globe have either entered the market or are rumored to be entering the market in 2019.

We can be confident in that vehicle subscription leases are here to stay, and the insurance industry is working quickly on getting up to speed to ensure all questions are answered. &

More from Risk & Insurance

More from Risk & Insurance

In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.


R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.


R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]