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Mobility and Event-Based Pricing

Pricing services is often arcane, taking into account many factors beyond simple supply and demand. As our world becomes more complicated and connected, it’s likely that mobility and event-based Pricing will increase and become more complicated.

We’re already familiar with the basics of this. It costs more to ride a subway train during rush hour than it does at 9pm. “Congestion pricing” has traditionally been used to try and steer people who are not in a hurry out of peak hours. The same principle is also applied to tolls, congestion taxes, and opening or closing HOV lanes in specific directions.

So, what will the future likely bring?

More Route-Based and event-based Pricing

Route-based pricing is often used in larger rail networks. For example, in the UK, certain routes cost more if you elect to go through a station in London. In the future, algorithms and big data may be used to apply route-based pricing to local transport. For example, making it cheaper to take a subway train than the bus when there is construction on the bus route, thus allowing the company to run fewer buses through the chokepoint (in most cities the subway or light rail is more expensive).

IOT techniques will allow for route-based pricing based off of the location of the user’s transit card or phone, steering people to routes that are less crowded and congested where possible. For tolls, it could combine with GPS systems to provide a route to drivers that avoids traffic jams, with the added incentive of avoiding or reducing tolls.

More Congestion Tolls

London implemented congestion tolls years ago. New York has also done so, discouraging people from driving into the city. With more sophisticated systems, congestion tolls could be based off of route and time of day, improving traffic flow. Combined with HOT lanes, this is only going to grow. In the future, self-driving cars may talk to each other and automatically choose the best route, but in the interim congestion tolls based off of time and location will start to serve the same purpose. Mobility pricing is being looked into by a number of cities in Canada, including Vancouver, which is likely to implement congestion tolls soon.

Jurisdictions are also starting to implement vehicle taxation based off of number of miles driven, to replace gas tax. This could also have route and time discounts applied.

In the future, congestion tolls may be dynamic, with the system using smart city technology such as sensors in lamp posts to determine exactly how many cars are on a given road at a given time. Congestion tolls are often used to fund transit projects.

Better Event-Based Pricing

AI can be used to improve event-based pricing for both businesses and customers. By allowing hotels to automatically calculate and push higher pricing for certain events and then restore the old price if the event is canceled, it will save a lot of time. It also allows event-based pricing for much smaller operators and for people who list their home on couch surfing sites.

Whilst some people might not consider this to be a good thing (many consumers are frustrated by the seemingly-arcane dynamic pricing used by airlines), as the system becomes more sophisticated it should become fairer. People will, however, have to get used to the concept that different people may not be offered the exact same price for the same product. Improved transparency will be key, and systems may have to be programmed to reveal the factors that go into a price so that customers can make educated decisions. For example, somebody looking for a hotel room for a vacation may not be aware of a major local high school football game pushing prices up in one neighborhood.

In fact, in the future, we may all have virtual personal assistants who counter event-based pricing by using dynamic search methods to find cheaper products without us needing to spend hours searching.

Fairer Insurance Premiums

Right now, insurance premiums are based off of very broad categories of risk. For example, auto insurance may be based off of your vehicle type, your age, and your location. This lumps individual drivers in with categories that may not reflect their risk. Yes, many 20-year-old men drive recklessly, but this is not true of all of them. In the future, your car may keep an eye on your driving habits (until, at least, your car is doing the driving) and send data to your insurance company that allows them to charge you appropriate premiums. If you drive less frequently, have good driving habits, and maintain your car properly you can keep your premiums down. Of course, some people might find this to be an unconscionable invasion of privacy, and companies will have to be very careful how they use and store the data. But drivers will no longer be subsidizing less safe drivers in the same demographic group. Insurers are likely to charge a higher rate to drivers who refuse to use the system. There is, however, some risk that repair costs (and thus premiums) may go up because of the cost of damage to the computer systems themselves. And insurance companies may encounter an overall loss which will require things like improved methods to combat fraud and charging for add-ons like roadside assistance.

Smart housing may also help determine home insurance costs by, for example, giving you a premium incentive for remembering to arm the burglar alarm or for having an alarm which detects when everyone has left the house and arms itself automatically.

Insurers Moving Beyond Insurance with event-based Pricing

Insurers may offer more and more services that are not strictly insurance as we see it now. This might include roadside assistance, as already mentioned, partnering with companies to provide smart home security systems, etc. Health insurers are already partnering with medical monitoring companies to offer good deals to older and mobility-impaired individuals in the hope that the monitoring systems will reduce the number of accidents and health crises they have.

Some commercial insurers are also starting to move into cyberinsurance, in order to help their customers reduce the risk of a data breach, which can result in massive costs and companies going out of business.

For insurance providers in particular, the growth in congestion tolls and the improved information about exactly how your customers drive and use their cars will allow for dynamic pricing that will improve things for customers and for you. STRATECTA can help you develop new event-based pricing models that will help you preserve revenue and provide better customer service. Contact us today to find out more.

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Georg Tichy

Georg Tichy

Georg Tichy is a management consultant in Europe, focusing on top-management consultancy, projectmanagement, corporate reporting and fundingsupport. Dr. Georg Tichy is also trainer, lecturer at university and advisor on current economic issues. Contact me or Book a MeetingView Author posts