Before the arrival of the reality of the autonomous car, the world must change to adapt to the needs of this type of vehicles, but also as part of a global revolution that will redefine the concept of cities, mobility, and sustainability. The car will be more a service than a product, and the peculiar characteristics of the connected reality of intelligent vehicles will be the cornerstones of these changes.
The convergence between mobile technology and automotive innovation is revolutionizing the way we drive and change, and this will undoubtedly have a massive impact on the insurance market. In fact, a white paper published by KPMG in June 2015 claims that “the transformation to autonomous vehicles could bring the most significant change in the auto insurance industry since its inception.
Forces behind car insurance change
Auto insurance moves 700,000 million dollars in policies every year in the world, which accounts for 42% of all GeneralInsurance on a property or casualty. With these figures, it is normal that insurers are already thinking about alternatives to the paradigm change that is about to come.
Since technological evolution condemns entire sectors to disappear or at least reinvent themselves to survive car insurance, as we know it today, will no longer have a utility and a demand when autonomous vehicles are the majority in our streets, or at least, according to the experts of Accenture John Cusano and Michael Costonis in the article Driverless Cars will change Auto Insurance Here’s How Insurers Can Adapt published by Harvard Business Review.
The authors predict that by 2035 there will be in the US 23 million entirely autonomous vehicles. The arrival of the autonomous car will have an immediate direct consequence: the drastic fall of the accident rate on the roads. Statistics place the human factor as the leading cause in more than 90% of accidents. Driving will be safer, with fewer risks, and the number of compensations and payments by insurers will plummet. The premiums charged to the insured should, accordingly, adapt to the new situation and be reduced as well.
However, there is still a break for insurance companies, since the transition to the autonomous car will be gradual. In a scenario with five stages -0 is that all vehicles are traditional and 5 is that all are autonomous-, we would be currently between 0 and 1: cars begin to incorporate elements related to autonomy. There is time to react before reaching stage 5.
Opportunities with the automotive revolution
The key is that the car insurance industry finds new ways to earn income in a world dominated by the autonomous car. Cusano and Costonis identify three areas that could be exploited by companies:
- Cybersecurity. Bearing in mind that cars will increasingly be computer equipment connected to networks, securing vehicles against hacking (ransomware, cybercrimes, and misuse of information …) will be a secure source of income. The article ventures the figure of twelve billion dollars that can be moved by this concept. When talking about the safety of entire fleets of vehicles, the number can grow exponentially.
- Reliability of the product. The teams of the autonomous cars are increasingly sophisticated and, therefore, more onerous. Failures related to software, device memory or artificial intelligence algorithms can undermine user confidence in the manufacturer brand and sink sales. It is another of the fields in which there are opportunities for insurers.
- Infrastructure insurance. The necessary technological infrastructure of equipment and services in the cloud to guarantee the operation of autonomous vehicles is something that is also capable of protecting and ensuring.
For the authors, the quantification of income that can generate these concepts would amount in 2026 to 81 billion dollars, 15 billion annual 2020 until the year in question.
The industry must begin to develop strategies for the future of driving
The steps that recommend that insurance companies continue to adapt to the new environment are the following:
- Develop a specialization in big data and analytics, so that you can effectively manage all the information generated by an autonomous car.
- Generate the infrastructures and the actuarial models necessary to adapt to the technological improvements that are modifying the cars.
- Examine the ecosystem of alliances with strategic partners, such as vehicle manufacturers, the software and communications industries and public administrations, among others.
- Redesign the current business model, based on securing thousands of small risks, and transforming it into another one that ensures a small number of significant uncertainties.
Conclusion
The simplest solution for insurance may be to cover vehicles, rather than drivers, while another possibility envisages a government tax to be imposed on all autonomous vehicles to ensure insurance coverage. However, it is clear that the insurance market must begin to face this new scenario, develop new strategies and actively transform these next obstacles into new business opportunities.
As always, the alterations will be profound and will reward the most innovative solutions. It is time for the industry to think, reduce speed, step on the accelerator pedal, and seriously face the future of vehicle insurance.
