The auto insurance industry really hasn't changed much since its inception nearly 100 years ago - but that's all about to be history. The introduction and growing availability of connected and autonomous vehicles has made auto insurance an industry that’s ripe for disruption. Imagine an insurance product that can actually help make the driver - and their passengers - safer. The benefits of today’s new auto tech combined with access to essential data will ultimately provide car owners with insurance solutions that provide more value, a better overall customer experience, and increased safety. It’s the end of auto insurance as we know it, and I feel fine.
Auto technology is changing rapidly
Vehicles are evolving to take over more of the driving responsibilities from humans. They’re now high tech and over time more vehicles will be connected, and autonomous. The new generation of semi-autonomous and autonomous vehicles will be equipped with advanced driver assistance systems (ADAS) and a myriad of sensors, which, ultimately, should not only make the roads safer but also deliver previously unavailable data that will lend valuable insights into accident risk in both semi-autonomous and manual modes. Currently, more and more vehicles are capable of Level 2 autonomy and this segment is forecasted to reach a 33% share of new vehicle sales by 2024. Autonomous driving will disrupt auto insurance by shifting the responsibility from the human driver to the machine - it’s not going to happen overnight but it will happen.
The internet of things (IoT) now includes your car
Yes, you heard that right. IoT is everywhere now, including your car. To best understand how IoT connectivity is going to change auto insurance, you have to also look at how it’s changing the vehicles we drive.
With this new generation of cars, much of the technology is connected. For example, Teslas get over the air software updates regularly. Additionally, large amounts of data can be pulled from entire fleets of vehicles to gain insight into what’s happening in near real-time. IoT connectivity can be used to get a more specific and accurate understanding of driving behavior and create a more precise risk model that enables usage-based discounts.
When you consider traditional auto insurance, even if an app or dongle is being used, that technology is monitoring the behavior of the driver. The insurance programs of the future will be different because of connectivity, and the ability for technology to monitor both the car and the driver. When a vehicle’s advanced safety features are in-use I believe those miles are safer. Additionally, by monitoring routes, traffic, and driving behavior in real-time, there’s an opportunity to make the roads safer by educating consumers and turning over some of the driving to the machine. If the new ADAS systems are used responsibly, the machine should be a safer driver - and IoT connectivity is key to helping prove this out.
Data is the fuel for innovative insurance policies
As autonomous driving increases so does the amount of driving data collected in near real-time. One of the big shifts the insurance industry must embrace is the changing value of data because the value of historical actuarial data will erode over time, and the new store of near real-time driving risk data will become a valuable commodity - it will be the most current, most accurate, and most insightful data set that the insurance industry has been able to collect to date.
Insurers must find a way to harness this driving data, apply the latest machine learning techniques, and develop predictive models of accident risk with higher degrees of precision than previously possible. This will enable the creation of insurance solutions that are vastly different from what’s been seen before. Now, technology will be monitoring the car, how often the car’s autonomous and semi-autonomous features are being used, and evaluating risk in near real-time.
This is significant because when new safety features have been added to cars in the past - airbags, anti-lock brakes, etc. - insurance companies have monitored the impact of these features over several years, sometimes a full decade, before discounts were realized for consumers. Because the technology in the new generation of cars is connected - it’s now possible to get large amounts of data from entire fleets of vehicles. This allows insurers to underwrite at the speed of tech vs. having to wait for years of historical data to populate actuarial tables.
Consumers should expect transparency
Have you ever received your insurance statement to find that it had either increased or decreased? Increases tend to be for obvious reasons that one can recall - a traffic ticket or a fender bender, for instance. But have the decreases ever left you scratching your head, happy that it’s happened, but wondering how you can make this a more frequent event? Us too.
When an insurer is able to combine real-time driving and vehicle data, consumers will be able to better understand changes in premium over time. Auto insurance premiums should go down for people that embrace advanced safety features and use assisted driving systems like AutoPilot, Super Cruise and Co-pilot 360 in a safe way. And we believe that level of transparency will be better for everyone!