While cyber risks may already be widespread after a quarter of a century of online life, the age of the driverless car has not quite hit our roads just yet – although it is certainly on its way. On-road testing has already started in many countries across the world, and it is anticipated that self-driving vehicles – albeit with somewhat limited functionality – will be on the market in the next decade, while fully autonomous vehicles could be on the roads as soon as 2030.
This will create issues for insurers when it comes to liability. Will the motor policies of the future insure the owners of an autonomous vehicle, and will they provide liability cover for the manufacturer?
Despite much discussion, the industry still doesn’t know the answer to the question about the fundamental nature of insurance in a world with driverless cars – but this fundamental societal change will certainly lead to the creation of a new type of motor insurance policy. Indeed, some insurers have already developed policies for co-shared cars – and more models are certain to emerge in the coming years.
Many people think that these new policies are also likely to have a new breed of customer, and insurers keen to make the most of this emerging market need to start preparing now or risk being left behind.
The introduction of driverless cars is likely to coincide with a drop-off in vehicle ownership as autonomous fleets become the norm for individuals looking to get from A to B – an evolution of the recent shift towards ride-sharing and the rise of part-time taxi services using private vehicles.
This will mean that motor insurers will need to move further away from the commoditized mass market business model that has dominated the industry for years, and instead focus on insuring fleets of vehicles owned by mobility companies hiring out their vehicles on a per-trip basis.
This could require insurers to be much more accommodating of usage-based insurance that is sold on a subscription basis, rather than via an annual premium (more on that later). Indeed, several insurers have already started co-insuring cars using co-sharing apps, and we can only expect to see more of these initiatives as driverless cars start to become the norm on our roads. Of course, before these fully autonomous cars become a reality, insurers will still have to deal with the semi-autonomous and connected cars that are already on the market.
Advanced Driver Assistance Systems (ADAS) are now the norm for all new cars, providing drivers with a suite of tools such as lane departure warnings and automatic braking to improve safety and reduce risk. Telematics technology, meanwhile, is already changing the way policies are underwritten with the additional data it provides on things like driving style, time of journey and driving location.
The connected nature of these systems gives insurers access to a stream of real-time data that can be analyzed automatically by artificial intelligence and machine learning. Insurers can then send tailored feedback to their drivers on how to improve their driving performance.
This means that insurers can directly influence the risk profile of their customers, driving down costs and improving road safety. Not only does this make that particular driver a much safer risk to insure, it can also allow insurers to offer policyholders premium discounts or special offers at affiliated businesses as a reward for safer driving.
This is not only a great tool for building brand loyalty, these incentive schemes are also a great way of changing driver behavior and improving the overall risk profiles of both customers and insurers. Such technology can also be used in the claims arena to automate processes and streamline the user journey
Things like automatically choosing the best garage to carry out an auto-repair and keeping customers constantly updated with the process of their claim may not seem like game-changers, but for consumers looking for a faster and more on-the-go claims process the benefits can be great.