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The insurance sector rocked by self-driving vehicles
Dino Collazzo
“Self-driving cars” will greatly limit the number of accidents on the roads and old insurance policies will soon be eliminated. Nevertheless, according to Matteo Carbone, director of the Connected Insurance Observatory, new policies against cyber risks, integrated services as well as the use of the so called “black box” represents a new business opportunity for insurance companies.
Goodbye insurance! As increasingly “intelligent” vehicles make their appearance on the market, soon to be followed by totally autonomous vehicles, the insurance sector will probably see their earnings take the plunge. In fact, Advanced driver assistance systems and the presence of on-board software and sensors able to connect to external objects and infrastructures, will result in greater safety for tomorrow’s motorists and the consequent certainty of fewer road accidents. A scenario that doesn’t bode well for the insurance sector which can expect a strong contraction in insurance premiums. Nevertheless, despite a number of surveys and scenario analysis indicating in 2020 the year when insurance companies will see part of their earnings disappear, some insist in warning against the axiom: “self-driving cars equal zero risks therefore less insurance policies”. “True, as intelligent self-driving vehicles make their appearance on the market, it is easy to predict fewer accidents and greater road safety which translates in a reduction of insurance premiums – says Matteo Carbone, founder and director of the Connected Insurance Observatory. But equally true, though, is the fact that this technology carries also new risks, such as, for example, cyber risks, which means new business models like short term policies or tailor made solutions. This goes to show that, despite these momentous changes, there is no guarantee that the insurance sector will suffer any major setback. Clearly, though, a transformation is required”.
According to a study performed by the Swiss Re Group (a leading Swiss wholesale provider of reinsurance) and Here (a company which provides mapping data and technologies as well as cloud services for the automotive world), currently, 42% of the gross premiums written in the property/casualty insurance segment globally, must be ascribed to car insurance. The growing presence of connected vehicles equipped with Adas sensors, able to “inform” the on-board computer in real time about possible dangers in order to assist and support the driver in his decision making process, will have the effect, in the long run, of eliminating 80% of road accidents. A positive result indeed in terms of fewer fatal accidents and injuries, but one that will also be responsible for the progressive disappearance of 20 billion dollars in insurance premiums by 2020. On the other hand, Swiss RE researchers insist that despite the risk reduction, proportional to the increasing number of hi-tech vehicles on the road, the global volume of car insurance premiums will continue to grow within the next 20 years, thanks to a higher demand of insurance policies in emerging economies, which will offset the loss in the more advanced economies. However, this reservoir is destined to dry up once self-driving vehicles will be the only ones left running.
“We are all thinking about a long term future and we imagine a world in which all the vehicles on the road will be totally autonomous – underlines Carbone. But it’s quite difficult, though, at this stage, to know exactly what road mobility will be like in the future, and this applies also to the insurance sector. What we can analyze, though, is the current transition phase where we will have a few self-driving vehicles among many traditional ones. In case of an accident, who will be considered responsible, the driver or the software? And that’s where the Black Box comes into play”. It is no coincidence, therefore, that these digital devices – Italy being the world leader in this field with 4,8 million policies linked to the use of a black box in 2015 alone, and a growth forecast for 2020 in the region of 12 million – represent a sector in which insurance companies are concentrating most of their investments. Both in producing a specific driver profile and assessing if the on-board presence of hi-tech devices will be rather useful in establishing beyond any doubt whether the use of Adas assistance devices will cause the driver to pay less than the usual attention. “Nowadays Black Boxes are able to detect a motorist’s driving style – observes the director of the Observatory – but we expect that, by as early as 2017, we will be able to detect the driver’s behavior inside the car as well. It all comes down to integrating information on the motorist’s driving style and the total distance travelled with the surrounding context and level of distraction. These are areas in which the most advanced insurance companies are already investing their resources”.
Not just Black boxes, though. The insurance sector has already started looking, with growing interest, at the opportunity of providing additional services to traditional compulsory policies. These are business opportunities limited to specific niches in the market, but could become vital for the survival of the property/casualty car insurance segment. In other words, it’s all about insuring people from the risks linked to mobility in general, including car sharing schemes, taxis or busses. Dedicated and temporary policies are currently being developed by several start-ups along with some of the most important insurance companies. Finally, if future scenarios are showing signs of a strong contraction in insurance premiums, what can and should be done now is identifying those services that clients are interested in and are willing to buy. In so doing, when risk associated policies will inevitably start dropping, the importance of insurance companies will continue to be significant, as they will be able to offer increasingly dedicated and diversified policies. To seize these opportunities, though – concludes Carbone – a number of innovations and developments are required. And many insurance companies are already investing hefty sums in this business”.
According to a study performed by the Swiss Re Group (a leading Swiss wholesale provider of reinsurance) and Here (a company which provides mapping data and technologies as well as cloud services for the automotive world), currently, 42% of the gross premiums written in the property/casualty insurance segment globally, must be ascribed to car insurance. The growing presence of connected vehicles equipped with Adas sensors, able to “inform” the on-board computer in real time about possible dangers in order to assist and support the driver in his decision making process, will have the effect, in the long run, of eliminating 80% of road accidents. A positive result indeed in terms of fewer fatal accidents and injuries, but one that will also be responsible for the progressive disappearance of 20 billion dollars in insurance premiums by 2020. On the other hand, Swiss RE researchers insist that despite the risk reduction, proportional to the increasing number of hi-tech vehicles on the road, the global volume of car insurance premiums will continue to grow within the next 20 years, thanks to a higher demand of insurance policies in emerging economies, which will offset the loss in the more advanced economies. However, this reservoir is destined to dry up once self-driving vehicles will be the only ones left running.
“We are all thinking about a long term future and we imagine a world in which all the vehicles on the road will be totally autonomous – underlines Carbone. But it’s quite difficult, though, at this stage, to know exactly what road mobility will be like in the future, and this applies also to the insurance sector. What we can analyze, though, is the current transition phase where we will have a few self-driving vehicles among many traditional ones. In case of an accident, who will be considered responsible, the driver or the software? And that’s where the Black Box comes into play”. It is no coincidence, therefore, that these digital devices – Italy being the world leader in this field with 4,8 million policies linked to the use of a black box in 2015 alone, and a growth forecast for 2020 in the region of 12 million – represent a sector in which insurance companies are concentrating most of their investments. Both in producing a specific driver profile and assessing if the on-board presence of hi-tech devices will be rather useful in establishing beyond any doubt whether the use of Adas assistance devices will cause the driver to pay less than the usual attention. “Nowadays Black Boxes are able to detect a motorist’s driving style – observes the director of the Observatory – but we expect that, by as early as 2017, we will be able to detect the driver’s behavior inside the car as well. It all comes down to integrating information on the motorist’s driving style and the total distance travelled with the surrounding context and level of distraction. These are areas in which the most advanced insurance companies are already investing their resources”.
Not just Black boxes, though. The insurance sector has already started looking, with growing interest, at the opportunity of providing additional services to traditional compulsory policies. These are business opportunities limited to specific niches in the market, but could become vital for the survival of the property/casualty car insurance segment. In other words, it’s all about insuring people from the risks linked to mobility in general, including car sharing schemes, taxis or busses. Dedicated and temporary policies are currently being developed by several start-ups along with some of the most important insurance companies. Finally, if future scenarios are showing signs of a strong contraction in insurance premiums, what can and should be done now is identifying those services that clients are interested in and are willing to buy. In so doing, when risk associated policies will inevitably start dropping, the importance of insurance companies will continue to be significant, as they will be able to offer increasingly dedicated and diversified policies. To seize these opportunities, though – concludes Carbone – a number of innovations and developments are required. And many insurance companies are already investing hefty sums in this business”.
