Technology, car-sharing and millennials are changing the insurance world
Telematics insurance has emerged from its initial niche market and is growing increasingly popular with safe and virtuous drivers around the world and with others on account of its vast range of added value services. However, the insurance market must now prepare for the forthcoming paradigm shift in mobility that has been set into motion by the telematics revolution itself.
Meanwhile, vehicle ownership trends are slowly, but certainly changing – maybe even becoming a thing of the past. Millennials do not see cars as status symbols and clearly prefer the lower cost and lesser hassle of ride-sharing and car-sharing services.
Moreover, the rise of self-driving vehicles is set to radically transform our cities. Experts claim that we will see autonomous vehicles on our roads within ten years and the standard claim is that the rise of smart, self-driving vehicles will reduce road accidents by as much as 90%.
Is the insurance market ready to face this brave, new world?
Perhaps the major issue faced by the insurance market is how to negotiate the initial transition period in which self-driving cars are introduced.
Indeed, insuring a world of only self-driving cars may be rather simple, but everything becomes far more complicated if you consider that there will be a period in which both humans and artificial intelligence systems will be driving vehicles on the same roads. Automated cars may well be extremely safe, but as long as there are human drivers around, the accident rate will not decrease significantly. As a matter of fact, some experts venture to suggest that accidents may even increase.
Then, factor in legal issues and national legislations and this transition period, could turn out to be rather long and confusing for everyone involved – especially for the insurance market.
As with the adoption of any new form of technology, let alone such a paradigm shift in age-old habits, many people will not want to use a self-driving car. They will not trust the technology or will insist they drive better – or feel safer if they do. Again, this will prolong the transition period.
The mass adoption of self-driving vehicles may well take more than 10-15 years from their initial introduction: both for people to learn to trust this new technology and for the older cars to be phased out.
Insurance vs. Warrantee
Technology poses a further issue: connected vehicles are already teeming with sensors, automatic braking systems and a wide range of other smart systems, but the forthcoming self-driving vehicle revolution will populate our roads with mobile high-tech systems controlled by artificial intelligence platforms. Who will be responsible for satellite failures and communication breakdowns, or for sensor damage? And what about cybersecurity threats and hackers?
The insurance industry will have to sit down with the automotive industry to develop a new set of standards to guarantee and protect the automotive future.
Naturally, roads are always part of the equation. Self-driving cars require smart infrastructure. What conditions are the roads in? Have the lines been freshly painted? And what about during snow or heavy rain? How long will it be until our autonomous vehicles are safely free to travel virtually anywhere?
Our cars are parked 95 percent of the time. That’s why ride-sharing and car-sharing platforms and similar services have become so popular. Cars are no longer a status symbol for the new generations, so owning one that is hardly used does not make much sense.
Shared mobility will certainly overlap – maybe even fully merge– with the self-driving car revolution. And it will certainly have a more immediate impact on the insurance market.
Shared vehicles are destined to be used far more frequently than traditionally-owned vehicles. This means that they will wear down more rapidly, possibly leading to accidents with more than one driver. Furthermore, these vehicles are often shared by friends and colleagues, rather than by families, so insurers will have to devise new insurance models.
Usage-Based Insurance Model
Clearly, the UBI-model of telematics insurance is in pole position to resolve this issue. Insurances can follow and monitor drivers – through smartphones, watches and other wearables – rather than vehicles, and custom-tailor policies directly to each user.
Nonetheless, whatever pans out in the future, after self-driving cars are introduced, it will probably be a while before we behold a world of driverless cars that have reached a fully autonomous SAE Level 5, but by then the human element should have dropped out of the equation and the insurance market will be able to take a short break, before the next great innovation appears on the road.
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