Car insurance has gone through a big shift in recent years. Sites such as comparethemarket.com provide easy access to price and coverage details, simplifying the decision-making process for consumers. Collision avoidance systems reduce the risk of low-speed accidents and on-board cameras provide evidence of fault, reducing the risk of fraudulent claims and ambiguity. But what's next in automotive insurance?
The connected car has already become a catalyst for disruption within the automobile insurance industry. Through the Internet of things (IoT), insurers now have access to a wide array of new data sources (telematics) enabling better customer intelligence for segmentation and risk understanding. Location, speed, direction, throttle response and steering ferocity can all be analysed to create a better understanding of an individual and their potential likelihood to have an accident. As a result, insurers like Aviva are offering discounts to customers based on their driving style and habits, rather than more traditional metrics such as age and vehicle choice.
New players such as Google are already testing what is likely to be the next piece in the risk assessment puzzle with their self-driving technology. With sensors delivering a virtual 3D view of any accident, Google is using computer learing to reduce the likelihood of future accidents by learning from previous ones. This same combination of telemetry and learning will likely be employed by insurers to further their understanding of potential risks in a much more fluid way.
With data being provided in real time, and analysis delivered within minutes, future insurance premiums could well change from week to week depending on how your drive rather than being fixed for a year. Insurers could even offer top-up rates similar to those seen in the mobile phone industry, allowing drivers to extend their insurance duration by driving more safely.
The IoT delivers a new dynamic by providing real-time access to this data for manufacturers and insurers. According to the FinTech Collective, an estimated 380 million autonomous or connected vehicles will be on the roads by 2030, potentially reducing the number of accidents by 30%. Fewer accidents mean lower insurance premiums. As a result, the auto insurance market could shrink by as much as 40% in the next 15 years.
With all this data in the hands of manufacturers and their partners, there is a real opportunity for disruption. Traditional insurance houses will likely need to look to build stronger relationships with manufacturers in order to sustain competitive pricing.
Source: FinTech Collective A.I, Auto Insurance. Published online 27 Feb 2016 Source: Insurance Disrupted, Deloitte. Published Online 20 July 2015