Last week I attended the Future of General Insurance Conference in London.
As customer needs and distribution channels change, a whole new set of challenges and opportunities are arising for incumbents. As a result, one of the more thought provoking sessions — and one particularly close to our core business at Consumer Intelligence — was ‘Motor Insurance: Remaining relevant in a connected world.’
It’s likely you’ve seen reports of the distant but impending doom of the manually operated vehicle, and it’s all but inevitable you will have learned about the rise of Artificial Intelligence, and how it could pave the way for a future of automated claims and policy management, and even underwriting.
But what does it ultimately mean for the almost 40m drivers and insurance policies currently in force on our roads?
Forget driverless cars — think carless drivers
Everyone is talking about driverless cars, but the session asked the question: Will we see more and more carless drivers?
With the rise of platforms like Uber and the sharing economy, coupled with technology that will mitigate, even eliminate the need for a human behind the wheel, set against the backdrop of spiralling motoring costs, the implication is clear.
Could it be easier to just not own a car, and its associated maintenance costs?
An increasing number of reports, including the Insurance Times, say yes. This has significant implications for the composition of the motor insurance market.
"Everyone is talking about driverless cars, but the session asked the question: will we see more and more carless drivers?"
A Bank of England study in March said the motor market could shrink by up to 40%, depending on how aggressively autonomous vehicles were adopted, while a report from Deloitte at the turn of the year suggested the conventional premium pot — in other words the current market — could shrink by as much as 80% by 2040 as new models including carpooling become the norm over the next decade.
Threat to the industry
The industry of course is not standing still on the issue. Players including RSA and XL Catlin are investing heavily in the automated driving space, including developing insurance propositions. And there are no shortage of either incumbents (take Direct Line Group who we heard from at the event or Admiral) or startups (Cuvva or Trov) who are developing new products and business models that reflect new patterns of consumption and expectation.
Still, on a market level, insurers need to be asking themselves the following questions:
- How do we insure autonomous cars?
- How do we use connected technology to help customers?
- Who should we partner with today?
Next, insurers should be considering who, in the future, will be their:
- Suppliers
- Customers
- Competitors
- Distributors
The road ahead
The session suggested that technology will help with security and making our lives safer potentially reducing the frequency of claims, but the assumption that it will inevitably bring down the cost of claims could be overstated as the investment in the technology could net off any savings it generates.
Technology is costly, and while claims frequency will likely drop in the future, severity will increase. As a result, premiums may not fall (even if the market shrinks) — at least not to the extent some people think.
It’s a message we are hearing more and more often, but in motor the meaning feels more literal: moving with the times means giving customers what they want and need, when they want it, and how they want it.
And whether it’s behind the wheel, in the passenger seat, or not even in the car in the first place, putting the customer at the heart of what we do will help instil some of the trust that has been lost.
It’s all about transparency. And after all, a robot generally has nothing to hide.
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