There is no shortage of speculation about how personal auto insurance may become obsolete in a driverless era, how auto manufacturers’ product liability may compete with personal auto insurance, and how ridesharing may replace personal car ownership and vaporize the need for personal auto insurance. Those topics make good cocktail conversations, but they have little practicality for insurers for the time being.
Since it will take decades for the vast majority of vehicles on the road to become autonomous, the near-term challenge insurers are facing is elsewhere and more mundane: It’s all about the transition state, not the speculative end-state.
First, vehicles are increasingly stuffed with expensive electronics, already driving up the cost of claims per incident. While the frequency of claims may diminish, their severity may increase. Second, insurers have limited knowledge of the cars they insure today. As vehicles become sophisticated machines with autonomous, anti-collision capabilities and more, insurers need to get a better understanding of what exactly they are on the hook for. Third, as manufacturers roll out a hodgepodge of autonomous capabilities, insurers need to start worrying about drivers’ proficiency in using them, whether the drivers were effectively trained, and how they end up interacting with their cars. For instance, check out the excellent work Bryan Reimer (@bryan_reimer) is doing at the MIT AgeLab on this topic. Fourth, insurers must worry about how they will assess what happened in an accident and to what extent the man-machine interaction had a role in the crash.
The insurance industry is still very early-stage in this regard. Most insurers lack detailed data on the level of car equipment, insight into drivers’ level of training and proficiency, and a cheap and quick way to access the car computer to better understand what happened in the event of a crash.
Telematics technology could help in a big way. Wider adoption of insurance telematics in particular could help insurers gain deeper insights into cars’ and drivers’ behaviors.
The march to autonomous driving does not threaten the insurance industry, at least not for the time being. It calls, however, for a more aggressive push to popularize insurance telematics. Insurers that still view insurance telematics as a niche product need to wake up and appreciate the role telematics could play in navigating the transition to autonomous driving.