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Auto Insurance and Automated Vehicles: Who’s the Consumer, Who’s the Consumee?

At the recent Insurance-Canada.ca Technology Conference (ICTC2013), there was lots of discussion about how insurers are preparing to consume telematics data.  One presenter turned this around and described how consumer lifestyles, supported by  telematics-enabled self-driving vehicles could be consuming a chunk of the insurance industry.

We’d like to know what you think.  Does this cause you to shift gears in your thinking, or just put the pedal to the metal in driving business.

The New Consumer Is Less  of an Autophile

There have been several reports noting that the use of telematics and other technologies could impact automobile insurance (see a review of some of these in our blog post last May).

Catherine Kargas, Vice President of MARCON, added to this conversation, focusing on changing preferences  of Canadian consumers.  (Kargas presented results of research she had been conducting  at the Telematics Session of the ICTC2013 and authored a white paper on the subject, posted on the Insurance-Canada.ca web site.)

Kargas presents data (primarily Canadian) suggest that we might be at or just beyond what the Economist has called ‘peak car’, including:

  • Urban condo-owners are purchasing units that have no parking spaces,
  • Younger people are getting drivers’ licenses later than they used to, and the percentage of the population holding a drivers license has dropped,
  • Canadian mass transit use is increasing faster than population growth,
  • Canadian subscription to car-sharing services is growing rapidly.

Urbanization is a major driver (pun intended) for these trends.  In addition, Kargas notes that preferences for telecommuting, home entertainment, health interests (biking, walking), and costs of personal automobile ownership are contributors to a decline in the love affair that Canadians have with their ‘own’ cars.

The Driver-less Vehicle Getting Street Cred

Simultaneous with the change in consumer interests, there is an alternative to personally driven vehicles.  There was lots of press about the Google car when it was introduced in 2010.  That test vehicle has matured.  It is now licensed for use in 3 US states and, as Henry Blodget recently blogged on Yahoo Finance,  has been driven (if that’s the right word) more than 300.000 miles without an accident while it was self-driven (a driver took over at one point and caused a fender bender).

While wide-spread use of the driver-less car may be some way out, Kargas points out that autonomous driving features are already being deployed the standard market.  Some are in use now now (cruise control, lane-keeping assist, anti-lock brakes, parking assist, pedestrian recognition).  Others are just on the horizon.  Kargas notes: ” The 2014 Mercedes-Benz S-Class will be equipped with 360o vision allowing the vehicle to build 3D images of its environment plus internal sensors to monitor the driver.”

 What does this mean for Automobile Insurance?

Last year, Celent’s Donald Light published a report which put forth a scenario where four factors – Telematics, Collision Avoidance, Automated Enforment, and Driver-less – could reduce accidents which could cause reduce liability and auto physical damage premiums substantially.

Kargas adds two more elements:  (1) the reduction in total number of vehicles based on urbanization, shared vehicle services, etc.; and (2) the possibility that with the elimination of the driver, the vehicle manufacturers themselves may elect to assume liability for misfeasance or malfeasance of their products (and become the primary insurer).

So what’s Next?  What Do You Think?

Kargas, Light, and other analysts are keen to note that they are describing ‘sceanrios’ not predictions at this point.  Kargas notes that MARCON is embarking on additional research to introduce timelines and a better description of impacts with the introduction of driver-less vehicles.

We’d like to know what you think.  Are Kargas, Light and others on the right road – reduced driving, accidents, and premiums on the horizon – or have they taken a detour from the path to the real future?  In either case, what will the impacts be for insurers, agents/brokers, adjusters, etc.?  Will this change our map to the future.

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