There is an interesting debate involving a couple of possibly competing trends: one is the use of Telematics to support Usage-Based Insurance (UBI); the other is the emergence of Driverless Vehicles. We think that some of the discussions might be muddling some issues — and, regardless of the outcome, we think there are some clear winners already. We’d love to know what you think about all this.
In One Corner: Telematics/UBI Initiatives …
We have written on how Telematics enabled UBI has taken hold in some geographies around the world, and wondered what was missing in Canada. There does seem to be traction by some insurers in Canada (the most recent being the heavily marketed Ajusto programme from Desjardins), which, a recent poll suggests, could to play itself out with more announcements through 2013 and 2014.
There is even discussion about a broker driven programme on behalf of select insurers.
And In the Other Corner: Driverless Vehicles ….
Automobile technology has matured to the point where organizations as divergent as auto manufacturers and Google are actively developing autonomous (driverless) vehicles. As our Insurance 2023 colleague, Catherine Kargas, VP At MARCON, has noted in an excellent report on the future of automobile insurance, autonomous vehicles are part of a larger trend which will reduce the demand for automobile insurance (perhaps up to 80%) as we know it.
In addition to determining whether this will occur is another important question: How long will it take?
So, What’s the Competition….
Getting into the Telematics UBI game is a non-trivial, potentially expensive exercise for insurers. Net new systems have to be acquired, old (even new) systems need to be re-configured. New expertise needs to be found and brought in. If the insurer believes that automobile insurance market could be reduced significantly, the business case for UBI could be further challenged.
However, an insurer might see that developing the expertise in using UBI information allows them to capture a high proportion of the current market share and positions the organization to compete for insurance and services revenue as the autonomous vehicle trend expands. On that basis, UBI has a long-term strategic value.
And the Winners Are ….
We don’t know where this will all end, but we do think there are clear winners now:
- Telematics suppliers. There is clearly a market for this technology and for the expertise they bring.
- Data Analysts. We have written about the critical need for the industry to develop skills in data analysis well beyond the current norm. Either option above will test those skills.
- Brokers. Either way the competition goes, there will be confusion in the consumer market. What’s covered, what’s not? What other products (umbrella) can be used? Trained intermediaries are uniquely positioned to address these important questions.
- Insurers and brokers who are thinking about the issues and opportunities, and actively evaluating strategies now. This looks to be both complicated and important.
Ladies and Gentlemen, Place Your Bets …
We’d love to know what you think about this. Are these issues resonating with you? Are these competing trends, or will they come together in a Kumbaya moment? Will UBI get enough traction to become a common feature, or will insurers hold off, waiting for more information? Is the driverless vehicle as disruptive as some of the information suggests?
Leave your comments below. And, set your own odds, if you wish.