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Emerging Auto Threats and Opportunities: In Conversation with Catherine Kargas

For the third year running, the Insurance-Canada.ca Executive Forum (ICEF2015) will feature Catherine Kargas, Vice President, MARCON leading an expert panel in exploring how upcoming changes to regulations and technological improvements will impact auto insurance over the next decade.

Patrick Vice, Partner at Insurance-Canada.ca, interviewed Catherine for some additional background. Following is an excerpt.

Vice: You have put together quite a panel on the future of vehicles and insurance. Who are the panelists and what is the expertise they are bringing?

Kargas: I believe we have brought together a group of key individuals who will discuss how the technology is evolving.

Kathryn McGarry (MPP for Cambridge, Ontario and Parliamentary Assistant to the Minister of Transportation) will be addressing the issues from the perspective of the Government of Ontario and the Ontario Ministry of Transportation.

 Bob Burrows (CEO, G4 Apps Inc., leading APMA’s Connected Vehicle Program) and Derek Kuhn (VP Sales, BlackBerry Technology Solutions) are two of Canada’s leaders in the space of automotive autonomy and connectivity.

Vice: 10 years is a long time in the world of technology. What are the most surprising trends you see over that period?

Kargas:The most surprising trend for me is how fast the technology in the automotive autonomy space is progressing.

The technological advances of the last few years combined with the rise of new business models in the mobility space have already resulted in some disruption. One need only think of Uber. Just a few years ago, no one had heard of this company. Today, Uber has a valuation of $50 Billion, annual gross revenues of $10 Billion, more than 160,000 drivers and a presence in hundreds of cities around the world. We are seeing only the beginning of the disruption.

A number of trends are combining to create the perfect storm in the mobility space. These trends include increasing urbanization, growing congestion and pollution levels as well as an aging population and a relative disinterest in driving demonstrated by younger adults. Combine these trends with a high cost of ownership and operation of a personal vehicle that is utilized only 4% of the time and you have an ecosystem that is ripe for change.

Vice: You work with insurers and brokers. How ready are they for some of the changes you see coming?

Kargas: We brought up changes in mobility and their implications for insurance at the 2013 Executive Forum. The attendees were essentially in two camps: those who thought I was talking about a science fiction experiment and those who believed that change would happen after they retired. At the 2014 Forum, we had no naysayers but the conversation was limited because the insurance community had not quite understood the implications of this technology.

Many of the Canadian insurance executives that I have been in contact with understand that complete vehicular autonomy is a reality they will need to face. However, few in the industry have their heads wrapped around how they need to prepare. This is understandable given the number of unknowns.

Vice: Last year, Don Light from Celent showed a roadmap to the end of automobile insurance. Are there any good news scenarios that could balance that?

Kargas: I believe that insurance in the mobility space will change dramatically but there will continue to be opportunities for insurers that understand the changes and are prepared to evolve.

Assuming fully autonomous technology is commercially available within the coming decade and the regulations are in place, it will take time before the millions of vehicles on Canadian roads are replaced. During this “hybrid” period, motorists will continue to require insurance.

This period will be a challenging one. While the vehicle is assuming more and more of the driving function, the growing number of in-vehicle distractions will generally result in motorists paying little attention, resulting in increased collisions.

I suspect that the transfers between human and machine will not go as smoothly as some in the auto industry may hope. Auto insurance policies for semi or highly autonomous vehicles will likely involve two rates: one for kilometers driven by the motorist and a lower rate for kilometers driven by the vehicle itself.

Moreover, despite the fact that the objective of using fully driverless vehicles is to significantly reduce the frequency, collisions will continue to take place.

Also, as we move into the shared, driverless mobility ecosystem, new risks will emerge and these risks will present opportunities for insurance companies that are informed, involved and willing to adapt.

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About the 2015 Insurance-Canada.ca Executive Forum

By all accounts, powerful forces are forming just outside the insurance industry’s doors. Insurance executives need to decide: Are these going to threaten our enterprise or provide new growth opportunities?

The 2015 Insurance-Canada.ca Executive Forum, August 31, 2015, Toronto Sheraton Centre,  is designed to help  executives develop strategies that will prepared organization to survive and thrive in both scenarios.

Additional details and registration information available here.

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