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Automobile Insurance in the Autonomous Vehicle Age

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We have written on the future of automobile insurance in the era of autonomous vehicles.  While some insurers are sitting on the fence, some auto manufacturers and leading underwriters are driving new approaches to mobility and insurance. We’d like your thoughts.

What’s the risk?

There is a lot of high-volume speculation on the impact of autonomous vehicles on the auto insurance world. And for good reason. In Canada and the US, automobile insurance represents 50% of premiums.

This would be a significant impact on risk and premiums, yes? So let’s go deeper.

Writing in VentureBeat, Scott McLaren, executive vice president and chief marketing officer at Fortegra Financial Corporation, notes Elon Musk said in an interview that ‘recent advances in auto technology could lead to human-operated vehicles becoming illegal someday’.

While banning human guided vehicles is some ways out, there will be impacts on insurance. Citing Bain & Co, McLaren posits that reckoning  could come soon, as an increasing number of autonomous vehicles hit the road (estimating 10 million vehicles by 2020),

With what we know, will  there will be a hit in premiums?  Possibly, but perhaps not at the ‘scorched earth’ scale.

At a more granular level …

Accidents involving autonomous vehicles would result from:

  • Human controlled vehicle causes the accident,
  • Faulty systems, or poor maintenance in the autonomous vehicle,
  • damage from flooding, sleet, etc.

In all of these cases, insurance for the vehicles (including autonomous) would make sense for the near term at least.  But this may require different risk profiles.  Some insurers – Aviva  being one – are working to improve precision.

And some insurers anre seeking new risk new partners

Aviva has been working with Tesla to develop insurance programs that align with the automobile  manufacturer’s unique offerings.   Back in February, Tesla announced that it was seeking to package all of the peripheral requirements – including maintenance and insurance – into the purchase price of the automobile.

Jeff Evanson, Tesla Vice President of Global Investor Relations, announced that the car manufacturer had been doing this quietly in Asia.  “It’s our vision in the future that we’ll be able to offer a single price for the car, maintenance and insurance in a really compelling offering for the consumer. And we’re currently doing that today.”

Evanson added that they had been running this inside the organization, but preferred an external insurance provider.  “If we need to we’ll insource it, but I think we’ll find that insurance partners do adjust rates proportionate to the risk of a Tesla.”

Aviva is taking a proactive approach to autonomous vehicles, starting in the UK, but reaching quickly to Canada.  In June 2017, Maurice Tulloch, Aviva’s International Insurance Chief (and former CEO Aviva Canada), announced an autonomous vehicle approach.

Tulloch indicated that Aviva was talking to a number of companies involved in developing driverless cars.  The end game would automatically have an insurance policy delivered along with the automobile, or come in a collaboration with a start-up supplier.

Since then, Aviva Canada has announced InsureMyTesla, “a tailor made insurance plan focusing on convenience, enhanced protection, and increased value, rewarding your choice with benefits catered to Tesla drivers”, including bespoke coverage.

Where to next?

InsurTechTO — coming up on November 6 — will focus on the talent and tools that are supporting new technologies for underwriting, risk management, and claims.

We are prepping for the 2018 Insurance-Canada Technology Conference, being held on 27-28 February 2018 at the Beanfield Centre.  Our theme will take a wholistic approach — “Insurance Vectors: Risk, Engagement, Technology.”  Stay tuned for details.

Meanwhile, we welcome your comments.

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