The insurance space is traditionally a slow-moving industry, but for once it appears to be changing up a gear to be part of the automotive industry of the future. It is impressive how quickly IoT has become part of our everyday lives, when only a couple of years ago it was considered a tech ‘buzzword’.
Today we can say that connected cars and autonomous vehicles are going the same way.
Given that anything that can connect to the internet can collect and store data about user behaviour, insurers have an incredible opportunity here to gain increased insight into driver habits and how well customers take care of their vehicles – in real-time.
This means that assessing and pricing risk (and therefore premiums) can be a much more accurate process than ever before. Also, if you consider that in the UK last year, 1.5 million cars were registered featuring a form of Advanced Driver Assistance System (ADAS), more and more people are not only driving connected cars, but cars with enhanced safety features – proven to reduce accidents, says Rachel Pattison, head of marketing at Audatex UK.
Autonomous vehicles are also gathering pace as companies like Tesla and Google push forward these technologies to win the trust of road users around the world. One of the main selling points of an autonomous vehicle is that it’s ‘safer’.
At present the public’s perception is skewed by a mistrust in this unproven technology and so it’s the responsibility of every industry responsible for putting these cars on the road to deliver certainty. Once this technology has been proven to mitigate risk for drivers, you can bet that consumers will expect premiums to go down.
This might prove to be a challenge. Even though risk might be reduced by autonomous vehicles and cars with ADAS, the cost of repairing these vehicles might actually push premiums back up. One advantage of a smart vehicle is that it can diagnose itself at the conception of the issue to minimise damage and maintain safety, but once in the bodyshop, the repairer will need to order expensive parts and have specially-designed tools and machines in order to make any repairs.
Even the cost of a sensor will inflate repair costs significantly. There is a lot of work to be done between manufacturers and repairers to make sure that these incredible technological innovations don’t remain in the hands of the few and damage the bodyshop industry.
Perhaps most interesting to drivers will be how the insurance industry responds to the proliferation of these technologies, moving away from policies that insure products, to policies that insure people. Currently, the insurance industry creates quotes based on an ‘experience’ model – if you’ve been on the road for a long time with no accidents, you get cheaper premiums.
With the increased data that will be collected by these ‘driven devices’ there is a potential shift in our future towards an ‘exposure’ model: rather than looking at how much experience you have had as a driver, insurers may instead look at where you regularly drive and what the area is like for accidents, which could get rid of no claims bonuses for example.
This is great news for the consumer as it flips the current system around in their favour (if they make sure they’re on best behaviour). It might even lead to bidding wars from insurers who want to take on a consumer’s insurance given they’re such a ‘safe bet’.
For example, if they exercise three times a week, drive safely, leave all their valuables indoors with a premium smart security system and only spend holidays in Iceland (the safest country in the world), then they will be seen as a safe bet for insurers and at the top of their wish-list. If customers can provide the data proving they have a ‘virtuous’ lifestyle, then this power shift will be an interesting one to watch unfold.
The industry’s eye is on the big players making the big waves, but how that will impact customers is yet to be realised. In order to democratise the cars of the future, the whole industry – insurers, bodyshops, manufacturers, software providers and regulators – need to work in unison to answer the questions that are being raised in our ecosystem. As for the customer, it really is all to play for and it looks like the increase in data collection will provide a real opportunity for them to dictate the way things are done around here.
The author of this blog is Rachel Pattison, head of marketing at Audatex UK
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