The thing about roads is that, by and large, you can see what’s coming ahead of you. And when it comes to driving technology, it’s quite clear. We’re moving closer to driverless with each passing day, argues Callum Rimmer, CEO & co-founder, By Bits
Reaching a point of consumer acceptance
Autonomous vehicles have been around in their simplest forms since the early 2000's - Toyota Prius introduced automatic parking back in 2003. Since then, the technology has come a long way, and manufacturers such as Ford, Volvo and Tesla are all pushing to have fully autonomous vehicles on the road by as early as next year.
Indeed, it was announced earlier this month that Motional, a developer of driverless technology, and ride-hailing app Lyft are planning to launch a fully driverless public ride-hail service in Las Vegas, the first city in a multimarket rollout. Away from the wheel, automated technology is being used to help customers and for the common good. It can be used to suggest alternative routes to avoid congestion, saving time for the driver and helping cut pollution by reducing congestion and drive time - something that will be critical in the transport sector's fight to cut carbon emissions.
These trends are showing us that we're heading rapidly towards the inflexion point of consumer acceptance, demand, and affordability of autonomous tech, but one thing isn't keeping up; insurance.
Keep up with the future
The equation is simple, really. Insurance is predicated on risk management, control and understanding. While technology is easy to predict and humans less so (but we're something the insurance sector has learned to manage), it is the combination of the two that insurers are finding difficult to adapt to.
It is this problem that insurers must overcome in order to keep up with the future of driving. They need to take a more flexible approach to risk and democratise pricing of this risk to support the innovation happening in the automotive space. If they don't, as a mandatory legal requirement for driving a vehicle on the road, the insurance industry could walk itself into a most invidious position — an inhibitor of progress. There are, however, four key solutions to cross this chasm for insurers.
Data, Data, Data
Vehicles are now sharing data like never before, with the connectivity of cars being a standard on most new vehicles. Data is being streamed in real-time and is accessible either directly from the vehicle manufacturers or service abstractions on top of these companies. This data is already being used to improve driver experience (mobile apps which promote engagement), automatically alert emergency services and for usage-based insurance products which have risen hugely in popularity post-pandemic while vehicle usage plummeted but premiums did not. Insurers need to be utilising this data to create better pricing models and more customer-centric insurance products.
Automated braking and parking systems already contribute to a reduction in incidents and the severity of these incidents. Investing in data will allow new factors for modelling risk. These could be as simple as ‘is a safety feature turned on?' or ‘are the seatbelts plugged in?', all the way through to the percentage of time autonomous driving mode is being used. Understanding when an autonomous mode is activated is the first major step in understanding the risk reduction associated with it. Actuaries can model and pivot against this, but only as long as they have the data.
Vehicle manufacturers want affordable insurance. In a world of vehicle electrification, outlined excellently in this recent Deloitte report, insurance becomes the second most expensive part of car ownership (after purchase cost of the vehicle). Insurers should be doing more to work with vehicle manufacturers to consume the data that is available to them. They should be proactive in understanding technological advancements and the timeline for these coming to market. Furthermore, Governments around the world are investing in mobility and legislating for it, with autonomous driving technology playing a big part. The insurance industry should be lobbying for, not against, evolving mobility technologies and insurers should be involved in the conversations and thought leaders in those conversations.
Create new product lines
Insurers should be creating product lines that encourage consumers to share data and so that they can engage with it. They should see, with an understanding that the risk and market are still relatively small, that now is a chance to learn. Now is when mistakes can be made, and seeds of knowledge found and planted for the future. Usage based insurance products have twin benefits; firstly for the consumer (price savings and transparency) and secondly for the insurer (a clearer, more flexible understanding of risk). These types of products are going to become an essential part of a modern insurers portfolio and embracing them now is an ideal transition step for insurers that feel adapting to autonomous technology remains a quantum leap away.
Embrace changing vehicle technologies
Insurers are not looking to the future and they should be! The industry is still spending too much time and resource on modelling and pricing for ‘the now', and not ‘the tomorrow'. There are huge near term advantages to the insurers who embrace the changing vehicle technologies.
The ability to engage now, make a quick decision and learn outweighs the risk associated with the unknown. Procrastination and worse, wilful ignorance, will cause insurers to fail. The future is in the data.
This article was produced in association with By Bits