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Car Insurance, what is coming next

According to Warren Buffet, the CEO of Berkshire Hathaway, any technology that reduces auto accidents is remarkable, but auto insurance companies should not be holding a party, yet. The truth is, 90% of car accidents are a result of human error. Thanks to autonomous vehicle technology, that percentage will soon be lower than 5%. There are so many technological advancements taking place now. The future of car insurance is here and it's amazing.

Driverless Technology Will Replace Human Drivers 

Let’s face it. The motor industry is on the verge of major changes as a result of driverless technology. Smart technology is and will be changing the ownership of motor vehicles. Unlike a few years ago when car ownership solely belonged to individual drivers (male or female), that's no longer the case. In the near future, companies like Alphabet, Apple, Jaguar Land Rover, Honda, Volvo, and Tesla will finally make available a working autonomous vehicle.

I know in the past it was hard to imagine cars driving themselves, but why should it surprise us now that the technology is being tested. The same technology has been featured in numerous movies such as I-Robot. Thanks to advancement in technology, very soon, autonomous vehicles will be whizzing past your diesel or gas-powered vehicle.

Autonomous Cars Will Have Artificial Intelligence

With autonomous vehicles, a computer with AI capabilities will be able to monitor different sensors that will be feeding the computer with data from the surrounding environment. As a result, driverless automobiles will be in a position to navigate from Point A to B and even park at any destination.

At the time of writing, car manufacturers Jaguar and Land Rover have made plans to create a fleet of over 100 research vehicles during the next four years. The goal is to develop and test a wide range of what Jaguar Land Rover calls “Connected and Autonomous Vehicle.” Jaguar’s current plan is to drive the first research vehicles on a new 41-mile test route. This will cover urban roads and motorways in and out of Solihull and Coventry.

General Motors has Partnered with Lyft to Test Autonomous Cars 

GM in partnership with Lyft will also be testing with fleet-based ownership of autonomous vehicles and so will Uber and Volvo. In the near future, autonomous cars will surely replace almost all taxi services and driver-based transportation services. Kids may go to the prom by ordering up a limousine on their smartphone that comes rolling up with no driver. While that might be cool to teenagers, it surely will create some nervous parents.

How will the fleet-based ownership of autonomous vehicles affect the motor insurance industry?

The primary goal of the automobile insurance industry has been to register automobiles and provide insurance-related packages designed for a wide range of customers. In addition, they have been fulfilling insurance claims made by car accident victims. With the latest advancement in fleet ownership of driverless cars, automobile insurance firms need to be worried.

Insurers Can Expect to See Lower Premiums as a Result of Driverless Vehicles 

For starters, fleet ownership of autonomous vehicles eliminates the need for individual drivers. As a result, automobile insurance firm will earn fewer premiums. Secondly, the autonomous vehicles will be controlled by a computer fitted with AI capabilities. The computer will be gathering data from different sensors located on the body of the car such as cameras. Using the information gathered, the computer will be able to make “decisions” as stipulated by law and its software coding. As a result, it is expected that the number of accidents will drop. So, will insurance claims.

It is also expected that the above changes will begin affecting car insurance firms as of 2025. As a result, the car insurance industry will suffer a loss of $25 billion. This is huge, especially when you consider that the automobile insurance industry is worth $200 billion.

Uber and Lyft are Already Hurting Auto Insurance Companies 

At the moment, ride sharing companies - Uber and Lyft among others - have already cut into the profits of vehicle insurance firms. You would think that ride sharing companies and their ability to register millions of drivers to work for them will be good news to the automobile insurance industry. Well, it’s not. While drivers are registering to work with ride sharing companies, other car owners are selling off their cars since ride sharing is convenient and affordable.

There would be hope for the motor insurance industry if Federal Express, UPS, and other trucking companies continued to rely on self-driven vehicles but NO! That possibility is slowly fading away. In 2017, Tesla announced a sleek semi-truck. The semi-truck comes with semi-autonomous capabilities, weighs more than 33,000 pounds and has a range of 500 miles at a maximum weight on the highway. The unveiled semi-truck has a coefficient drag of 0.36. This makes the truck to have better aerodynamic capabilities than a $2.7 million Bugatti Chiron (drag coefficient of 0.38).

Right now, Tesla is testing its semi-truck and global companies like Pepsi are already interested. Soon, it will feature prominently on US and European roads.

How can the automobile insurance industry stay afloat in the wake of the autonomous vehicles?

In 2009, global titans like Alphabet were hard at work testing and innovating driverless vehicles with autonomous features. Remember Waymo? Today, the company has partnered with Honda to build a self-driving vehicle that will revolutionize the motor industry. Jaguar Land Rover and Tesla have already showcased their semi-autonomous capabilities no other company has been able to achieve. While industry experts have predicted that autonomous vehicles will be available in 2025, that date seems like a year or two away instead of 8 or 10 years.

Car Insurance Companies Need to Adapt

How will the motor insurance industry cope with the new changes? Are there new sources of revenue for the automobile insurance industry to capitalize on in the wake of autonomous vehicles?

Yes, there are. Below are three sources of revenue the automobile insurance industry can capitalize on when autonomous vehicles are a reality.

  1. Infrastructure risk coverage

Although autonomous vehicles will be driverless, they will be supported by cloud server systems and others which will feed the vehicles with data and information meant to improve the driver’s safety. It is estimated that the annual revenue in terms of premium will be more than $500 million. The premiums will cover casualty and property insurers who will be underwriting the software and hardware values in use. You already know that governments self-insure against such risks which means the opportunity for the automobile insurance industry will be lower.

  1. Hacking and cybersecurity

As said earlier, driverless vehicles will be controlled by computers with AI capabilities supported by infrastructure such as cloud servers. This means the vehicles will be susceptible to hacking, phishing, cyber theft and even ransomware. Just imagine a computer hacker in China or Russia hacking into a driverless car owned by a wealthy individual located in Europe or the US. The hacker will probably take control of the vehicle and demand a certain payment in order to return control of the autonomous vehicle to its normal operating mode. Apart from hacking, ransomware and cyber theft, think of ad companies mining personal information about you. Using geo-targeted ads, they can direct the autonomous vehicle to a certain restaurant, theatre, hotel or even a branded store. Auto insurance companies can take advantage and ensure against hacking, ransomware, phishing, cyber theft and even misuse of information.

  1. Insure against product liability

Autonomous vehicles will be fitted with sensors that will be feeding the computer with data. This will help the vehicle to transport passengers or cargo from Point A to B and so on. These sensors and chips are expensive to manufacture. In addition, there is the real risk of software bugs, algorithm defects, and memory damage. Insuring against these risks is a great opportunity for the auto insurance industry. It is estimated that automobile insurance firms will earn more than $3 billion annually.

What measures can insurers implement today?

#1. Train employees on data and analytics

A lot of data will be collected by sensors and processed by chips located in the autonomous vehicles. To grow with the industry, automobile insurance firms must start by training their employees on big data and analytics. This will equip the employees with the necessary skills and knowledge on how to collect, organize and analyze big data.

#2. Develop actuarial models
Autonomous vehicles are expected to be fitted with automatic emergency braking systems. This will change the safety of the new vehicles. By developing actuarial models, insurers will be prepared and be able to adjust with every new feature added to the vehicles.

#3.Map out ecosystem partners
It is important for automobile insurance companies to partner with other providers and the government at different levels. Mapping out ecosystem partners today can help to identify relevant partners allowing easier integration.

As noted earlier, autonomous vehicles will soon be a reality. While experts predict 2025 as the D-Day, recent revelations from automakers like Tesla and Jaguar Land Rover have shown that it might be sooner than later. As an automobile insurance firm, preparing yourself right now will eliminate chances of you being acquired or being run into the ground by massive losses and debts. The only thing certain about the future of auto insurance is many changes to the industry are coming.




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Customer acquisition, onboarding and engagement, underwriting and risk management, billing and claims – all these areas are being changed by the digital innovations. Digital Insurance Trends is a group for professionals who are interested in Insurance Technology, Fintechs, and Solutions Providers - as well as Global Industry Intelligence.

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