Morphing Automotive Insurance in the realm of Autonomous Vehicles

Came across this Point of View paper from Accenture on Autonomous Vehicles – plotting a route to the driverless future. An interesting and useful read examining the immediate impact of AV adoption on a few industry segments – including the insurance industry.

As with other businesses that get disrupted at the crossroads of multiple factors including tech advancements, evolving demographics, regulations, infrastructure and others, the lucrative insurance industry is no exception to the advances being made towards autonomous mobility.

Sharing a few thoughts on the Auto insurance part from the paper:

• Premium based revenues: With the cars targetted to get safer with autonomy, the premium revenue may appear set to fall.

However this decline may not actually happen. Autonomous vehicles may lead to fewer insurance policy uptakes but with the increased complexity of technology involved – both hardware and software – these would result into higher premiums.

• Insurance proportionate to the risk of the car – Self Insurance: With the increasing role of the vehicle as an entity being responsible for the passenger safety (instead of the drivers as of now), autonomous vehicle (AV) manufacturers leveraging their vehicles’ safety as their product differentiater can work with inbuilt insurance offerings – insurance proportionate to the vehicle.

With the vision of insurance being clubbed into the final price of its vehicles, Tesla has lately been selling car insurance with its vehicles in Asia. And in the process, partnered with insurance vendors – AXA General Insurance in HongKong and QBE Insurance in Australia. Partnering with AV manufacturers to jointly carve out insurance offering will bode well for the traditional auto insurance vendors.

On another note, this self insurance reminds me of the vertical integration in the smartphone industry by the likes of Apple and Samsung!

• Pay per usage/driver profile/xxx insurance offerings: Metromile is a good example of pay per usage. Another one can be on the driver profile. While Level 5 autonomy is the end game, the transition does involve human drivers and this phase is something which the insurance providers could do well to address. With the plethora of sensors included in the vehicles and on people, driver data (physical as well as emotional cues) will not be in dearth. What is required though is tapping it for useful insights and timely decisions – for targeted insurance offerings.

• Shared mobility impact: Above point on Pay per usage/profile/xxx insurance offerings is especially valid for shared mobility with multiple drivers. Car sharing platforms like Maven, Zipcar which connect drivers to available vehicles can have the relevant data access edge here for customized insurance offerings for this clientele.

• Cyber security risk: Now that is one real gold mine for the insurance vendors i.e. if they can come up with a relevant working offering. Something to remember though is the point that security is increasingly being embedded into vehicle hardware (like Electronic Control Unit as by Karamba) – which entails working together with car manufacturers too along with the cyber security folks. Revert to the point made above on Self insurance…..

• Who is liable??: This will become an increasingly grey area especially while the regulatory environment around this evolves. Will a shift of accident liabilities from drivers to manufacturers – who distribute this burden across their tier 1 and 2 suppliers – suffice?

List of involved and impacted entities includes (and is not limited to) vehicle manufacturer, owners and users (e.g. who is liable if the sensors get damaged), infrastructure provider (e.g. roads – which roads can the AV be driven on, which weather conditions, e.g. traffic lights – infra, communication providers, vehicle manufacturer), mapping and other relevant content providers and so forth. Add to this list, pedestrians – especially with the V2P communication. And so on.

• Blockchain: Are the present insurance details on ride sharing clear? What happens when aggregator services like Uber, Lyft and others morph into equivalent services over blockchains – ones in which the various drivers own their service rather than being xx aggregator platform drivers?

A couple of quick additional points towards dealership under Automotive Sales and Service : As cited in the article, it can be a natural fit for dealerships to become hubs of maintenace services. Points to be noted include

• Charging (Whether charging or swapping in/out of batteries, the number and locations of these centres basis the existing and changing EV ranges, the locale and driving habits etc.)
• Hardware upgrades and customization (existing dealership can especially value-add here with the regional/local know-how- they can help alleviate consumer hesitation and be key to facilitate AV adoption by masses).

Look forward to your thoughts!