http://www.insurancenews.com.au/local/automation-will-wreck-car-insurance-says-academic, 31 October 2016
The car insurance industry is in line for major disruption as automation removes risks, according to a new book.
Driverless cars and other technology advances could see premiums fall by 90% in the next 15 years, according to Michael Naylor, an economics lecturer at New Zealand’s Massey University.
“Once networked and autonomous cars are widely available, it has been predicted that car crashes will reduce by 80-90%,” he says. “This development is not that far away – Volvo has an aim of eliminating car crashes by 2020.”
In his book – A Perfect Storm in Insurance: How to Survive the Looming Waves of Disruptive Technology – Dr Naylor says technology will be introduced slowly, to enable drivers to adjust. But autonomous braking and parking is already being introduced on luxury cars.
“While a driver will be required to be at the wheel, the car may be in auto mode 80% of the time.
“There will not be a big moment when cars go from 100% human control to 100% automated. Instead, cars will go from 40% to 60%, to 80% to 100% during the next decade.”
Dr Naylor, who specialises in insurance, financial planning and international finance, says car theft will largely become a thing of the past, because voice and face recognition technology will make theft nearly impossible.
This will leave insurers covering only damage caused by object hitting cars or extreme weather events.
He cites examples of innovative insurers using technology like telematics to change their business models, and says insurers have been “laggards” in adopting new technology and realising the impact of disruptors.
“Insurers… need to start grappling with these changes now,” he says. “If they don’t, new disruptors will emerge to take their business from them.”