How autonomous vehicles are impacting the insurance industry

Autonomous vehicles are about to erupt onto the market. How will this new industry affect auto insurance companies, and are they prepared?

Key Takeaway

With the advent of the autonomous vehicle industry, and continued growth of the gig and sharing economy in the transportation space, there will be significant changes to the way we look at automotive insurance. As a result, insurance companies are looking to bring on AI engineers, data analysts and robotics specialists who can help them develop products which will enable them to remain relevant in this ever-evolving marketplace.

We’ve seen how auto manufacturers are transforming into tech companies, pressured in large part by the Tesla effect and the sudden explosion in development of the autonomous vehicle industry. Just as banks are pivoting toward a tech-first mandate, automobile manufacturers have also joined the competition for the world’s best tech and analyst talent in a fast attempt to safeguard for the future.

Adding to the list of top employers – specifically for AI and robotics talent – are some US automobile insurance companies like Allstate, who are under immense pressure to determine how and to what extent they will soon be impacted by the rise of the self-driving vehicle phenomenon.

That includes evaluating old risk models to determine how they can be adapted to incorporate new and never-before-seen scenarios, like those which shift responsibility from the driver to a new player: technology. In order to remain relevant as this technology takes shape, these companies must invest in proprietary research to better understand how it works and where potential weaknesses may lie.

Hiring data indicates rising trend

According to Howard Hayes, senior vice president of product innovation at Allstate, in The Wall Street Journal, as self-driving cars move closer to reality, the insurer “has a huge stake in understanding their safety and financial-risk implications—and in helping to make them safer—as it builds insurance products around them. To do so, its researchers need computer-vision, engineering and other driverless-car expertise.”

Allstate posted more than a dozen jobs related to autonomous-vehicle technology in the 12 months ended in June. In addition, the insurance giant is hiring a number of posts related to machine learning, and deep learning as it relates to pricing optimization.

In total in the US, Allstate had 74 job openings related to AI engineers and data analysts – matching the keywords “big data”, “AI “, “data scientist”, “analytics” and “machine learning” – out of nearly 1000 open listings from September to December. Here’s how other major insurance companies stack up when it comes to future-proofing for the advent of the autonomous vehicle industry:

Further impact: how the insurance industry will change

Automakers like Tesla are now beginning to partner with leading insurance companies like Liberty Mutual and Aviva to offer custom packages for their own fleet of vehicles. Looking both to autonomous, or driver assistance, features and maintenance cost of the cars, these products require entire new models to be built that are specific to the latest developments at Tesla.

Not only will this create an entire new class of insurance products, but it will begin to shift liability into the hands of the car manufacturer rather than the driver.

As well, it is the hope that with better technology, less accidents will occur, resulting in potentially lower insurance costs. As a result, pricing for insurance premiums will need to become increasingly more competitive as individuals may begin to opt out of personal insurance once self-driving cars become more mainstream.

Meanwhile, the steady growth of the gig and sharing economy and the advent of InsurTech are forcing leaders in the industry to think differently about their product offerings, and ways they can shape their products to cover a wider variety of scenarios.

According to the Deloitte 2019 Insurance Industry Outlook, “The sharing and gig economies could fuel rising expectations for an enhanced customer experience based on convenience and customization, while blurring the boundaries of commercial and personal insurance lines as well as undermining the relevance of many standard coverages.”

To tackle this problem, InsurTechs are offering new, more relevant coverages, capabilities, and platforms, “unburdened by the usual policy categories or annual commitments…[and] less encumbered by legacy issues facing incumbents.”

Those that are able to survive and compete will be those that continually stay abreast of rising technologies, trends and changes in consumer behavior, and who can adapt their offering accordingly to continue adding value and remain relevant.  

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