The views of David Williams, managing director of underwriting and technical services at insurer AXA provides a carrier's viewpoint on auto insurance.
"The downside, however, comes down to cost.
“This kit is quite expensive. It also tends to be fitted in exposed places around the vehicle, so if your vehicle is damaged, then it’s likely to cost more to repair. Even windscreens. We’re already seeing insurers putting up windscreen excesses on vehicles that have [advanced driver assistance] systems (ADAS) because it’s not just a piece of glass anymore. There’s so much more to it,” Williams added.
“You could argue [this is] a potential negative, [having] increased costs, but the reality is claims frequency and severity should be reducing as well because those systems will be helping good drivers avoid accidents and so it has to be something that we should be supporting.”
Katie Scott Insurance Times 5th May, 2021
That key to leveraging that trend is data sharing and Williams emphasises the importance of building relationships with car manufacturers. Being able to harvest data from these businesses will be vital in effectively pricing risks for semi-autonomous vehicles, continued Williams.
On the other hand the auto OEM may have a different viewpoint.
Elon Musk challenges the status quo announcing Tesla will insure its own vehicles. For now Tesla is licensed as a broker ij the US to conduct business on behalf of the State National Insurance Company Inc, a unit of Markel Corp MKL.N. In the UK Tesla partners with DLG.
The promise from Musk is that the superior data Tesla gains from its vehicles will make a big difference.
"Tesla hopes to use its crash data not only to improve their insurance operations but also to learn how to adjust their car designs for less expensive repairs in the future. On the call, Musk said it was, “very helpful for us to have a feedback loop to see what is driving insurance expense.” Seeing collision repair costs of $15,000 is “crazy,” he said, and emphasized that the feedback loop from the insurance data back to the design and manufacturing teams was invaluable. "
Elizabeth Bart Milliman Sep 2020.
The connected car and connected driver/passenger will generate more and more data as the vehicle technical stacks and hardware/software advance. Tesla is in the lead today and starts unencumbered by legacy internal combustion engine technology. Tesla thrives on data mastery and we all know that the ability to monetise data is the key to profitability and market leadership.
Of course every auto manufacturer is hard on Tesla's heels.
The focus should not be on the auto OEM or the insurer however but rather the customer. Williams alludes to this: -
“Everybody shouldn’t be getting involved just because they want to be getting involved in the future whenever it is. It’s those steps in between that our customers will be experiencing on a daily basis and we need to be understanding those risks and making sure that we’ve got products that are suitable for them in the future.”
This includes recognising the shift to “mobility as a service” and a usership model rather than car ownership. This shift will mean that customer behaviour will change as will the nature of auto insurance. Customers will want more flexibility and relevant products. As the owner of the vehicle trends towards fleet operators and, eventually, robotaxis insurance will be more a case of product liability than personal insurance.
You can expect to see the initial deployment of autonomous vehicles (AV) in city and large town centres with a combination of AV, smart cities and smart highways overcoming the challenges of legislation, compliance, lack of standards and an existing parc of ageing ICE vehicles.
I discussed this in some detail in "Car manufacturers or traditional insurance carriers. Who will win the tech race?"
In reality there will be a wide spectrum of competition, cooperation and growing ecosystems. Other enterprises may surprise insurers and auto OEMs by capturing the data centre ground and thus being able to monetise data. Mobility Services covers a wide range of enterprises from auto manufacturers to component suppliers, insurers to roadside assistance service providers. Claims management and fleet management.
And always present are the digital giants Amazon, Google, Facebook, Apple and the Chinese Cohorts.
David Williams has opened a Pandora's box in which disruption is a constant threat to incumbents.
What you see is that your core market is no longer the same now as was a decade ago. Your products often haven’t changed that much but customers are expecting dramatic changes. They do not want to be in a call centre queue for minutes but still want to be able to talk to a real, empathetic person whenever the need to. They do not want to send or receive forms but manage lives from their phones and tablets. They want changes to happen in seconds and on a 24/7 basis. New technologies like Cloud, mobile apps, AI and IoT are bringing new levels of customer engagement and automation.
On the horizon, Blockchain/Web3, autonomous vehicles,… All this is happening while you are still fighting today's competitive battles with core systems often based still on Cobol.
This is where vision, strategy and new business models are vital.
The conclusion is very simple and yet complex. No digital transformation in which your legacy system is integrated with, lifted, rewritten,… will solve any of this. You need to think about setting up separate teams that build these new businesses from the ground up and use the best in mobile, cloud, AI, IoT, blockchain,… from best-in-class providers.
Your digital future is about reimagining your business and building it like you are the VC overseeing many small start-ups. Your legacy business and mindset is probably holding you back, not your legacy systems. Free your mind and the rest will follow.
nsurance2025: The uptick in semi-autonomous vehicles fitted with driver assistance systems is “good news” in terms of impacting claims exposure “if used properly”, said David Williams, managing director of underwriting and technical services at insurer AXA. Williams was speaking to Insurance Times editor Katie Scott as part of the title’s three-day virtual conference last week, Insurance2025. During the interview, he said that the UK has “a prediction of 2,500 deaths [on roads and] 25,000 serious accidents a year” – these are the figures that semi-autonomous vehicles can work “to reduce initially and then remove”.