The Accenture Digital Innovation Survey found that one-third of insurers expect usage-based insurance, or telematics, to account for more than 6 percent of auto insurance premiums by 2017. More aggressively, the National Association of Insurance Commissioners puts the number at closer to 20 percent.

Telematics are one example of connected cars, and can help people drive more safely through coaching and feedback. But the possibilities for connected cars—and their utility in the insurance landscape—go beyond just telematics.

Consider a routine fender-bender. In the not-too-distant future, the cars involved could initiate the FNOL process with their respective insurers. In addition, they could notify emergency services and repair shops, providing detailed information about each driver’s behavior leading up to the accident, road conditions and any GPS or relevant location details. These capabilities could help streamline and speed up claims resolution, helping insurers reduce costs and improve the customer experience.

Many car models today come with parking assistance and collision alerts, so are we also on the road to driverless cars (autonomous vehicles)? Google has already popularized use of these vehicles for its mapping applications, and at January’s Consumer Electronics Show in Las Vegas, Ford’s CEO wagered a prediction that driverless cars would be on roads by 2020.

While driverless cars would help alleviate traffic and likely result in fewer vehicle accidents, there is still much work to be done—including public education. Ultimately, consumers will need to trust in the technology and safety, and indications are that many remain skeptical of the whole notion. Clearly, liability issues will need to be sorted through. Driverless cars also raise concerns about cybercrime and hacking. Yet, manufacturers’ prototypes in the United States and Europe continue to show promising results. Similarly, Ford and State Farm have partnered with a research team at the University of Michigan on a program to develop next-generation automated vehicles.

Insurers cannot take a wait-and-see approach. Carriers should be actively considering what driverless cars will mean for the industry, their business and their success.

For more information:

• Read Connected cars and the insurance opportunity, part 1: Telematics, customer retention and risk management.
• Register to download Insurance telematics: A game-changing opportunity for the industry (PDF).
• Learn about trends in connected cars and the opportunities across industries in The Connected Car Shifts into High Gear (PDF).
• Learn about the opportunities and potential impacts for autonomous cars in Realizing the Benefits of Autonomous Vehicles (PDF).