Other parts of this series:
The threat posed to traditional automobile insurers by the rapid evolution of autonomous vehicles is real, but so is the $81 billion opportunity represented by new forms of cyber, product liability and infrastructure insurance.
To get ahead of competitors and gain an early mover advantage in this sector, insurers should consider the following initiatives:
- Develop needed expertise in big data and analytics. Although there will be a struggle for control of data generated by autonomous vehicles and the communications and software systems that support them, market participants with the ability to collect, organize and analyze this data will have inherent advantages over those with less developed capabilities.
- Begin the actuarial and modeling process. The introduction of partially autonomous safety features has already changed the safety profile of newer vehicles. For example, autonomous emergency braking systems that direct instantaneous deceleration and braking of a vehicle are directly responsible for a 15 percent reduction in frontal crashes. Insurers should adapt current actuarial and modeling techniques to be ready as vehicles add more and more autonomous features, including the “tipping point” at Level 3 when human drivers become largely optional.
- Explore the partner ecosystem. To participate effectively in the autonomous vehicle environment, insurers will need to collaborate with OEMs, providers of communication and software systems, governments at multiple levels, and many other entities. Insurers not doing so already should be actively identifying and mapping out potential ecosystem partners.
- Think about new business models. Depending upon the opportunities pursued, insurers whose revenues derive primarily from personal automobile policies (insuring thousands of small risks) may have to transform themselves into large commercial insurers writing policies on a small number of very large risks. Thousands of auto insurers will be replaced by a much smaller number of commercial carriers. For the remaining players, this will entail major changes in areas including product development, policy administration and distribution.
Over the next five to ten years, the need for cyber insurance and product liability insurance on vehicles will outpace the decrease in individual premium revenues. Insurers taking preemptive steps now to convert this opportunity will be in a much better position to succeed as the autonomous vehicle revolution continues and world shifts to this new mode of transportation.
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