A good number of prognosticators are loudly heralding the end of auto insurance and the insurers that rely on this income stream — due to the arrival of autonomous vehicles.
While there is no doubt that auto insurance will change over time due to autonomous vehicles, the doomsday folks paint a picture of an almost certain — and right around the corner — cataclysmic change, with the general population cheering wildly about not having to pay for auto insurance anymore. Disappointingly for them, this is a highly unlikely scenario.
At the most fundamental level, autonomous vehicles are expensive. Until the bulk of the population can afford autonomous cars and trucks, we will be living in a world with a foot on each side of the driving paradigm. This means that while the autonomous vehicle might not hit the car in front of it, the vehicle behind it may well end up in its back seat. Uninsured and underinsured coverage, comprehensive coverage, coverage for property damage, and liability coverage will be needed for a long, long time.
In the meantime, auto insurers will have the opportunity to work out the liability paths with the autonomous auto manufacturers. And auto insurers will have the time to adjust their product mixes and financials. Underwriters and claims personnel will adjust processes and practices. Believe me; I am not suggesting that change won't happen. It will.
Insurers will adjust
And some of the changes will be painful from several perspectives. But with all the various factors potentially reigning in the spread of autonomous vehicles — cost, regulators, consumer wariness — insurers will adjust. At least the ones that believe in innovation and data and analytics will adjust — and flourish.
What people are not focusing on is the rapid change in the products and services that are coming from the convergence of emerging technologies, which is happening right now. Take a quick perusal of the topics in SMA's Next-Gen Innovation Community, and some examples came to light:
- To diagnose a rare genetic disorder, a physician combined an exomes analysis with a facial comparison using an app called Face2Gene, which was developed by the same programmers who taught Facebook to find your face in your friends' photos.
- To reduce manufacturing times and production periods, Adidas will use 3D printing or additive manufacturing methods as the core technology of its factory that produces sneakers.
- The use of "cobots" — collaborative robots that perform tasks alongside humans — is rapidly gaining popularity, and it is the fastest-growing segment of the $1 billion U.S. robotics industry.
- The global semiconductor industry is pushing to develop new chip designs, materials, and manufacturing processes. One reason is the widening use of the artificial-intelligence technique known as deep learning in products — both consumer and manufacturing products.
Additional examples could consume volumes of space. But what does this convergence mean to the insurance industry? It means unknown risk and unknown liability. Unlike the autonomous vehicle world, where underwriters and claims adjusters understand the general risk and liability landscape, the convergence of emerging technology is now and will continue generating significant numbers of unknowns. Inter-relationships of the unknown risk and liabilities will be the most challenging.
Rapidly changing world of products and services
The insurance industry should not be as concerned about the impact of autonomous vehicles as it should be about what is happening now in the rapidly changing world of products and services due to the effects of emerging technologies. Underwriters and claims personnel must be supported by sophisticated data and analytics capabilities using AI, machine learning, and cognitive computing (pick your favorite advanced tool!) because risk and liability will not be in the same form as is currently familiar to insurance professionals. Without sophisticated technology revealing previously unknown risk, underwriters and claims workers may not even see it coming!
There are a lot of reasons that insurer organizations will not look the same in 5-7 years. Core modernization, digital capabilities, and, yes, autonomous vehicles will generate change. But the halls of successful insurers will not be empty. They will be filled with technical experts in product liability, D&O, E&O, cyber, and medical malpractice, to name but a few product lines, who will have the ability to rapidly respond to a risk and liability landscape that didn't exist — in their wildest imaginations — 2-3 years ago. Insurers that are not preparing themselves for this eventuality will fail to survive.
Karen Pauli is a principal at Boston-based SMA. Email her at kpauli@strategymeetsaction.com. This article first appeared on StrategyMeetsAction.com and is reprinted here with their permission. Opinions expressed in this article are the author's own.
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