Driverless cars are upon us
It was in 2007, while I was living in Nigeria, that a (now defunct) Nigerian bank ran an ad campaign featuring a self driving car chauffeuring its owner, while having a conversation about the stock market and the weather. It ends with the tagline “one day cars will drive themselves, and at bank PHB we are already thinking about that.”
Well, PHB might not have lasted, but it wasn’t because they were wrong about their driverless car prediction.
When I saw it, I remember thinking that it would be a very long time before this could happen. Well, only 11 years after, and no matter how we perceive this would work, there is overwhelming evidence that the driverless car reality is upon us. Take for example Daimler partnering with Bosch to roll out self-driving taxis in 2019, and General Motors targeting 2019 for the release of its public ride sharing service across several cities using self-driving cars. This is only a year away!
Why the need?
There are several arguments as to the need for driverless cars and the corresponding benefits and, it is my belief, that their emergence has been born out of necessity rather than adventure. For example, according to a US Department of Transportation, National Highway Traffic Safety Administration Report, 94% of accidents on the road are attributed to human error - so, how do we reduce or even eliminate this?
Then, there is the positive impact driverless cars would have on:
Fossil fuel and combustion on the planet - driverless cars would be mostly powered by electricity thereby reducing the harmful impact of car emissions on the environment
The irritation of traffic congestion in several cities - when fully operational, it’s envisaged that driverless cars will use car-to-car communication to avoid things like traffic buildups, road works and hazards, and seek out clearer routes to prevent traffic congestion. While some mobile applications currently offer similar functionality, the driverless car system can be taught and programmed to adhere to restrictions such as variable speed limits.
The perennial cost versus need to own a car debate - the mobility as a service model has been suggested as an alternative to car ownership. This would make car usage much more accessible and also offer an alternative for those who don’t need to own and use a car on a regular basis. It’s expected that companies who offer a driverless car service will likely do so on a subscription basis. This will also lower the number of cars on the road, having a further positive impact on the two points mentioned above.
What does all this mean for motor insurance?
No doubt there are very many arguments for and against the need for self driving vehicles, but most important to us at Concirrus is how driverless cars will affect the motor insurance industry.
The big question of who insures what is beginning to be answered. The UK for example has taken the approach that traditional motor insurance covers defects or failures of any autonomous features, rather than product liability provided by the manufacturer, with new regulations introduced in the past month.
Other considerations that will be essential for insurers are:
Access to additional sources of data and analytics - things like cars malfunctioning will become very important.
Countries other than the UK may consider a shift from personal to product liability and, as such, product liability, public liability and cyber risk will need to be considered when it comes to motor insurance.
With access to car diagnostics data, insurers may play a hand in perfecting the underlying technology.
Car manufacturers could begin to take a more active role in providing insurance as part of their product offering - insurers will need to work out where they can continue to provide value in this new landscape.
With access to so much data and insight, insurers and brokers could have the opportunity to move outside a purely underwriting and claims management role into risk management and risk mitigation.
There’s certainly a lot to think about and the Concirrus team would love to help insurers understand more about how data and technology can help them prepare for this new eventuality. So to end where we started, with a slight twist… “one day cars will drive themselves and, at Concirrus, we are prepared for that.”
Sammy Emojevbe - Shown above
Concirrus take a fresh approach to solving the challenges faced by the insurance industry. Our Quest products access and interpret large sets of static demographic and dynamic behaviour-based data sets, and combine these with historical claims information to reveal the behaviours that correlate to claims. The outcome is new insights and rating factors that simply did not exist before, the ability to better deploy risk capital, improve loss ratios and drive down operating costs. Concirrus’ Quest Motor platform is designed to support motor insurers in a very different future.