The world Is changing so can insurance keep up, asks Susan Kuchinskas?
In the first day of the conference, Chicago lived up to its name as the Windy City – appropriate given the winds of change that are blowing harder at the insurance industry. In almost every presentation, the connected car was at the centre.
Connected car at the centre
Cars with persistent connections haven’t exactly reached the tipping point but that point is getting closer. David Lukens, director of telematics for LexisNexis Risk Solutions, noted that, following the Japanese tsunami and the US recession, car sales have increased thanks to pent-up demand. More people who did not buy cars in the previous five years are opting for connected cars now.
He said that, in 2025, roughly 60% of vehicles on the road will have some kind of native connectivity. Yes, that’s a lot of cars to insure. The caveat, he said, is that there will be a mix of connectivity solutions. “What it really means to me,” he said, “is that, even in 20 years, I can’t rely solely on connected cars in order to run a UBI programme, because I don’t have coverage of the whole fleet.”
What the connected-insurance world will look like in his view: “There will be a minestrone soup of different ways to collect data going forward.” And then, there’s now – a world where most cars do not have any connectivity at all. In this market, state insurance commissioners are concerned that UBI programmes may shut out people who can’t afford a fancy phone.
David Niziolek, director countrywide underwriting strategy and solutions with MetLife, said MetLife is grappling with this. It built the MyJourney programme with a dongle solution; a vendor provides the solution and risk rating. He said: “The question becomes, is there a one size fits all solution for every customer? Not everyone has a cell phone and some people will never plug hardware into their vehicle. The technology is not there for an embedded solution. We’re struggling to figure out what is the best solution going forward.” And every vendor has a good reason why its solution is the best.
The dongle is the only solution that can address the vast majority of cars on the road, said Linda Senigaglia, enterprise account executive, connected car at Danlaw. The smartphone is tethered to the body, so you get tremendous insights into the behaviour of people, according to Hari Balakrishnan, founder and CTO of Cambridge Mobile Telematics.
Dave Pratt, general manager, usage based insurance for Progressive, provided an unbiased plug for embedded solutions. “The percentage of new customers that have a connected car that is capable of providing the data we need is tiny. But that is probably the best consumer experience,” he said. Meanwhile, Bob Gruszczynski, OBD communication expert at Volkswagen Group America, reiterated his position: ‘Hands off that port!’
Insurance in a mostly autonomous world
Now, the industry has clearly focused on the future of autonomy which will, as Jim Levendusky, vice president of telematics at Verisk Insurance Solutions said, “turn the auto insurance industry on its head”.
There will be 33M fully autonomous vehicles in 2030, according to Frederic Bruneteau, managing director of Ptolemus. “We hear a lot of waves are coming. But we need to understand how fast they are coming and how big they’re going to be,” he said.
Autonomy will create huge disruption in the insurance marketplace, according to Anne Melissa Dowling, acting director of the State of Illinois Department of Insurance. “Actuaries will need to be analyse very different data sets and do it very fast,” she said.
There will be an impact on sales channels, she added. For example, will there be a human intermediary or will insurance be purchased automatically? If the latter, the cost of sales could diminish substantially, while employment could be impacted upon.
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