The combined effect of big data, artificial intelligence and machine learning has potentially huge implications for the future of motor insurance. Hardly a week goes by without research or an industry spokesperson highlighting the demise of traditional practices and the rise of insurtech.
For example Insurance Times recently quoted AXA’s UK technical director David Williams’ suggestion that as much as 80 per cent of today’s motor insurance market will have disappeared by 2040. That’s not a death knell for motor insurers. Instead the market is likely to change, with insurance being defined and transacted differently. Insurers have time to react, and there is huge potential for technology to benefit the motor market.
The advent of driverless cars, continued insurtech innovation, the impact of the sharing economy, the growth of consumer power and the expectations of millennials – these are some of the factors that will increasingly shape insurance products and the relationship between insurer and insured.
The road ahead
While driverless cars have been a talking point for some time, the pace of change is quickening and insurers must plan for the future when technology replaces humans at the wheel. In the Queen’s Speech, the announcement of an automated and electric vehicles bill included the provision of compulsory insurance for self-driving cars, underlining the challenge facing insurers as liability becomes less clear-cut.
The car of the future may see liability shift from drivers to manufacturers, while improved safety could result in a huge reduction in claims. We are also seeing the development of embedded insurance, where cover is bought with the vehicle.
Negotiating the route with insurtech specialists
As motor technology and insurtech redefine transport and risk management, specialists such as RDT will be fundamental in helping to smooth the way for insurers and provide a better experience for their customers. If 80 per cent of today’s motor insurance market will have vanished by 2040, we can expect to see it replaced by a new market in which insurers have become data-driven service companies, rather than simply risk assessors.