The autonomous vehicle: a new turn to be taken for insurers

 

We are on the eve of a revolution in the automotive sector, with the uprising (and faster than we think) of autonomous cars. Car manufacturers are announcing a broadcast to the general public from the beginning of the years 2020, and these models would represent almost 30% of world production in 2035. Moreover in France we should have a legislative framework from 2019, allowing us to drive on the public road with a level 4 autonomous car.

 

Classification of autonomous vehicles

Level 1 First Aid for driving There are a few options to improve driving experience: adaptive cruise control, blind spot detection, line-crossing alert, etc. Existence of a number of such options as early as the years 90.
Level 2 Shared driving The capacity of the machine to replace the motorist in certain situations: Park assist, emergency braking system, alerts in case of sleep or discomfort in the driver, etc. The driver must be able to regain control at any time Appearance from the years 2000 on high-end vehicles. Today, many brands offer these kinds of options on their vehicles
Level 3 Limited independent driving Certain driving phases can be totally delegated by the driver (highway, traffic jams, parking manoeuvres), but the driver must be able to intervene if necessary. Tesla now offers this level of autonomy, while Audi tests it on its flagship car (A8), but it should be noted that the legislation restricts the use of autonomous driving.
Level 4 Extended Autonomous driving Resumption of the main principles of level 3, with a major difference: The driver has the right not to be concentrated on the road. Its presence is however necessary in order to bring the car on the phases where the driving is delegated. Pending the evolution of legislation, Tesla announces the launch of a level 4 stand-alone car from 2018, while Audi is developing a model for 2020. A concept because Renault, the symbiosis, was presented at the Frankfurt Motor show of 2017, capable of making full trips on motorways, changing the line, crossing toll gates, without any human intervention.
Level 5 Total autonomous driving Fully automated vehicles, requiring no human action, regardless of the driving phase Toyota is thinking about setting up autonomous shuttles for the Tokyo Olympics. Experiments have been taking place for many years at Uber, Google and Tesla. According to most manufacturers, these vehicles will be placed on the market between 2025 and 2030.

 

The arrival on the market of autonomous vehicles should be done in a gradual way, but it represents a real challenge of adaptation for financial services, especially for insurance companies, which will have to take into account very quickly This new reality.

The first change concerns the typology and frequency of claims. In fact, actuarial studies show that 93% of road accidents are the responsibility of the driver. Thus it can be inferred that roads more frequented by autonomous cars would be potentially much less dangerous. The overall cost of the claims would decrease, resulting in a decrease in the volume of premiums collected by insurers. However, a single car accident could be much more costly than what we know today. Not to mention that despite this drop in car claims, new types of risks could emerge: cars could become targets of cyber attacks, data piracy, road accidents triggered remotely , remote flights, etc. It will therefore be necessary for insurers to radically change their risk assessment in order to adapt to this new market.

Another major change for insurers is the determination of liability incurred in the event of a claim. Today, in the event of an accident, a driver is generally at fault and his insurance covers the damage caused. Tomorrow, the driver becomes totally (or almost) passive. Another manager will have to be appointed, but it must be sought from the manufacturer, the equipment manufacturers, the software publisher, the platform operators and even the administrations responsible for the planning of the Territory. If we ignore the consequences for the victims of these accidents, the question of evaluating the respective responsibilities of these various actors promises long and captivating debates between experts and jurists from all sides.

Finally, this “revolution” could drastically change household consumption patterns. Today, a car rolls on average less than 3% of its life time. The arrival of the autonomous vehicle could allow the development of self-sharing, for both economic, sociological and ecological reasons. All the players in the value chain are likely to be impacted negatively by a contraction of the fleet, and insurers will not escape this phenomenon.

 

Insurers will have to adapt to this new deal

The combination of these different factors makes the insurers stand on the eve of a mini-revolution; They will have to adapt very quickly if they do not want to take the risk of “missing the turn” of the autonomous vehicle.

It will be first of all for them to review the contracts proposed to the customers and to adapt the clauses, the guarantees, the method of charging to new uses, to new risks and to a new claims by its nature, its frequency, and the Responsibilities that must now be shared between the owner of the vehicle (can we still say the “Driver”?) and those who have provided the vehicle.

Insurers will have to face a number of commercial challenges on the other hand. The insured will no longer necessarily be an individual, owner of his vehicle, as is the case at present, but more and more often a company: a landlord, a fleet manager, even the builder himself, who could integrate Insurance in the same way as the maintenance of the vehicle in its price of sale or rental. The distribution of insurance contracts and loyalty techniques will therefore be greatly altered. As for distribution networks, their role and sizing will need to be adjusted. Companies will have to adapt to a new market, offer B2B offers for companies that operate fleets of vehicles. These are probably the companies (Uber, DiDi and other Waymo) that will accelerate the development and democratize the autonomous vehicle.

Some insurers have not yet waited to position themselves on this new niche. This is the case of Allianz, which has marketed an attractive auto contract (about-25% on the premium) for semi-autonomous vehicles in order to take into account their beneficial effect on claims. Axa has chosen a different strategy and has signed an exclusive partnership with Tesla which offers its customers in Hong Kong a customized insurance package when purchasing a vehicle. Root, an American Assurtech specializing in the “pay How you Drive”, launched in 2017 a specific contract for TESLA drivers: the latter receive 10% discount on their premium, calculated according to the route made, When they activate the autopilot.

So we see that the question is not so much whether, but rather when and how traditional insurers will have to adapt so as not to run the risk of being pawned on their core business by Assurtechs, more agile and quicker to deploy new insurance models.

 

[Automatically translated by Lingotek]

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