The Changing Face of Car Insurance
2 June 2017
Every year, it seems there is more bad news for drivers. Insurance, petrol, road tax all seems to be increasing at a rate of knots. The increase in Insurance Premium Tax as of June 2017 will mean that car drivers will, on average, see £10 per year added to the average insurance premium. Car insurance is already the subject of much grievance owing to its steady increase – the average premium is now up 16% to £586.
But now, electric motoring giants Tesla, are forcing insurance companies to seriously consider how policies will change as cars become safer due to advances in self-driving technology. In fact, Tesla is already selling car insurance included in the price of its vehicles in Australia and Hong Kong, as part of an overall vision to one day include insurance in the final price of all its cars.
This ‘safe driving’ technology, which Tesla nicknamed Autopilot, has already seen crash rates drop by 40%, according to statistics from the National Highway Traffic Administration. This is a seriously impressive return on the technology, and likely to have a major impact on the car insurance industry as a whole.
The next generation of cars are designed to be even safer and Tesla CEO Elon Musk is quoted in Business Insider as saying: “The company [Tesla] wants to ensure companies are dropping costs proportionate to the reduced risk of driving a Tesla.”
The personal auto insurance sector could shrink to 40% of its current size within 25 years as cars become safer with autonomous tech, according to a report by the global accounting firm KPMG. It also states: “A continual decline in the frequency of accidents should drive a drop in industry loss costs.”
However, there are still many questions marks over self-driving cars and safe driving technology. The changes to the car insurance industry are unlikely to happen overnight. For fully autonomous cars, coverage will likely shift from personal to commercial as accidents are linked to technical failures.
The complication lies with semi-autonomous cars: If there is still a driver behind the wheel, who is ultimately responsible for the vehicle?
Insurance companies are being encouraged to consider the implications and plan a strategic response to the changing nature of the automobile industry. Both established automotive names and new technology giants are racing to produce new generations of ‘driverless cars’ or safe driving features. This competitive streak will ultimately impact upon the car insurance industry.
New technologies are changing the face of many traditional industries, such as banking and health care. Whilst we aren’t quite at the science-fiction stage of flying cars, it will be interesting to see how the automotive industry adapts and presents new technology and how this will affect the traditional car insurance format.
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Written By Stuart McKenna