Insurance Risks Remain in an Autonomous World

The old Chinese curse, “May you live in interesting times,” could very well apply to the auto insurance industry these days.

That’s because, while the industry is moving at a slower pace than that of the auto industry it shadows, it’s still on the move. As the driver’s relationship to the car changes so, too, will an insurer’s relationship to that operator. One of the clearest indications of this will be the number and nature of claims being filed.

Owing to increased accident-avoidance systems in assisted solutions, we can sensibly expect the number to drop. Yet Donald Light, a director at the North America property and casualty practice at researcher Celent, believes there’s a caveat. “While frequency drops, severity may increase at first because of the cost of replacing ADAS equipment – or more vehicles being total losses.”

“As we move up different levels of autonomy, new risks will be apparent,” said Jonathan Charak, of the US Casualty Actuarial Society. “For instance, with both autonomous and standard vehicles on the road, there remains a large potential for an autonomous vehicle to obey the laws in a strict sense while a human driver bends the laws, which can cause collisions due to divergent driving habits.”

That sounds like a scary prospect, both for the insurer that has to carry the risk and the policy holder that theoretically faces a higher premium. Many believe the solution lies in technology. Advanced-level cars even at this early stage produce a mountain of data, not only on the vehicle’s performance but also on the driver’s handling of the machine. As ever in the insurance industry, the more information an insurer has at its disposal, the more accurately, fairly, and attractively it can price a policy.

Yet, the insurance industry has some catching up to do. When asked whether this rise in data has affected the claims process so far, at least in his home market, David Williams of AXA Insurance (UK) said bluntly: “Not really but there is big potential. So far there has been limited use and sharing of this vehicle data, OEM’s are guarding it as they see clear future value.”

However these proprietary instincts should melt away with the realization that such data can be used to benefit insurers and policyholders. If this helps save money and lower risk for those groups, the benefits should loop back around to help automakers sell cars and keep developing all that technology.

Williams ticks off several data weapons in an auto insurer’s future arsenal. “Images from HD Video, radar, LiDAR, ultrasound, all this will help but, in the short term, then things as simple as geo-location and communication could be used to instigate a claim without any human interaction, a recovery vehicle being sent to the customer as well as being able to contact the customer to check they are OK, their circumstances, rather than waiting for them to ring you.”

Already, some fairly low-level and established technologies are already being used which make the claims process quicker and, in the best cases, more accurate. Charak points out that the smartphone has been a useful tool for a policyholder to submit a claim backed by hard video and/or photographic evidence.

However, technology alone can’t do the heavy lifting. Insurers need to develop their own means of harnessing the increasing number of tools and data points at their disposal. The latter is of particular importance, said Charak, especially in combating fraud. “A unified/standardized way to organize data would be valuable, whether it comes from a car manufacturer decision or a third-party vendor,” he said. “Eliminating data manipulation allows for greater time and resources to create insights and potentially lower expenses in creation and maintenance of a product.”

The insurance industry can also do more to automate claims procedures and increase transparency. Williams believes that: “Tracking a claim’s progress also should not be underestimated. RFID tagging can automatically let a customer know how repairs are progressing as [their car] moves through the body shop.”

Happily, insurers have already started their motors on this. “Online tools to report and get updates on claims is… a big step forward from where we were previously,” said Williams, citing an example of a now-commonplace practice that was rare only a short time ago. As with any industry, technology will march over the classic procedures and practices of the auto insurance business. In the future, with the coming of advanced-level assisted driving and ultimately autonomy, the nature of claims will certainly shift and, along with it, the job of servicing them.

After all, said Light, even with the anticipated reduction in accidents and fatalities “There will still be the occasional tree limb dropping on an inconveniently parked car (machine vision and AI will not be able to see and anticipate everything) but the work of the remaining claims adjusters will be focused on technology and litigation.”