Insurers should not fear the driverless car

With autonomous technology marching with increasingly confident strides into the auto industry’s products, insurers will have to adapt their risk models to cope.

That’s the clear message from Aldo Monteforte founder and CEO of telematics technology specialist, The Floow.

Speaking to TU-Automotive, Monteforte said insurers must adapt by using all the data collecting opportunities the connect car technology can offer.

He said: “The whole industry continues to be affected by the same technology drivers, you have growing quotas of cloud-based services and continued advances in data science. There is also an unprecedented proliferation of sensors and these individual drivers continue to influence the development of the industry.

“I think what has become more centre stage has been the concept of increased autonomy of vehicles and by autonomy I don’t mean driverless cars because that will be a very long-term issue.

“I am talking about vehicles that come equipped with systems that will enable the driver to sub-contract the governance of the system to on-board equipment and benefit from being completely disengaged from the conduct of the vehicle.

“I think we are closer to this state and, for us, this is a great opportunity because we help insurance organisations to assess and measure risk. Today we do that by observing individual behaviour who is in control of the vehicle but, in future, an insurance company will want to understand the risk of the vehicle as a robot.

“So we are working to equip our insurance partners with scores and risk management technologies that will allow them to price at any set of circumstances, whether the car is being driven by a human or a robot.”

Many believe that with autonomy reducing auto risk, the insurance providers could be left with lower premium revenues and a shrinking business opportunity. But Monteforte thinks there are plenty of opportunities existing in the marketplace before autonomous vehicles achieve widespread acceptance.

He explained: “This is an industry designed to price risk and if crashes are going to decrease then there will be less need for a pool of financial resources behind claims. Our concern is not so much about the size of the gross written premium (GWP) but with creating the intelligence that allows insurers, bigger or smaller, to operate and price in this brave new world where they are pricing for something they don’t understand.

“Autonomous vehicles that will be circulating on roads still heavily populated by normal, non-autonomous vehicles, are a quantity we don’t know yet for sure. Will consumers embrace this technology, how many of the 800,000 new vehicles coming into the global market each year be autonomous?

“Yet, it is a natural extrapolation to think that in 30 years there may be now accidents and possibly some insurers would be concerned about the fall in GWP but I think the route that will take us there is much more interesting than thinking about the end state would have us believe.”

Monteforte said the advance of autonomous features in cars could see the rise of a whole new breed of risks the insurers will need to address.

He said: “There are bound to be risks associated with the interaction of human driven vehicles with robot controlled ones and would probably generate a spike in risk. Our main concern is, whatever the outcome, there will be risk to be managed and our role is to develop technologies and algorithms to enable our partners to face this new world successfully with the best analytical tools to operate and run their insurance businesses.”

Monteforte is convinced the advantage of data streams from the connected car will open other business opportunities for the insurance market.

He said: “The new generation of risk models that are developing are fed by data from the on-board systems. Therefore, we can anticipate functions and flaws that have nothing to do with the human interaction but coming from the systems themselves. If these risk models are accepted by the insurance industry, then it should unlock a greater adoption of the connected car technology because both regulators and consumers would say ‘hey, there is a risk to this’ and this can be kept within an insurance framework. So if something goes wrong, there is underwriting capital available to clean up the mess.

“What will change with the insurer’s role, and what is much more interesting, is that the data that will be available to develop these risk models will be coming from the car’s on-board systems.”