Mark is a Partner at ReSource Pro Consulting.
In part one of this blog series, we discussed major trends spotted at CES, including mobility, electrification, sustainability, and digital experience. But how will these emerging trends impact P&C insurers now and in the future? I categorize the implications into the good, the bad, and the ugly below.
The Good
There will be increasing opportunities to insure the growing number and types of micro-mobility options. Some insurtechs and some incumbents are already providing coverage for e-bikes and other new options. For now, the movement to bikes and scooters has yet to take off in the North American market as in other parts of the world, but it is likely to do so in the future.
Eventually, when level four and five autonomous vehicles dominate the highways, there should be a dramatic reduction in accidents. However, the vision of completely autonomous vehicles where human error is eliminated and accidents are dramatically reduced is still a long way off. Most observers believe it will be five years before level three AVs are broadly approved by regulators and appearing in significant numbers on the roadways.
The Bad
Unfortunately, for the next decade, new mobility options will likely make things more complicated, introduce more risk, and make vehicles even more expensive to repair. Insuring the mix of vehicles on the roadways will become even more difficult.
Vehicles will have an increasingly diverse range of digital and autonomous features, many of which have implications for risk (both positive and negative). The focus on the digital experience adds new levels of distraction. Rating may become more difficult, and dealing with regulators will be more complex as all try to determine the most accurate and fair way to price insurance. Vehicle repair is already a challenge with complicated computer/electronic features and inflation leading to higher percentages of total loss vehicles.
The Ugly
The increased cyber risk due to the digitization of vehicles could get ugly very fast. Cyber risk is already a challenge for insurers in other areas. The potential for vehicles is not only about stealing digital information but in commandeering the vehicle to cause accidents. Another ugly factor relates to liability. As more autonomous features are built into vehicles, it becomes more difficult to determine if the liable party in an accident is the driver, the OEM, the device or software maker, or another. Side note: ISO has recently introduced an endorsement for auto-hacking expenses.
Challenges and opportunities for insurers
The evolution of EV, AV, and new types of vehicles on land, air, and sea is transforming the mobility environment. The next decade offers both challenges and opportunities for insurers. It is incumbent on insurers to do three things for success. First, increase tracking and monitoring of developments in the mobility space. Second, gather and analyze data to understand how risks are evolving. Telematics data will be vital but also all data related to the risks of various features and vehicle types. Finally, experiment and innovate. Standing still with the same old coverages to the same old markets will only provide success for so long. It is imperative that companies develop new insurance offerings for an evolving mobility landscape.
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