A report by KPMG suggests that commercial auto insurers are currently in a “chaotic middle” period as more of their clients (such as mobility services and trucking companies) make the transition into utilizing autonomous vehicle technology.
The auditor’s report warns that the current core business models for traditional auto insurance carriers “may be under threat of obsolescence” with auto manufacturers “potentially becoming a viable alternative to cover driving risk.” KPMG then says that over the next 10-15 years, insurers will enter a “chaotic middle” as they absorb and respond to these changes.
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“As old business models and strategies become increasingly obsolete, carriers will need to identify new ways of doing business,” the report read. “This is not incremental change but rather a radical rethink of the core mission of the company.”
KPMG believes that mobility companies such as Uber and Lyft will be at the forefront of autonomous technology, citing a number of pilot programs being planned or underway (i.e. Uber and Volvo’s tie-up, Singapore’s self-driving car debut, Ford’s own autonomous ride-hailing service, GM and Lyft’s collaboration). Notably, the report pointed out that ridesharing companies utilizing self-driving technology could help their passenger-customers warm up to the idea of using smart cars for their own personal use as they grow familiar with the concept via service vehicles.
Trucking companies have also been identified by the report as early-adopters of autonomous technology. The relatively straightforward nature of the trucking business – delivering items from one point to another – presents the perfect opportunity for automation. Economic incentives, such as higher vehicle utilization once a human driver has been replaced, will also push trucking companies towards autonomy.
KPMG suggests that insurers take a twofold approach to address the challenge of autonomous vehicle technology: insurers should optimize the downslope in their auto business, while at the same time diversifying into new products and services.
“As their automobile books shrink in size, insurance executives will need to understand the pace of their respective downslope and manage the business through the change,” the auditor said. “The irony is that to be successful and relevant, insurance companies will likely need to invest into this declining line of business to update core functions to reflect new risks, technologies, and data.”
“In parallel, [insurers] will need to identify alternative products and services to close the gap in revenues lost to the declines in automobile premiums,” the report continued. “This diversification approach will also require significant investments—both for financial commitments and executive team mindshare.”
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