With the advent of automobile technology such as driverless systems and telematics, the personal car insurance industry is at a crossroad. Will personal auto insurers still have a place in an industry where manufacturers not only have better means to price policies, but could also take full liability on their vehicles’ performance?
A report by KPMG published 2015 expected the personal car insurance sector to shrink to 40% of its current size within 25 years. KPMG suggested that this decrease is not just because manufacturers will be more likely to take full liability for their driverless cars, but also since smart car technology could potentially reduce the number of accidents on the road.
With driverless car technology moving forward, the auto insurance industry could lose all meaning once liability for vehicular accidents shifts from drivers to the manufacturers.
Next year, Volvo is set to test its driverless cars in London. The manufacturer, along with Mercedes-Benz and Google, has stated that it would take liability for accidents in its driverless cars. Other manufacturers of driverless cars could take similar stances in the future.
"As the car becomes more autonomous ... we believe more of the liability will be absorbed by the manufacturer or the entity that has made the algorithms behind the brain of the car," said KPMG principal Jerry Albright. "At one point, does that become such a large portion that carmakers say, 'We will insure all these cars'?"
The personal auto insurance sector might not even have to wait for driverless cars to roll out to feel threatened—car manufacturers have the means to better track motorist behavior through telematics, and if they were so inclined, they could even offer policies of their own based on the data gathered.
CBC News reported that some car manufacturers such as BMW, Ford, General Motors, Jaguar, and Land Rover already outfit their automobiles with features that allow drivers to monitor and control their cars through their smartphones.
This same technology could also allow manufacturers to keep track of their vehicles through telematics (remote monitoring technology). The data manufacturers collect from the vehicles could then be used to help price insurance policies.
While car manufacturers are readily embracing telematics and the opportunities it brings, the insurance industry has been slow to adapt. To date, only a few insurers in Canada such as
Desjardins, the Co-operators and the Personal Insurance Co. offer their own telematics systems to record policyholder driving habits.
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