Brokers attending the closing session of this week’s P&C technology conference took a collective gasp when one industry veteran predicted the future of car insurance might be included in the price of a new car – bypassing the broker completely.
“You might actually be able to buy a car with the insurance package as part of the sticker price,” George Cooke, president of Martello Associates, told brokers gathered for the panel discussion ‘Innovation, Transformation and Insurance 2023.’ “And that insurance would be issued by one insurer, already included in the price of the vehicle.”
Cooke cited recent developments by the auto industry to incorporate more and more advanced driver technology into vehicles, technology that will one day include telematics devices in every car coming off the line. Presumably, telematics would facilitate the kind of auto purchase/insurance bundling Cooke predicts.
Cooke, who spoke earlier on how telematics is transforming the auto insurance industry, pointed to the recent Desjardins Group takeover of State Farm Canada’s operations – a company that has a large book of Ontario auto clients.
“I was absolutely flabbergasted when Desjardins bought State Farm,” said Cooke. “And with State Farm’s large book of Ontario clients – a book that has traditionally not been profitable – you have to ask yourself, why?”
Cooke theorized that Desjardins is looking ahead, looking to capture those clients and place itself in the position to service those auto clients in the future.
“In 10 years, there may not be auto insurance as we now know it,” he said. “The actual product will change, and there are going to be some very large winners and losers in the coming years. The company that has figured out who the customer is will be the winner.”
Part of what makes up the changing customer is the move to driverless cars and ride sharing, said fellow panelist Catherine Kargas, vice president of Marcon. (continued.)
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“Last year there were 500,000 cars in the United States not sold due to car sharing,” she said. “That means 500,000 fewer premiums. There is no reason to expect those numbers not be reflected here in Canada, and that decline is expected to increase anywhere from six times to 10 times by 2020.”
It is also a case of fewer vehicles being used, but much more often, added Kargas – and that should be noted by the insurance industry as a whole, as the classification of insurance should be shifting.
“Really, we are seeing a move from personal to commercial to fleet commercial, when we consider how the vehicles are being used,” she said. “This is what we’re facing as an industry.”
Ride sharing, which involves people using a rideshare app to ‘hitch a ride’ with another participating driver, offers the rider sharer to enjoy transportation, usually cheaper than taxi service.
It opens up an opportunity for brokers to provide coverage to individuals, even if they don’t own a car, said Kargas.
“Chances are the coverage is insufficient in the current situation of ride sharing,” she said.
Another example of how insurance will be changing in the coming years is the driverless car.
“By 2018 we will have commercially available driverless cars on the road,” said Kargas. “Autonomous vehicle projects have already been announced in Ontario.” (continued.)
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It will be the intervening years between now and full automation that will produce accidents, and brokers and insurers should be prepared for that, she added.
“Before full automation, accidents will be severe,” said Kargas, “usually when the automatic car becomes overloaded and tells the driver, ‘you take over!’ and the driver is in no position to respond.”
For Cooke, the regulatory bodies and insurance industry need to hurry up and keep pace with a technology that is outpacing current rules and existing coverage.
“How would you insure the driverless car in five years? In the context of the current regulations, the answer is a discount,” said Cooke. “At the moment, we have a technology that we aren’t sure how to insure that will be driving the car in five years.”
To learn more about how telematics is coming into the Ontario market, see 'CAA awards major telematics contract.'
