By Jerry Albright, KPMG
The question would’ve been ludicrous just a few years ago. Yet now, insurance companies are being forced to grapple with it: How do you write a policy for a car that drives itself?
The development of autonomous vehicles is expected to transform the auto insurance industry in the coming years. Yet most carriers aren’t worried about the coming disruption, according to a recent KPMG survey of insurance executives.
Learn more about auto insurance in the age of driverless autos.
Why? Most industry leaders don’t think driverless cars will happen anytime soon, if at all. And even if the cars do become a reality, these executives believe the impact on their business will be minor, as coverage will be handled by smaller, “niche” insurers.
Such skepticism about the future of driverless cars is certainly understandable, yet advancements in driverless technology are moving more rapidly than anyone expected. Some industry leaders and analysts now believe that fully autonomous vehicles will be on the nation’s roads within five years.
That doesn’t give auto insurers much time. And the questions raised by this new market are mind-boggling.
Consider: Whom do you insure — the driver or the car? If the car violates a traffic law or hits someone, who’s responsible? Does the driver have any liability?
That raises an even bigger, if less obvious, issue: If driverless cars prevent accidents and save thousands of lives every year, how much auto insurance do people really need? The industry could be facing a major retrenchment with little time to prepare.
Here are some guidelines to help auto insurers start considering their options.
Determine how vulnerable you are. Do some “what if?” scenarios to find out your exposure to the changing market. Then see how it will affect current insurance policies, premiums and other metrics. Decide how — and when — your company is going to adapt to meet these challenges.
Review your business strategy. What are the opportunities and threats in a driverless car market? What are your strengths and weaknesses? Review your strategy on everything from target market to product mix. Then make whatever changes are needed, including how your corporate culture will adapt.
Monitor the driverless market. Set up some key indicators to keep track of how fast the technology is changing — and its impact on auto insurance.
Prepare your operations. Form a task force to develop a plan of action. How will you change underwriting, ratings, claims and customer service?
Figure out the cost. How much will all these changes cost? What can be done to curb expenses, especially if people no longer need much auto insurance?
Train your employees. What do they need to learn? How do you deal with resistance to change?
Form partnerships. Determine which companies are involved in driverless insurance and how you can partner with them. Develop an industry point of view on such key issues as liability and regulation.
For more information on auto insurance in the age of driverless autos, click here.
Prepared in association with WSJ. Custom Studios.
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