Horse-and-Buggy Thinking on Driverless Cars

What the future has in store for insurers who ignore tech trends (it's not good)

If you worry that your smartphone is already smarter than you, consider this: apparently, Daimler had to deprogram certain capabilities of a semi-autonomous Mercedes recently,because regulations wouldn’t allow the car to do the things it can do. And, at the Insurance 2024 forum in Toronto early last month, Catherine Kargas, vice-president of the market research firm Marcon, made executives think about the driverless car in ways no one has probably contemplated yet.

The assumption is that driverless cars will be bought, but why buy when you can rent? As Kargas pointed out, we have substantial populations with disabilities and/or mobility needs. They may not need a car all the time. We have people who simply don’t want or can’t afford a car—too expensive. If you can get a vehicle “you need for the immediate trip, and not have to worry about maintenance, taking care of it… parking it, wouldn’t you give up your regular vehicle in order to have this type of service at a much lower cost? Well, that’s the kind of question that your consumers are going to be asking themselves.”

Read: Are Insurers Ready for Driverless Cars? 

So what does that mean for garages? Car theft could be a thing of the past, because why would you steal what can be affordably rented? The whole point of ripping off Porsches and stripping them for parts is that they’re in demand. Once upon a time, wood paneling encased your radios and other appliances, because we thought of them as furniture—as luxuries—but who cares about “fine Corinthian leather” in a pod that takes you from A to B?

Kargas has a long list of questions for the insurance industry, but they’re the right questions. Will manufacturers, for example, “self-insure up to the first 100, 500 million, a billion dollars, and then go out and request additional insurance from insurance suppliers? Will they buy excess liability?” Hell, forget cars for a moment. Kargas can envision driverless fleets. “In the marine industry, freight transportation, cargo ships that are completely unmanned,” she says. “Rolls Royce is working on a technology and is expected to release it within the next couple of years.” She expects to see driverless trains, and combines for farms.

Read: Toyota Promises Collision-Prevention Tech for All Cars

“I think that as we move from personal auto to commercial auto, because of fleet operations, there’s not going to be thousands of fleet operations in each region,” Kargas told Top Broker. “So, what are the chances that all brokers are going to have a piece of that pie? Not big. So the broker is going to try to find, potentially, other products to be able to offer to the individual… insured. In a context where the cost of mobility [for] using such vehicles and such technology is expected to decrease considerably for the average Canadian, American, et cetera,” they’ll have disposable income they can invest in other types of insurance. And if the right product is developed by the right carrier and pushed by brokers, this is the type of thing that could be well received by the public.

“The young who either are not of age to be able to drive or an increasingly growing population of those who decide that they don’t want to drive… all of these individuals are people who currently the broker is not selling insurance to. But, moving forward, there’s an opportunity to do that.”

Read: Liability Claims, Demand Set to Increase: Swiss Re

And though there may be no one behind the wheel, the wise broker better strap in for the ride. Kargas borrowed a slide from Daimler that showed a bunch of company names. “Do any of you recognize them?” she asked her audience. Complete silence. “These are names of the leading horse carriage manufacturers when the automobile was introduced…” None of them have survived.

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Copyright 2014 Rogers Publishing Ltd. This article first appeared in the November 2014 edition of Canadian Insurance Top Broker magazine

 

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Transcontinental Media G.P.