A recent report by strategy consulting firm Celent (Boston) looks at the impact of advanced technology on the auto insurance industry. Based on a review of available and emerging safety technology – including collision avoidance, automated traffic law enforcement, telematics and robot cars – it provides estimates for the reduction of accidents. One of its scenarios predicts total auto industry premium to drop from 25 percent of total insurance industry premiums to only 13 percent by 2022. Most of these reductions will be due to available safety technology; fully autonomous cars will make their impact felt in the decade thereafter.
The report entitled ‘A scenario: The death of auto insurance‘ analyzes the adoption of advanced car technologies. It sees the first robot cars becoming available for private use in the time frame between 2018 and 2022. Between 2023 and 2027 the author expects driverless technology to become a preferred feature of high-end cars. Its adoption may be subsidized through tax incentives. The timeline ends in 2027; the report does not give an estimate for when driverless technology will be required in new cars.
The report asks the auto industry to actively prepare for this scenario. It recommends to
- expect the largest impact in activity and budget levels for sales service and claims
- begin monitoring the evolution of technology-induced changes in insurance losses
- draft a strategy for addressing the impacts (expand non-auto business, grow through mergers and acquisitions, accept shrinking revenues)
The report should also be a wake-up call to other industries which will be affected by driverless technologies. While some industries are at risk (including car dealerships, repair shops and auto manufacturers), it presents great opportunities to many others – which will be able to introduce completely new services and business models.