by

YogendraMirajeRohitDwivedi

Auto-Insurance Industry’s collision with Driverless Cars

Contents�  Introduction�  ImpactonAuto-insurancemodel

ü  Liabilityü  Underwritingandpricingü Claimsü Profitabilityü  Strategy

� Conclusion� References

Introduc-on� Driverlesscars–aninnovationandmilestoneinauto-industry

� Onecar–solutiontomanyproblemssuchascasualties,trafficcrashes,trafficjams,parkingspace

� USauto-insurancemodel

Impactonauto-insurance•  Impacton$200billiononauto-insuranceindustryisprofound

•  Majoraspectsofauto-insuranceimpactedo  Liabilityo  Underwritingandpricingo  Claimso  Profitabilityo  Strategy

Liability� Whowillbeliable:Ownerormanufacturer?

� Complexityindecidingliability:Technicalfault–auto-manufacturerExternalfactor–carowner/Insurer

� Manufacturer–InsurerandInsured!MayprovidelimitedinsuranceMayneedtogetinsuredtocoverriskofbulk-producedfaultyapplications

Underwri-ngandpricing� DrivingrecordItwillbeobsolete,butmaybereplacedbysystemcredibilityofdriverlesscar

� Thetype,makeandmodelofcarPremiumwillbehighascarwillbeexpensive

� TypeandamountofcoverageRiskofdamage/theftismore,riskofaccidentsisless

� Obsoletefactors–age,gender� Carwillbeinsured,notthecar-owner!

Claims�  IndustryisfueledbyclaimsMajoraccidents-oneevery14secFatalcrash-oneevery16minute

�  Largestnon-lifeinsurancesector� Butpictureischanging….

Claims(contd..)

0

5

10

15

20

2002 2012 2022 2032

PastandprojecteddatarepresentationofMotorvehicleaccidentsinUSA(Unit=millions)

No.ofaccidents

No.ofClaims

Claims(contd..)�  Inpast10years,netpremiumsaredownby7%�  Innexttwodecades–claimsmayreduceby90%,natureofclaimswillchange� Claimsfraudwillbeeliminatedduetoavailabilityofhugedatarelatedtoeverysinglemotionofcarsinvolved

� Claimsinflationwillstagnate� Roleofclaimshandlersandadjusterswillchange

Profitability� Premiums∝Frequency,severityofaccidents� Reducenetpremiumsmeanslessrevenue�  Shrinkageofindustry:$200Billionà$20Billion� However,fewexpertsclaimthatduetoincreasedseverityandcosttofixcars,businesswillbemoreprofitable

Strategy�  Insurersneedtomakestrategicchoicesduetolackofactuarialpremiumdata

�  Fewinsurerswilldelayprice-reductionandenjoyshort-termprofit

�  Insurers,focusedontransition,willreduceprices,stealthebestcustomersandgainmarketshare

�  Strategyisthekeypointtosurvivetheimpactofdriverlesscars!

Conclusion�  Significantroleofmanufacturersininsurance

�  Insuranceprocesseswillbecar-centric� Muchlikehomeinsurance–Claimsrare,buthigh� Challengesforauto-insurers–maintainprofitmargin,decidetherightstrategy

References�  AutomobileInsuranceMadeSimple,ByEdBoylan,MarkSwercheck�  http://www.insurancejournal.com/magazines/features/2013/02/11/280151.htm

�  http://www.forbes.com/sites/chunkamui/2013/03/28/will-auto-insurers-survive-their-collision-with-driverless-cars-part-6/

�  http://wakesteendriversafety.blogspot.in/2013/03/the-driverless-car-and-auto-liability.html

�  http://bgr.com/2013/01/29/google-driverless-car-liability-laws-309926/

�  http://www.census.gov/compendia/statab/