With the advent of autonomous cars, 5G, machine learning, neuromorphic hardware and even human augmentation close behind, technology is having a massive impact on the insurance sector.
And thanks to the internet of things (IoT), we’re moving towards a hyper-connected society in which we’ll benefit from increased predictability.
That is to say: our surest prediction for the future is that our ability to predict will get better (the irony!).
In this blog post I’m going to explore the future of insurance and predictability, taking autonomous vehicles as a case study.
Making predictions: how soon is now?
The best case study for the predictive future is the autonomous vehicle. It’s a great example of how quickly we can expect to see the impact of the IoT emerging.
So bring on the autonomous vehicles incapable of crashing, ready to whisk us to destinations in the fraction of the time journeys currently take.
This sounds idyllic, but adoption and cost are the real drivers in technical advances – not the theoretical and the possible.
We need to think about how rapidly we can expect to see our imaginings take shape and make sure our predictions aren’t too optimistic.
Let me take you back to 1998 and the birth of mobile communications as we know it.
Predictions about the future of mobile ran like wild fire. People imagined the connected home controlled by your mobile assistant, grocery delivery and ordering via text messaging, mobile wallets, picture and video exchange.
20 years later we’ve only recently started seeing some of these technologies coming into general use.
So we need to think about this question: what will create the delay for our use of future predicted devices?
Take care during the crossover period
Autonomous vehicles will be incredibly valuable to drivers and other road users when they reach the market. But how are we all going to stop using regular vehicles?
Is there going to be some kind of incentive for everyone on a given day to surrender their old cars and move to autonomous vehicles?
This is an important consideration, because one of the greatest risks to autonomous vehicles is facing is the unpredictability of drivers in regular cars.
Autonomous vehicles work on connectivity. They know where other vehicles are in relation to them because they’re constantly talking to one another, meaning they won’t be able to deal with an unconnected, human-driven vehicle. Its movements won’t be logical enough or planned fully ahead of time.
I like to think about Sweden: they managed to change from left hand drive to right hand drive overnight in 1967.
How did they all receive the information that this change was coming? How were they all able to act upon it? This baffles me, let alone the infrastructure changes that would have to have been made in 24 hours.
For this reason, it’s an interesting reference point for the switch to autonomous vehicles that is going to occur.
Perhaps the change could be smoother than we think.
Don’t underestimate cultural factors
There are also serious cultural factors we will need to contend with.
Vehicle collectors, for example, are going to be pretty miffed to find out that they can’t drive their much-loved vintage cars on the road.
And more than this: people love driving as a hobby. In some circles, it’s a leisure activity. Most of us remember the first time we got our driver’s licence. It’s a rite of passage.
We are not just car users we are car lovers. This part of our culture will be difficult to erase, and it has the potential to seriously impede the introduction of autonomous vehicles.
Old technology could hold change back
And finally we need to think about what we do with old technology.
It will be the old technology – the legacy systems and the platforms – that will hold most large enterprise businesses back from adopting the very latest tech.
Ask yourself this question: will a domestic insurer with an average premium of £250-£300 be able to offer connected homes with sensors that will reduce water damage by 30% on an individual level?
Installing a £100 sensor to detect water leakage on a reduction of £20-30 per annum will not be a natural choice for most customers because it ties them to one insurance in order to benefit from reduced premiums over a longer period.
This flies directly in the face of the current trend for insurance customers to shop around regularly to get the best deal.
Equally what happens if there is a claim: does somebody with a sensor get a reduced premium then? Or are insurers going to implement price increases regardless, meaning a person prepared to shop around still gets a discount without helping the insurer reduce losses.
Insurers will have to decide whether these sensor deployments become enforcements like telematics in young driver vehicles.
There would be benefits to this: it would give everyone an opportunity to access fair premiums by sensor deployment, even if you are otherwise uninsurable (because your house is on flood plains, for example).
Everyone can reduce their premiums by being prepared to connect, but it means everyone will need to deploy sensors and update their old technology.
The future is uncertain, but we will get there
This blog post is not intended to throw scorn on our expectations for the future. Far from it.
It’s an attempt to point out the future’s uncertainty, and show that not all things will arrive as quickly as commentators would have you believe.
Ultimately, the insurance industry over the next 10 years will belong to those who have a strong future vision and are committed to it, even in the face of unforeseen obstacles.
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