The world Is changing so can insurance keep up, asks Susan Kuchinskas?

In the first day of the conference, Chicago lived up to its name as the Windy City – appropriate given the winds of change that are blowing harder at the insurance industry. In almost every presentation, the connected car was at the centre.

Connected car at the centre

Cars with persistent connections haven’t exactly reached the tipping point but that point is getting closer. David Lukens, director of telematics for LexisNexis Risk Solutions, noted that, following the Japanese tsunami and the US recession, car sales have increased thanks to pent-up demand. More people who did not buy cars in the previous five years are opting for connected cars now.

He said that, in 2025, roughly 60% of vehicles on the road will have some kind of native connectivity. Yes, that’s a lot of cars to insure. The caveat, he said, is that there will be a mix of connectivity solutions. “What it really means to me,” he said, “is that, even in 20 years, I can’t rely solely on connected cars in order to run a UBI programme, because I don’t have coverage of the whole fleet.”

What the connected-insurance world will look like in his view: “There will be a minestrone soup of different ways to collect data going forward.” And then, there’s now – a world where most cars do not have any connectivity at all. In this market, state insurance commissioners are concerned that UBI programmes may shut out people who can’t afford a fancy phone.

David Niziolek, director countrywide underwriting strategy and solutions with MetLife, said MetLife is grappling with this. It built the MyJourney programme with a dongle solution; a vendor provides the solution and risk rating. He said: “The question becomes, is there a one size fits all solution for every customer? Not everyone has a cell phone and some people will never plug hardware into their vehicle. The technology is not there for an embedded solution. We’re struggling to figure out what is the best solution going forward.” And every vendor has a good reason why its solution is the best.

The dongle is the only solution that can address the vast majority of cars on the road, said Linda Senigaglia, enterprise account executive, connected car at Danlaw. The smartphone is tethered to the body, so you get tremendous insights into the behaviour of people, according to Hari Balakrishnan, founder and CTO of Cambridge Mobile Telematics.

Dave Pratt, general manager, usage based insurance for Progressive, provided an unbiased plug for embedded solutions. “The percentage of new customers that have a connected car that is capable of providing the data we need is tiny. But that is probably the best consumer experience,” he said. Meanwhile, Bob Gruszczynski, OBD communication expert at Volkswagen Group America, reiterated his position: ‘Hands off that port!’

Insurance in a mostly autonomous world

Now, the industry has clearly focused on the future of autonomy which will, as Jim Levendusky, vice president of telematics at Verisk Insurance Solutions said, “turn the auto insurance industry on its head”.

There will be 33M fully autonomous vehicles in 2030, according to Frederic Bruneteau, managing director of Ptolemus. “We hear a lot of waves are coming. But we need to understand how fast they are coming and how big they’re going to be,” he said.

Autonomy will create huge disruption in the insurance marketplace, according to Anne Melissa Dowling, acting director of the State of Illinois Department of Insurance. “Actuaries will need to be analyse very different data sets and do it very fast,” she said.

There will be an impact on sales channels, she added. For example, will there be a human intermediary or will insurance be purchased automatically? If the latter, the cost of sales could diminish substantially, while employment could be impacted upon.

Moving from risk rating to claims adjusting

Another new trend was an increasing awareness that connected-car data can not only improve risk rating, it can also improve the process of dealing with claims. Of course, some vendors have been touting this for years; this year, it seemed closer to reality. From the first notice of a crash to the final settlement, data can be used to

Vance Loiselle, CEO of TrueMotion, noted that 40% of customer churn is down to a bad claims experience. If insurers can improve the claims experience, he said, churn will go down.

As Larry Thursby, vice-president of property and auto product/pricing for Nationwide, noted, in the six years since its SmartRide programme went live, Nationwide has integrated UBI data with its policy administration systems. The next task to be accomplished is integration of the claims adjustment systems. “There’s a powerful use case,” he said, “but now you have to integrate with one of the carrier’s biggest systems.”

Is mobility insurance the future?

One concept that was taken for a ride in several sessions was that, in a world where people increasingly use multiple modes of transportation, and are less likely to own a personal vehicle, insurance might be tied to a person instead of a car.

Eric Nordman, director of the Regulatory Services Division and the Center for Insurance Policy & Research, NAIC, made what he admitted was a wild proposal: “Every citizen is required to buy health insurance, and auto insurance gets dumped on when people don’t have medical insurance. Why not move the accident portion of coverage over to the health insurance world?”

Carla Bailo, head of mobility research and business development at Ohio State University, suggested that a new product, “mobility insurance,” might cover a person anytime he or she moved around, whether via public transport, a transportation network company, private vehicle – and even via bicycle or while walking.

Conclusion

Finally, Roosevelt Mosley, principal of Pinnacle Actuaries, delivered a cautionary note. Based on Pinnacle’s analysis of the Twitter sentiment about usage-based insurance and the companies that provide it, he warned, “The consumer focus changes over time; customer sentiment regarding UBI is still overwhelmingly negative, while reactions to autonomous vehicles are mixed.” Twitter sentiment tends to be polarised, he added – only those with a very positive or very negative experience tend to tweet about it.

But Matteo Carbone, a principal of Bain & Company, was able to back up the potential for improving customer satisfaction with some hard data from an unnamed insurer in Italy. He said that, instead of providing discounts, one carrier was able to charge customers 10% to 15% more by adding services that customers loved.

UBI is here to stay: Ptolemus estimates that, by 2030, 60M cars on the road will be insured by some form of UBI – approximately half of all vehicles. It’s up to the industry to make customers love it.

Now catch up with Day Two

TU-Automotive ADAS & Autonomous USA 2016

03 Oct 2016 - 04 Oct 2016, Novi, USA

The most focused forum on the here and now of self-driving technology. As these technologies storm the headlines, we focus on the current challenges and unite players from research labs, automakers, tier 1’s and the complete supply chain to plan for the imminent future.