Insurers have struggled for years to make a profit from motor insurance due to intense competition and a rising tide of fraudulent claims. Now they face a much bigger threat as new technology sends key information about drivers’ behaviour, including their speed when an accident occurred, directly to car makers.
Kenny Leitch, telematics director at British insurer RSA, said car manufacturers will want to offer insurance directly to car owners to remove the risk of a Jaguar, for example, being sent for repair and the insurer replacing it with a courtesy BMW – which the driver ultimately prefers.
“You can see them trying to grab control, they do not want insurers taking control,” he said.
RSA is in discussions with car manufacturers on ways they can work together and “we will keep talking to them,” Leitch said. One way forward for insurers is joint partnerships.
Japan’s Toyota Motor and Aioi Nissay Dowa Insurance, for example, are planning to jointly develop car insurance based on a driver’s habits.
Car manufacturers, including Jaguar Land Rover, BMW, Ford and General Motors, are already making cars that are hooked up to smartphones, letting drivers do everything from honking the horn remotely to recording the force with which they brake and accelerate.
The data from these connections could then be used to price insurance policies. Insurers, traditionally slow to embrace technology, need to catch up.
“Insurance is in the stone ages, while people are circling Mars in spaceships in other industries,” said Mark Wilson, chief executive of British insurer Aviva. It has opened a digital hub to generate new product ideas and make them more accessible via tablet and smartphone in London’s trendy Hoxton area, home to many tech firms.
“We need to build our own spaceship,” said Wilson.
Insurers are also using telematics – black boxes installed in cars – to monitor behaviour on the road and lure safer drivers with lower premiums.
Between 2013 and 2015 the number of policies using telematics tripled in the United States to 6.8 million, and more than doubled in Europe to 5.1 million, according to consulting firm, Ptolemus.
As Internet-connected and, eventually, driverless vehicles roll off production lines, traditional motor insurers need to adapt to ward off competition from car manufacturers.