Fifty years ago, television shows and cartoons showed us a future where people would be using flying cars, hovercrafts, or maybe even teleportation as a common way to get around. As the years ticked by, we saw small features, both aesthetic and functional, change and improve within the automobile industry, but nothing big until recently. Now we have fully electric vehicles with AI-enabled, self-driving, semi-autonomous features, as well as fully autonomous vehicle applications and experiments going on globally.
The thing few questioned along the way? What would these massive leaps and bounds in the automobile industry do to your insurance premiums? And likewise, would this deter a customer from buying a specific “vehicle of the future”?
At the present, you still hop in the front seat, with most of us turning a key or pressing a button, and you put your vehicle into drive with a lever or a knob. Because of this, most of the vehicles you drive leave your insurance unaffected; therefore, you are not persuaded to avoid a certain vehicle due to insurance premium rises. That is, until now, as we have taken massive leaps in the marriage of automobiles, wireless networking, and computer systems.
Multiple vehicles now on the roads have semi-autonomous or, in some cases, close to fully autonomous features, aimed at making the roads safer and saving drivers from themselves. Most notably, disruptive innovator Elon Musk and his creation of electric automaker Tesla has been in the limelight, both for good and bad reasons in regard to their vehicles implementing autonomous driving modes.
The good is that, for example, a sophisticated system of sensors, radars, and cameras is more adept at detecting trouble than human beings, and computers do not drive while intoxicated or accidentally doze off while driving on the freeway. I own a Tesla Model X, and when it is in self-driving mode, for the most part, it drives better than I do.
The bad? Tesla has run into plenty of hiccups in its initial version of autonomous driving mode being more limited than once conceptualized. Couple that with the fact that there are far fewer Tesla Model X automobiles on highways across the nation than Fords or Chevys, and many buying a Tesla will quickly notice their insurance premiums go up, depending on the insurance company they choose to use.
A recent example can be seen in the case of entrepreneur Dan Peate, who founded a company called Hixme, a provider of group health insurance. Dan, being part of the insurance industry, was deterred from getting himself a Tesla Model X after he discovered through his own insurance company that his premiums would accelerate to roughly $10,000 a year. If he would have shopped around, he would have found a much lower price, but why should the price vary so much, especially if the concept of owning a semi-autonomous vehicle is that it is specifically manufactured to be safer on the roads? Shouldn’t your insurance drop drastically if your smart car can avoid accidents better than a human driver? If you find yourself asking these same questions aloud, you are definitely identifying a Hard Trend; there will be many more semi-autonomous and autonomous vehicles on the road every year.
Dan Peate also identified this growing Hard Trend and became more anticipatory in his thinking, as he then moved to start a wave of disruption from within the ever-rigid insurance industry he is already part of. He started Avinew, a new insurance company that monitors drivers’ use of autonomous features on cars made by companies including Tesla, Nissan, Ford, and Cadillac. Avinew determines insurance premium discounts based on how and when autonomous features are used.
Avinew has agreements with most manufacturers, allowing it to access driving data in real time, once a customer gives them permission, and then utilizes the data gathered to cut insurance premiums, rather than the antiquated counterpart where data is gathered after accidents have occurred.
Underwriters and actuaries base insurance prices on the type of risk, and oftentimes they charge more due to not having enough data. The prevalent risk is actually the unknown, not the assumption that a semi-autonomous or autonomous vehicle will put you in danger. With real-time data coming in from participating owners of crash-avoiding vehicles, coupled with the data on how much safer these features make driving, the wave of change is in motion, disrupting the multibillion-dollar auto insurance industry.
With the interconnectivity of the world today, policyholders will increasingly have a more dynamic and interactive relationship with insurers, and much like decentralized currency, having more accurate accounts of transactions, in this case how often you use a safety feature, will eliminate frivolous costs that deter many from buying certain types of future-ready vehicles.
Some in the insurance industry may call this an existential crisis, but it is actually a chance for entrepreneurs to turn disruption and change into opportunity and advantage by learning to be anticipatory, just as Dan Peate and Avinew have. But the question of “If the driver isn’t driving, why do we need auto insurance?” burns insurers’ ears.
Research conducted at the Stevens Institute of Technology in New Jersey indicates that premiums could drop 12.5 percent by 2035 with this new wave of auto disruption, and that as it stands in the present, product lines centered on autonomous features will offset some of the loss, but the gains will remain far behind.
Forecasts like this might make the insurance industry feel like it has plenty of time. After all, that same research above estimates that by 2035, there will still only be 23 million autonomous vehicles on American roads, which is less than 10 percent of today’s total.
The problem with this, and many other research reports trying to forecast the future of autonomous driving, is that they fail to use one of the key principles I have been teaching for many decades, a principle that has helped me to maintain a high level of forecasting accuracy over the past 35 years. The principle is Both/And. Researchers, many in the auto industry, as well as the press, fall into the trap of thinking future vehicles will either be fully autonomous or not autonomous at all (Either/Or thinking).
The future fact is that fully autonomous vehicles in general use on our streets and highways will have much higher risk due to potential hacking and technology failure issues than semi-autonomous vehicles where crash-avoidance systems are fully in place yet the driver can take over if they need to. What we will see is very rapid growth in semi-autonomous cars, as well as older cars being fitted with semi-autonomous crash-avoidance systems, and a rapid growth of fully autonomous vehicles in areas where their use can be maximized with less risk. That means that the numbers of vehicles with semi-autonomous and fully autonomous capabilities will grow far faster than most are projecting. Keep in mind that over 80 percent of people in emergency rooms are there from a traffic accident. A key driver that will accelerate this Hard Trend is the need to dramatically reduce accidents!
The insurance industry will have to move on this far faster than projected or be disrupted by anticipatory outsiders who can see the future faster than their slower counterparts. Insurance will be needed, which is very good news for the insurance industry, but the risk is shifting and following the risk to find the opportunity will be a key to growth in the years ahead. Hint: The risk is increasingly shifting to the vehicle manufacturer, the software provider, the seller, and the tech component system providers.
What is obvious is that the driver will increasingly become less of a risk, and the vehicle and systems will become more of the risk in all forms of transportation. One way an entrepreneur could look at this and anticipate what is to come is by paying less attention to what Dan Peate and Avinew are currently doing, and focus their energy on what will disrupt Dan Peate and Avinew in the coming years.
Risk will migrate. If the risk is less human involvement and more system centric, said risk becomes systematic and far more predictable and preventable in nature.
Blame has the potential to become quite convoluted, but they are all individual opportunities for existing insurance companies to anticipate, adapt, and grow, or stagnate and fail. The good news is that by using the Hard Trend Methodology, you have a choice.
Byline: Daniel Burrus is considered one of the world’s leading technology forecasters and innovation experts. He is the CEO of Burrus Research, a research and consulting firm that monitors global advances in technology driven trends to help clients profit from technological, social and business forces that are converging to create enormous, untapped opportunities.
He is a strategic advisor to executives helping them to develop game-changing strategies based on his proven methodologies for capitalizing on technology innovations. He is the author of seven books, including The New York Times bestseller Flash Foresight, and his latest book The Anticipatory Organization.
To Order FREE book: Visit https://www.anticipatoryorganization.com/get-the-book
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