Insurers might be in a bit of a boom period at the moment, with annual increases in the number of people driving and therefore annual increases in the number of people who require insurance, but the companies shouldnt’ rest on their laurels according to John Scott, the risk assessment management head at Zurich Global Corporate, part of Zurich Insurance Group.
Scott said to delegates at the Insurance Risk Europe conference in London today, that in the next few years there were technologies coming into the field of motor insurance which could spell doom for their businesses in the future. Comparing the introduction of automated driving features to the wave of negativity surrounding tobacco and asbestos, Scott said that fully automated cars would one day do away with the need for insurance, or at least, insurance in its current guise.
Again he drew parallels with the traditional film based camera industry and digital photography: “The analogue photographic industry saw digital cameras coming for 10 years, but when they did come it destroyed their businesses because they had not taken the right steps to manage the transition,” he warned (via Risk).
He also highlighted how automated technology would be accelerated over the next few years. In the past six months alone we’ve seen Google’s fully automated vehicles tested by a number of different politicians and companies around the world and it’s brought about a huge wave of interest. On top of that, many other companies like BMW and Baidu, Volvo and Tesla have all pledged an interest in fully automated vehicles and are developing stop gap technologies in the mean time which will bring down insurance premiums.
The other danger he said didn’t come from automated cars, but automated buses and other transport hub vehicles that could theoretically replace a lot of cars. Even if people continue to drive themselves for a couple of decades more, if large numbers of people begin switching to publicly owned automated transport, it could quickly lead to dwindling numbers of people taking out premiums, which means the weaker insurance companies would likely die off in a more competitive and shrinking market.
Another aspect of the industry which Scott was keen to paint as a big risk for insurers in the future, was the latest generation of adults. The millenials he said, were beginning to manage their assets much more like small businesses, which means they’re more business savvy than their parents were and are less likely to sign up for deals that they don’t want or need. On top of that, new schemes that allow homeowners and tenants to take a paying guest, is going to create a big insurance headache in the near future:
“The question is where do you claim when something goes wrong? A lot of companies are quite glib about this,” he said. “They say either you claim from your home insurance or from the insurance of the person who is staying over. I am sure most of you have small print in most of your policies that says it doesn’t work like that.”
The insurance industry has a lot of shaking up to do in the near future. Do you guys think it’s up to the task?