In the U.S., the auto-insurance industry is significant, gener- ating $220 billion in annual revenue and supporting 277,000 jobs. For many P&C insurers, auto-insurance coverage makes up more than 50 percent of their total cash-flow. It is
generally believed the introduction of autonomous driving technology will have a substantially adverse impact on the auto-insurance industry, leading to the eventual demise of the current way
While this might be true, the more important question is the
speed at which that demise occurs and the shape of the decline
curve—its decline dynamics. Many in the auto-insurance industry have predicted a slow decline of profitability over the next
20 years while some in the technology industry have predicted
a sudden drop in the next five years. While the end result is the
same, there is a world of difference between these two.
It is impossible to accurately predict auto-insurance demise
dynamics but knowledge of the concepts of industrial demise
can be useful. Cognizant found
few insurance managers regarded
changes in the automobile market
as worthy of concern before 2030.
Academic research, however, shows
that disruptive change often occurs
far faster than incumbents expect.
Remember that modern mobile
phones were only introduced in
2007, yet now dominate our lives.
The lack of concern by many in the
insurance industry is linked to the probable slow introduction
of fully autonomous cars. Creating 100 percent autonomous
driving systems—which can cope with issues like ice, snow,
Technology will bring huge changes to automobiles and
personal auto insurance over the next decade. Assuming there will
be no changes is a risky choice.
By Dr. Michael Naylor
Dr. Michael Naylor