Today’s dominated internal-combustion engine cars may be the least-used, environmentally-straining, time-consuming, and (in terms of accidents) the most dangerous machines on the planet: anyone using them for one hour a day with a traveling passenger might come up with a load of maybe two percent of the available seat kilometers. When these cars are used, the environmental impact is considerable. Not only are the traffic jams time-consuming, but also the non-productive time at the wheel would have to be calculated in order to capture the overall economic burden.
Shrinking pools in sight
All these challenges can be solved with technologies available today and at a reasonable cost. Emerging new car manufacturers such as Tesla or the sharing economy business models bring the established manufacturers under pressure: For autonomous vehicles are not only (still) one of the halfway accepted status symbols. According to forecasts, they will also make road traffic significantly safer and reduce accident rates. They also promise drivers the freedom to engage in meaningful work while driving.
It is becoming apparent that this combination of regulation (promotion of electric vehicles, shared mobility), technology (autonomous vehicles), disruption (new car insurance) and social factors (cars are no longer considered a status symbol in the U30 generation) Premium pools will globally reduce 18 to 60 percent by 2030 and 54 to 84 percent by 2040, according to analysts at Morgan Stanley. The most likely scenario is also uncomfortable for the insurance industry with a 55 percent drop.
Differences in the assessment
There are remarkably large differences between the insurance companies in assessing how quickly the changes in the premium pools will be reflected. For some, the conditions for car insurance will hardly change in the next ten years. The bonus pools would drop someday, but that should not be so fast. Insurers believe that a significant proportion of vehicles will still be insured today, some with additional semi-autonomous driver assistance systems. Towards the end of the next decade, autonomous vehicles could become more and more of an issue. Correspondingly, the insurance covers would take place depending on the chosen legal regulation and new risks (such as cyber risks, car rental instead of purchase,
By contrast, various coverages in the hull area would hardly be significantly changed (partial risk, collision coverage). How the premium pools will develop in the longer term will very much depend on how the damage frequencies and the claims expenditures will evolve, ie how fast today’s vehicles will be replaced by new semi-autonomous vehicles or even autonomous vehicles. When assessing the risk of a highly automated vehicle, in the future insurers will above all have to assess the quality of the installed safety systems in the interaction between active and passive safety.
According to analysts, the tendency of insurance companies to expect slow changes is deceptive: if a whole load of attractive electric new vehicles enters dealers’ showcases, then the introduction of catalytic converters is the appropriate model – and then the 70 percent exchange rate required the private vehicle fleet only a few years, supported by small tax incentives.
Car parts also have what it takes to decimate insurers’ premium pools. Insurance companies see this – and often act in a similar way, by participating in appropriate platforms or startups or developing new products. The sharing economy is a megatrend that insurance companies will not be able to avoid. The question will be how this affects the premiums.
On the one hand, it can be assumed that fewer vehicles can be found in traffic and the premium volume is correspondingly reduced. On the other hand, the increased use of vehicles changes the risk profile (higher loss frequency), so new approaches have to be examined in underwriting. The insurance side also raises the question of whether or to what extent entire communities can be insured in the future and possibly more fleet solutions come into play.
In the longer term, according to analysts open, whether the entry pays off in completely new areas, such as exchange platforms or transport services and whether a premium kink can be caught. Here, however, the side effect seems more important than the main effect: insurance companies learn first-hand how the new business models work – and they can collect relevant data and calculate premiums.