Will technology render auto insurance obsolete? That's the provocative question recently posited by Donald Light, analyst with Celent, which specializes in financial services industry research. Auto insurance may be minimal because there will be fewer and fewer accidents over the next 20 years.
Wishful thinking? Light suggests that with new forms of technology advancing on the scene -- from telematics, in which tracking and recording devices are implanted in cars, to collision avoidance technology now being built into cars, to robotically driven vehicles -- auto accidents may get rarer and rarer.
According to Light, the scenario is plausible because "most of the technologies on which it depends are already available—and to some extent are already in use." Thus, political decisions may accelerate or slow down this trend. The question that needs to be asked, says Light, is: "Will the federal and local governments mandate and deploy those technologies given their very significant impact on how citizens and voters use motor vehicles?"
As shown in Celent's chart below, auto accidents could start diminishing dramatically in later part of this decade.
Is Light way too optimistic in this projection? Light writes in his new report, A Scenario: The End of Auto Insurance: What Happens When There Are (Almost) No Accidents, "a provocative but plausible scenario" in which federal and local government in the US encourage the use of the three currently available technologies (telematics, collision avoidance, automated traffic law enforcement) and one emerging technology (robot cars). "The net effect is to substantially reduce traffic accidents and insured automobile losses," Light observes, along with a shift in the property/casualty insurance industry as these companies "see a major reduction in their auto insurance premiums revenue."
Telematics is already here today and becoming a big part of auto insurance coverage plans. Not only do they provide a financial incentive for people to drive safer, but also provide enormous volumes of data that help engineers design safer cars and roads. Globally, the Pay As You Drive (PAYD) insurance market now has more than 2 million customers and the market is expanding geometrically, observes Chris McMahon in Insurance Networking News, citing data from Ptolemus Consulting Group. Ptolemus predicts a 50-fold increase in telematics adoption by the end of the decade.
Ultimately, the rise of robotically driven cars (documented often here at SmartPlanet), means less human error in driving situations. (And hopefully not more machine or software errors.) But progess has been impressive. The car as we’ve known it is no longer a car. It’s a computer that happens to sit on four wheels. As described in many places throughout SmartPlanet, there are prototype cars that drive themselves, that monitor health conditions, and monitor road conditions. As my colleague Mark Halper put it: "Cars are morphing into computers. They’re turning into smartphones on wheels. They sing, they dance, they navigate, they drive themselves, they perform their own engine diagnostics. They tweet and send emails."
But I'm still going to keep wearing my seat belt, and advise everyone else to do so as well.
(Thumbnail photo courtesy of Intel Newsroom.)
This post was originally published on Smartplanet.com