Just as the cellphone replaced the household landline and Netflix replaced Blockbuster Video, the insurer titans of today like Geico could be distinct in just 30 years. Why you might ask? Well, the answer is technology disruption is hitting the auto industry in a big way.
There are several key technological advancements that will change not only driving forever but the companies that insure drivers.
The initial change most people are aware of is so-called ridesharing services like Uber and Lyft. These firms offer cheap and effective transportation to busy commuters. They have become so popular that many millennials are forgoing car ownership and just hitching a ride on their smartphone.
With these services now booming, that means less car insurance policies will be written going forward. It looks like this trend is here to stay and it's rapidly catching on all over the world.
The other trend that has yet to hit the market is driverless vehicles. After years of research by big firms like Tesla, Google and Apple, the future of transportation is here. That future is computer-aided self-driving cars. These advanced vehicles run on thousands of data input that are fed into a GPS system to both navigate the vehicle and keep it from crashing.
The first fully driverless modelis already available to the public. The question is not if this technology will take over, but when and what company will emerge as the market share winner. So far Google seems to be leading the way, with Mercedes and Tesla not far behind.
Apple also has some of the most renowned engineers in the world and has over $200 billion in cash on hand to develop their concept vehicle.
Auto Insurance Policies Could Decline by as Much as 80%
So, what does all of this technological change mean for insurers? At the moment it is not looking good. Driverless cars will not only reduce traffic crashes, but many experts believe they will virtually eliminate them. 0 down auto insurance is there to insure us against accidents. If there are no more accidents, will these huge companies go extinct? The answer may very well be yes.According to a recent research article by Morgan Stanley, car insurance policies could drop as much as 80% in the next 4 decades. That means about a quarter of a trillion dollars in premiums could vanish.
If this happens, it could mean big changes for everyone in the sector, including agents, brokers, and policymakers. At the moment the auto insurance industry is trying to position itself for the impending change in the marketplace.
Many insiders are not sure exactly how these new self-operating vehicles will be insured, if at all. Companies like Rodney D Young insurance are already moving to new commercial products that will position the company for future growth as the market moves away from personal lines.
Vehicles Are Safer Today than Ever
Vehicles on the market today are already much safer than cars were 5 or 10 years ago. Technological developments like advanced driver assistance is already helping drivers avoid most crashes. Over the next few years, the technology will only improve and ultimately converge into autonomous vehicles.Consumer studies have pointed out people are willing to embrace this new vehicle technology because of one primary factor, safety. Each year about 30,000 people die in vehicle accidents in the U.S. and autonomous cars have the ability to drop those numbers to near zero. Surprisingly, the U.K will probably adopt autonomous automobiles faster than the U.S. Next, will be Australia and then Western Europe.
Demographic changes in America will also likely affect the automobile insurance industry. The millennial generation has quickly accepted ride-sharing services, with 50% of those 18 to 34, have stated in surveys that they have used these personal transportation services.
This means a movement away from car ownership and car insurance policies. For auto insurers like Rodney D Young to stay competitive, they will need to focus more on commercial insurance lines as opposed to personal car insurance. In the next 25 years, the car insurance market could be 75% commercial and just 25% personal insurance.
Auto Insurers Must Quickly Adapt to Change
Going forward, auto insurers will no doubt have to adjust to stay not only competitive but in business. The internet has already disrupted many insurance companies that did not keep up with technology changes. For those like RodneyDYoung that sold policies direct to consumers, the challenge will now be re-focusing on commercial auto insurance.In addition, adding more lines like homeowner and even life insurance could keep many firms profitable. The next few years will see more change in the automotive industry than the previous 50, as technology breakthroughs keep changing our world.
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