Celent Says

Another View on the Future of Auto Insurance

Donald Light
Insurance Experts' Forum, January 10, 2013

PwC has just published an interesting and thoughtful paper on, “The Reshaping of Auto Insurance.” The paper describes the possible impact of various on-board technologies (automatic braking, telematics, etc.) on auto losses and the longer term potential for changes in auto insurance business models.

Here are a few Celent comments:

It is true that changes in frequency, and especially severity, of motor vehicle accidents will not drop overnight. But the PwC paper looks only at “on-board” technologies. By doing so, it ignores the potential impact of automated traffic law enforcement (e.g. speeding and red light cameras). Depending on the political will (and desire for revenue) of state and local governments, these technologies may have a quicker and more dramatic impact than on-board technologies.

There is also a potential incentive for governments to mandate vehicle-to-vehicle (V2V) communications as a way of increasing the carry capacity of roadways, and avoiding costly construction—plus, arguably, it is a green technology.

If and when liability for many accidents shifts to the manufacturers of the automobiles (and/or the on-board equipment), it is likely that the frequency of accidents will be significantly lower, leading to lower losses, and lower premiums for auto insurers.

So change is coming for auto insurers in terms of business and operating models. The big question is how quickly.

This blog has been reprinted with permission from Celent.

Donald Light is a senior analyst in Celent's insurance practice, and can be reached at dlight@celent.com.

Readers are encouraged to respond to Donald using the “Add Your Comments” box below.

The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

Too Much Manual Effort is a Show Stopper

Examining the administrative burden of doing business in the E&S market.

The Efficiency CIO vs the Agility CIO

There is a role for both types of CIO, each organization has different priorities whether they’re an insurer, intermediary, vendor, start-up, etc.

Becoming a 24/7 Insurer

Insurers should be in the business of making life safer and better for consumers all the time.

Putting Your Investments Where Your Transformation Is: Part 2: Optimizing Your IT Investments Portfolio

Sam Medina continues a 3-part series on Transforming the IT Investment Budget in order to fund new programs and initiatives without the necessity of additional capital expense.

The Mobile Side of Digital: From OK to Great

What are the mobile leaders, including Allstate, Progressive, State Farm and Geico, doing to go from standard to strong?

Using the Data Deluge to Empower Consumers

Insurers can learn from the use of activity tracking in other fields to help their customers make better decisions.