How Will Self-Driving Cars Be Insured in the Future?  November 27th 2023

How Will Self-Driving Cars Be Insured in the Future?

Auto coverage currently looks about the same for human-driven vehicles as for autonomous technology — but that could change as systems grow more advanced

Autonomous vehicles (AVs), also known as driverless cars, aren’t quite ready for the mainstream yet, but the technology has advanced quickly in recent years. Automakers have begun incorporating certain autonomous features into vehicles, while colleges, airports and companies like Waymo and Zoox test out robotaxi services and driverless shuttles.

In this article, we at the MarketWatch Guides team will look at how the rise of autonomous cars could impact the auto insurance industry.

What Does the Rise of AVs Mean for Insurance Companies? Melba Kurman, one of the authors of “Driverless,” believes that innovation in autonomous vehicle technology is currently outpacing the ability of the auto insurance industry to keep up. Kurman is an author and technology analyst, and this book offers a comprehensive introduction to self-driving cars. One of the biggest challenges to insuring driverless vehicles, she said, is liability. If a driverless car hits another vehicle or a pedestrian, determining who’s at fault gets complicated.

The traditional model of car insurance will likely need to be adjusted to hold manufacturers or software developers liable for collisions caused by autonomous vehicles. The industry will also need to develop coverage for newer risks, like those related to cybersecurity flaws and faulty GPS systems.

In addition to the liability question, the rise of driverless cars impacts the insurance industry in a few other ways:

• Regulation: Each state sets its own regulations for car insurance, so liability is different based on jurisdiction. Some states are no-fault, where insurers pay the injured party regardless of who’s at fault, while others are tort states where the party that caused the collision pays. As the liability question becomes more complicated and potentially shifts to manufacturers, this could push the federal government to create a standard of liability that overrules state regulation.-
• Underwriting: Some factors that car insurance companies weigh when determining the cost of insurance, like a person’s driving record and the number of miles driven, may decline in importance. The make, model and type of car could weigh more heavily.
• Telematics programs may become standard in more policies as well.
• Repair costs: Even though proponents of autonomous vehicles believe the technology will ultimately reduce the number of car accidents, repair costs may increase. That’s because AVs have complex components that require automotive specialists to repair. The number of mechanics trained to work on AVs will likely increase as the technology spreads, but there currently aren’t enough. Car ownership rates: As AVs become more popular, people may opt out of auto ownership altogether. Cities, municipalities and companies may own large numbers of AVs, but the average driver could decide against purchasing a car.

Dash Lewis, contributor to the MarketWatch Guides team and Rashawn Mitchner, Managing Editor

Google Cloud’s Walsh: Insurers increasingly embracing cloud and AI technologies

Google Cloud’s Nigel Walsh has called on more insurers to follow their peers in embracing cloud technology as part of a strategy of streamlining business practices.

Walsh told The Insurer TV he had already experienced a shift, with the industry now more eager to update its processes with digital tools and services.

He said this trend was likely to continue, with the insurance industry expected to develop more specialised cloud and AI products that could help insurers to better assess their risk landscape.

“Insurance is an industry built on data, and given that, it's a great industry for us to leverage AI of all facets,” he said.

Walsh considers the industry an ideal candidate for cloud technologies and AI-based products, with a 2022 McKinsey study having described the shift to the cloud as a “generational opportunity” for insurers.

“Insurance has always had a reputation of being slower than other financial services in many cases, and I think this is true also for how we interact with the cloud,” he said.

“But over the last couple of years, we've seen people go from ‘Should I be in the cloud?’ to ‘How do I get there faster?’

VIDEO LINK HERE

Is buy vs. build still the right question for insurers?

When insurance companies consider new tools, one question usually prevails: buy or build? Is it more advantageous to work in-house, or to collaborate with a partner? Recently, however, the answer to this question has become more nuanced. In fact, even saying "buy vs. build" creates a false dichotomy. Rather than thinking in binary terms, insurers should ask themselves another question: whether it's in-house, external, or a combination of both, how can they unlock the most value from technology?

The appeal – and the limitations – of "build"

There are many reasons why carriers might be hesitant to partner with an insurtech. Adding a third party to your organization always entails some amount of change management. When handled poorly this leads to failures and inefficiencies, the opposite of what carriers are looking for. Viewed from this perspective – and considering how much data carriers already have – it may seem reasonable to work internally.

But if insurers are serious about a pure "build" option, they need to be aware of all that entails. It's one thing to look at raw data, and quite another to transform it into functional tools. Realizing the full advantages of a tech solution involves several steps:

Sourcing data: Insurers today have access to an unprecedented amount of data. But high quantity doesn't always mean high quality (over 75% of insurance executives report difficulties cleaning data before analysis) Insurers must be meticulous when sourcing data, including imagery, permit records, and peril insights, or they will make damaging decisions in the long term.

Jeff Heine Chief Revenue Officer, Betterview

Duck Creek CEO Reflects on 2023 Transition to Private Ownership

Mike Jackowski, Duck Creek CEO and member of the company’s board of directors, talks about the meaning of private ownership for the company’s strategy, its record Q4 results and its plans for the adaptation of AI and other emerging technologies to its offerings.

Duck Creek Technologies (Boston) one of the most important and enduring vendors of core systems and related SaaS technology to the property/casualty reverted to private ownership early this year with its acquisition by Vista Equity Partners (Austin, Texas).

The move recalled a similar transition undertaken by another major vendor—Majesco (Morristown, N.J.)—acquired by by Thoma Bravo, a Chicago-based private equity firm with an interest in the insurance technology space in 2020.

Duck Creek’s transaction with Vista Equity Partners was announced in early Jan. 2023 and completed in March, and followed during the year by some important announcements, including key executive appointments. In May Duck Creek named a new Chief Operating Officer, Chris McCloskey, former Chief Customer officer of Datto, a cybersecurity and business continuity company.

In July, Duck Creek announced that it would reduce its workforce by 9 percent. In September, the company named a new Chief Financial Officer, Teresa M. Kim, who has an extensive background and history in cloud computing, technology platforms, and “Big Four” public accounting. She joined Duck Creek following a 20-year tenure with Akamai Technologies, a worldwide content delivery network and cloud service company, where she most recently served as VP of finance in the company’s cloud technology group, overseeing $2 billion-plus in revenues while helping the business to build a scaling world-class platform.

To get the view from the inside about the latest phase in Duck Creek’s evolution, IIR spoke with Mike Jackowski, Duck Creek’s CEO for more than a decade, and a member of its board of directors.

Anthony O'Donnell, Executive Editor, Insurance Innovation Reporter