Get ready to say goodbye to Flo.
According to one auto insurance analyst, the advent of safer vehicles – and eventually even driverless cars – will be so disrupting to the transportation sector, it could eliminate the need for auto insurance altogether.
“Ultimately, these advances are likely to actually eviscerate the personal auto insurance industry,” said Meyer Shields, managing director and analyst for investment firm Keefe Bruyette & Woods.
Speaking on his company’s “All Things Financial” podcast, Shield suggested the dismantling of the industry has already begun, with the popularity of comparison sites like Google Compare, CoverHound and Compare.com. With driverless cars expected to decrease traffic accidents by as much as 81%, then, it isn’t much of a stretch to imagine a future in which insuring personal transportation looks very different.
“The one thing we can’t say with any confidence how long it will take,” Shields said.
There are already a handful of ideas floating around the insurance space, however. With the majority of liability for any accidents involving driverless cars remaining with the manufacturer, any driver – or “operator” – liability will likely be covered by a policy sold at a driverless car dealership, posits Keith Moore, CEO of Coverhound. What such a policy would look like and the language involved is yet to be determined, but he believes carriers will back an almost “warrantee”-like approach to liability and third-party damages for personal and commercial vehicles.
Of course, such an approach would significantly cut into broker business.
“It’s totally going to have an impact on agents – auto has primarily been the initial product entry point for a lot of agents and brokers, and even direct carriers,” said Moore. “I’m not saying auto will go away in the next eight years, but because it is the main product that leads into eventual homeowners, life and other insurance purchases, it is really going to change the dynamic of how people connect with insurance.”
Not all industry representatives are so despairing of brokers’ future in the auto business, however. Thanks to the range of additional risks inherent with self-driving cars, many believe the advent of such technology will actually solidify the need for independents.
“Owners of these cars may be taking on responsibility for a piece of technology when they purchase these vehicles,” said John Tiene, who represents thousands of independents as CEO of Agency Network Exchange in New Jersey. “You may not be buying a liability policy anymore, but you may need a cyber policy or an operator policy or any number of new insurance products.”
For that reason, he says, the role of the independent agent is safe.
“The reality is there’s still going to be a huge need – maybe even a greater need – for professional insurance agents and risk managers to help owners of driverless cars navigate what will be a much more complicated insurance world than it is today,” said Tiene. “It may actually create more work.”
This year, an autonomous car fitted on an Audi Q5 sport-utility vehicle completed a 3,500-mile, coast-to-coast journey across the US. Analysts say total conversion to driverless cars will take significantly longer – by 2040, roughly 75% of vehicles on the road will be autonomous.