Last week, Google announced that it would accept liability for any injuries or damages caused by its autonomous vehicles’ design flaws or faulty components – a move that one industry insider says “nobody noticed,” but should be considered a giant red flag to brokers.
While many analysts have commended the tech giant for its willingness to take on risks that accompany emerging technology, some have pointed out that this could be a “Trojan Horse” attempt to enter the P&C insurance market.
“They’re trying to demonstrate confidence in their product, which is great,” said Blake Corbet, managing director, PI Financial Corporation. “But knowing what I know about Google, I immediately assumed this a way for it to get into the insurance business.”
Corbet argues that Google’s launch of an insurance comparison site earlier this year indicates its intention to move into the industry, and he feels that driverless cars are the perfect launching point for it to become a coverage provider.
In fact, this plan may be particularly strategic given that the nature of autonomous vehicles allows their auto insurer to operate with a greater profit margin than traditional insurers are able.
He explains that most P&C carriers typically distribute 96% to 98% of its premiums in claims, and then need to commit another 2% to 3% to admin costs. “It’s a big leverage game,” he said.
Google, on the other hand, would not face these issues to nearly the same degree or scale. So far, every one of its driverless car collisions was the fault of a human driver – a statistic that can be verified by video and data sensors.
This impeccable driving record, combined with the fact that Google could potentially mass produce these cars, has striking ramifications for the insurance industry.
“They’re effectively insuring the best cars on the road, the cars which they also design and manufacture,” Corbet said. “When they sell these cars or provide them to a distribution network, they can presumably require the purchaser to bundle insurance with the cost of the car.”
This also has the potential to create a two-tiered insurance market where “Google can presumably charge lower insurance rates for their cars, and higher insurance rates to the vehicles that are driven by humans, since we’re not good drivers. We’re brutally awful drivers, actually.”
While the shift to driverless cars will undoubtedly affect the broker role, there will still be a need for niche advisors.
“Cars have parts that wear out and fail at some point. They get flat tires and things of nature, so you’ll always need to have things like that insured,” he said.
In addition, even in a sharing economy where autonomous vehicles only serve to pick up and drop off customers (similar to a driverless Uber), Canadians will still have insurance needs.
“Industries adapt, and there’s probably an angle here for people to have their own personal insurance. What happens when you leave personal belongings in the vehicle, for example?”
In the end, Corbet feels it is just a waiting game to see how insurance will need to evolve to meet consumer demand.
“Whenever you have an asset, there will be gaps in policies, and you will need insurance for your personal life,” he said.
