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August 1, 2017
We’d like to suggest that there used to be three things in life you could be certain of — death, taxes, and the requirement for you to carry auto insurance on your vehicle.
According to KPMG, by 2050, you may not even need your auto insurance policy. That’s because autonomous vehicles may be taking you to and from work, like something out of a Total Recall movie. In fact, KPMG has adjusted their actuarial models to predict that the current auto insurance marketplace is going to shrink by $137 billion in the next three decades.
Cloud-Based Technology Will Change Our Need for Car Insurance
The KPMG study suggested that smarter cars would mean fewer accidents in the long run. This means a reduction in the number of claims that car insurers will be forced to cover. That’s good news for everyone, right?
Well, not necessarily. Smart cars, which are helping us break faster, have backup and blind spot cameras, and even help us parallel park, are inevitably going to evolve into self-driving vehicles. When that happens, there will be a corresponding evolution in the need for insurance coverage.
KPMG also suggests that auto manufacturers have an opportunity to assume more risk with these vehicles, which could open the door to providing profitable lines of insurance to riders in autonomous cars. Interestingly, there will also be a correlating increase in products liability insurance around these expensive vehicles.
The other issue, of course, is the increase in on-demand transportation. With the majority of Americans flocking to cities, and the millennial population eschewing the traditional trappings of their parents, it suggests that the need for personal automobiles, and insurance, will decline. KPMG suggests by 2024 most travel within cities and suburbs will be on-demand, not via personal vehicles.
Overall, the personal auto insurance market is predicted to decline by 70% in the next 30 years.
Fighting Fire with Fire – Adopt Cloud-Based Technology Models
The best answers for the insurance industry, in light of these predictions, is to adopt and model the same technology that is causing the threat to traditional business models. Venture capital money is flooding “InsurTech” start-ups, along with smart technologies such as autonomous cars. This will speed up the production of these cars, causing further disruption not just in insurance, but also in the automobile industry itself.
Adopting digital strategies now will mean shifting business models to embrace technology trends. Too, KPMG suggests new business models that diversify product lines by adding home-related products, or other types of commercial coverage, such as cyber security policies which will help cover any vulnerabilities caused by this new technology.
While the future seems tenuous for current insurance models, other industries will certainly feel the ripple effect of this big shift in how Americans stay mobile. In the digital era, the only thing constant is disruption, and only the insurance companies that embrace cloud-based technology will weather the coming storm.
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