The future of auto insurance in the age of disrupted mobility


Published 10 January 2020

The changes facing the auto industry globally over the next two decades will transform mobility, the very basis on which we live our lives, and require very different solutions from insurers.



David Williams
Managing Director, Underwriting & Technical Services
AXA Insurance, United Kingdom

Insurance challenges for the sustainable, smart and shared cars of the future

In the UK, the motor insurance market has seen bodily injury claims in turmoil with the government ‘Discount Rate’ lurching in an unexpected manner, costing the industry hundreds of millions of pounds. Gibraltar-based firms continue to fold, due to a combination of the above and the local regulator finally insisting on a more robust approach to capital.

But all this will pale into insignificance going forward; the changes facing the auto industry globally over the next two decades will transform mobility, the very basis on which we live our lives, and require very different solutions from insurers.

Those insurance solutions are not yet clearly defined. We know the direction of travel, but what makes the journey over the next few years so exciting is that we have the genuine opportunity to influence the future. This represents a massive learning opportunity, and if we are proactive rather than waiting for change, we can ensure our businesses are successful, providing the products and services our customers really want going forward.


Tackling the cultural shift of car ownership and mobility standards

Having your own car was a rite of passage when I was growing up – driving lessons from the age of 17, independence represented by your own four wheels. Look at all the old Hollywood movies; it’s always the guy with the car that gets the girl, but the times are changing. More and more of us are living in cities – 70% of the world’s population by 2035 is one prediction – and kids growing up in urban environments no longer have that desire for their own car. Buying a car represents one of our biggest financial outlays, and then most of us leave that asset depreciating parked somewhere, only being used 5% of the time. What we see in the future is more miles travelled overall (caused by an increase in population and wider levels of income in developing countries), but an increasing number of these will be in some form of shared mobility.


Technology is not always a good thing – initially at least!

A lot of noise has been made of late with regard to general claims inflation; the cost of vehicle damage repairs has been increasing way above general inflation levels, driven in no small part by the increase in vehicle technology, specifically Advanced Driver Assistance Systems (ADAS). As insurers, we should welcome any technology that helps reduce accidents & makes roads safer, but currently some commentators would argue we are seeing little in the way of frequency reduction, but severity is presenting a real problem. The issue is whilst ADAS technology is in its relative infancy, the costs of components are very high. £5,000 for a replacement Headlamp Unit? Quite feasible if it contains an ADAS sensor, and of course this technology tends to be fitted around the periphery of the vehicle where it is easily damaged, not tucked away somewhere safe from harm.

The jury seems to be out on the benefits from an insurer’s perspective as well, with industry colleagues in Germany arguing that this functionality causes drivers to become dependent on these systems, with less care generally taken. I’m less convinced it’s bad news, although there have been some notable incidents supporting the cautious view. We do need to understand the positives and negatives as we will be in the half-manually driven, half-machine driven/assisted paradigm for quite a long period.


How to be prepared for the autonomous revolution

As ADAS turns to autonomy, there are more levers, more to consider, and more of a need to influence the future. The UK government has been clear, Autonomous Vehicles, for which insurers will pick up the risk of injury to what previously would have been the driver, are defined as SAE level 4 & 5 vehicles only. These are the ones where the human isn’t the fall-back, the failsafe; the vehicle can safely stop if it comes across something it doesn’t understand or can’t cope with. The whole idea of calling a vehicle autonomous but then having it demand that a disengaged human gets back into the loop at a moment’s notice is very worrying, but this is exactly what some manufacturers seem to be suggesting. If you look at the European working parties who define what’s required for ‘safe’ motoring, I see the OEMs pushing definitions which bring less-capable vehicles under the automated definition. Mis-marketing of a vehicle’s capability is possibly one of the largest risks we have to contend with, and there are already legal cases in this regard targeting the most well-known of electric vehicle manufacturers and their ‘autopilot’.


Understanding the relationship with OEMs and insurtechs

Manufacturers want to sell their vehicles; we need to understand and encourage the technology as I genuinely believe it will make roads safer, but not at the expense of lives and people being injured by shortcuts in testing and legislation. Insurers have joined government-funded consortia, getting hands-on with the technology, providing data to our actuaries and performance information to our risk engineers. We need to do more of this – we won’t have the mass of historic performance data that we have on the existing motor fleet and we won’t be able to rely on human behavioural analytics, as humans won’t be in control when the accidents occur!

I saw one prediction that 100% of vehicles would be connected by 2025. Whilst I’m getting used to over-optimistic estimates, it does highlight a massive opportunity for insurers, or insurtech firms who want to work with both sides. Huge amounts of data could be available to us to help us understand the changes in risk, as well as potentially offering new services to our customers.

We need to make sure that we do get access to that data, complying with GDPR, understanding cyber & hack risks, as well as resisting any challenge for control from the OEMs. We should be already making sure we have the infrastructures, actuaries and data scientists to make use of it, partnering where appropriate for clever tech and specific expertise. With that, we should be able to better understand & price risks, influence better driving and provide more than just an insurance promise.

All this, of course, importantly contributes to much safer roads, with less accidents, injuries and fatalities; who wouldn’t want to be part of that future?


12-13 February 2020, Munich, Germany