FINANCE

A journey into the future of car insurance

 

Published 19 December 2019

The automation of driving and connected vehicles will have far-reaching effects on car insurance. This is a gradual process that has been running for years and will eventually end in a fully autonomous robot taxis. There is still a long way to go, so it is worthwhile to take a look at the individual steps of the journey.

Contributor

Jörg-Hipp_400x400

Jörg Hipp
Member of the Board -Automotive Department
Allianz, Germany

There is a fundamental problem in the methodology with which insurers traditionally assess risks

We currently insure vehicles with automation levels SAE Level 0 (ESP) to 2, i.e. the driver is assisted by the vehicle when driving through longitudinal and lateral guidance, provided his or her vehicle is equipped with appropriate Level 2 assistance systems. However, the driver always remains responsible. Insurers are currently finding it difficult to take the effects of modern driver assistance systems into account in terms of pricing. In addition to the practical problem of efficiently obtaining data on the installed systems, there is a fundamental problem in the methodology with which insurers traditionally assess risks. Namely, it is based on a large number of comparable risks and the longest possible history of claims experience. The technical progress in the automation of driving is very fast, so that one system generation is only installed for a few years and the vehicle properties can constantly change via software updates. As soon as enough data is available for an empirical analysis of the effectiveness of assistance systems, the findings are already outdated.

Therefore, instead of first analyzing the claims experience and developing insurance products from the knowledge gained the ‘old’ way, it is necessary to assess the technical performance of the systems ex ante and, on this basis, develop and market products which are then continuously further developed with empirical findings on claims. The Allianz Center for Technology has developed test procedures for the systems available today and carried out an assessment of the potential effect on the cost of claims. Allianz Automotive has developed a scoring model which allows for a “driver assistance discount” to be calculated easily and comprehensibly regarding the systems installed. This model can be further improved if the activation of the systems is taken into account in the individual vehicle usage of the customers.

 

Integration into the Connected App offers the possibility of addressing customers directly and purposefully

Such an insurance product can only function if it is integrated into the vehicle’s digital ecosystem. In addition to obtaining the necessary data, integration into the Connected App offers the possibility of addressing customers directly and purposefully. Insurance can thus become a relevant use case in the ecosystem of the connected vehicle and help to reduce the total cost of ownership.

The speed of technological progress is breathtaking. From a “technical" point of view, some vehicles could already be driving in Level 3 mode on the motorway today. However, these systems have not yet been released for use in road traffic. Vehicles with Level 3 functions are sometimes steered by the car and sometimes by the person. Without data from the car, insurers have no way of knowing what the ratio of self vs. automated driving is and therefore cannot adequately take the risk reduction from automated driving into account. The solution is an insurance product which is based on telematics data from the vehicle and which calculates a different price per kilometer depending on whether the person or the automated system has been driving.

 

Digitalization allows us to streamline claims processes and transform them into an exciting customer experience

For me, the integration of insurance solutions into the Connected Car ecosystem is crucial. In addition to the precisely tailored insurance products described above, another use case lies in claims management. Digitalization allows us to streamline claims processes and transform them into an exciting customer experience. Vehicle sensors can be used to identify and evaluate an accident. Throughout the entire process, the customer and, if applicable, the adversary can be guided digitally through the whole process: From securing the scene of the accident to documenting and reporting the damage to booking repairs and organizing replacement mobility. Allianz already uses an accident assistant for its fully digital car insurance. This assistant can be further improved and equipped with additional functionality by integrating the service into the vehicle’s ecosystem.

With Allianz Automotive, Allianz has a dedicated and powerful unit with the clear purpose to be the supplier and system provider for value-adding insurance solutions for the automotive industry.

 

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