Technology in insurance – Challenges and Opportunities
This is my first post of 2017, so I’d like to begin by conveying my best wishes for a happy and prosperous new year.
Every new year brings change and innovation, and few industries innovate as furiously as the auto industry, whether through facelifts and new variants, or concept cars and launches, all equipped with the latest technological advances to make driving safer and more enjoyable. This space has become even more competitive globally as Silicon Valley’s tech giants have moved into automobile research. As I write, driverless cars are being rigorously tested by various auto and tech companies in a variety of scenarios.
While many of these advances will take a few years to mature and reach the Indian market, their advent seems inevitable, and they could completely transform the auto industry. Already, the software in next-gen electric cars far outstrips the hardware parts in numbers and complexity. In the United States, the Tesla Model S sedan, for instance, has just 17 moving parts! This will have major implications for the way we run and maintain vehicles.
Technology is already all-pervasive in our lives, and has changed the way buyers purchase insurance. Buyers increasingly rely on information available through websites and aggregators, largely basing their decisions on price, even though premiums are only one factor among many. Other critical features and services, such as turnaround time, claim settlement etc. are best explained through face-to-face meetings, and insurers need to maintain dialogue with potential and current customers to enable them to make informed decisions.
Similarly, technology will change the way we look at insuring automobiles, and will introduce further complications in the way we assess and manage risks. For example, if cars are increasingly assisting drivers through features like cruise control, assisted braking, parking assist etc., who is responsible for an accident? We can evaluate driver error, but if it is a case of software malfunction, or even hacking, is the manufacturer responsible or the driver? What will come under first party insurance, and under third party insurance? How will we arrive at premiums for these technologically enhanced cars, at least in the initial days when there is no data available on the performance of the cars?
Perhaps it is time for a black box, as in aircraft, to monitor car parameters and inputs for post-incident playback. But insurers must also update norms and rules to make sense of the data gleaned from such a device, if the industry is to keep up with cutting-edge technology in its risk management.
We cannot, and should not, halt the march of technology. Our task, instead, is to understand its impact and implications, and to harness technology to offer the best products and services to our customers in the most effective manner.