A look at the future of the Motor Insurance Industry
The world we live in is being transformed before our very own eyes. And as experts foresaw, modern technology continues to evolve rapidly, driving the advancing digitalisation of every human endeavour. Disruption is ubiquitous and the insurance industry is no stranger to this revolution.
The Telematics Market
Telematics has moved well beyond the niche market that first saw it garner attention by the global industry. It has become the new standard for providing both insurers and policy holders with cost-effective insurance policies, bundled with packages of services and products that ensure greater safety and introduce an extremely wide range of added value services. Indeed, the insurance industry is in the middle of a major paradigm shift as it integrates new technology and prepares for an imminent future of smart cities and self-driving cars.
In a presentation held at the London InsurTech Rising Summit (October 16-18, 2017) on the “Future of Insurance,” Octo Telematics CMO Jonathan Hewett addressed the vast disruption currently interesting the insurance industry and the many opportunities that are ready to be transformed into new business.
A New Insurance Industry
The insurance industry – and especially the motor insurance industry – is facing an unprecedented series of opportunities driven by skyrocketing computing power, the incessant accumulation of raw data and ubiquitous connectivity. On average, our cars have more computing power than the Apollo 11 Mission used to land a module on the Moon and bring it back to Earth. Today, vehicles produce up to 5GB/hour of data which adds up to 164 Exabyte/year. Moreover, we are all increasingly integrated into the greater Internet of Things: 40% of the world’s population is on-line today and it is estimated that there will be 30 billion connected objects in the IoT by 2020. (source: McKinsey; GIP; HIS; Prognos; Digital Society Study)
Convergence of Technology and Data
This convergence of technology and data means that the motor insurance industry can now provide new underwriting strategies based on the massive amounts of data produced by vehicles, mobile devices and drivers. This, in turn, drives individual policy pricing based on data evaluated in real-time and automatic analysis of crash incidents and their sequences. Moreover, insurance policy providers now manage an ongoing, proactive relationship with their customers via push notifications and interactive services, rather than the “vintage” once-a-year approach to sign annual policies.
Global usage-based insurance policies are expected to grow from 15.2 million in 2016 to 92.6 million in 2020, a CAGR of 50% in just four years. Similarly, the market penetration is expected to quintuplicate worldwide by 2020. This brave new market is estimated to be worth 35 billion dollars. (source: Ptolemus)
Key Challenges for the Future
The future of fully autonomous vehicles is clearly visible on the horizon. It’s just a matter of a few years before intelligent vehicles become a common sight on our roads. This, in itself, will present an entirely new sector addressing the insurance of self-driving vehicles, along with the emergence of device economics.
A second aspect will concern the world at large, but also pose an interesting challenge to the insurance industry, as it faces the need to integrate systems and data with legacy systems. The insurance market will have to address a heterogeneous world in which self-driving cars will co-exist with legacy vehicles and other devices that may not support state-of-the-art security and connectivity.
In fact, a third key challenge will be represented by total monitoring and coverage – the complete detection of all crashes and their automatized claims processing – once all legacy vehicles have been either eliminated from circulation or, more likely, effectively integrated with state-of-the-art telematics systems.
A Single IoT Platform
One of the final objectives of the current Telematics Revolution will be to integrate all aspects of motor insurance logistics into a single IoT platform. This is already underway via mobile devices but the future will entail far more; it will include full integration of activities beyond scoring of driving behaviours and styles.
Moreover, the industry has to create modular services that can be custom-tailored to industry partner needs and advance seamless API integration through platforms like Octo’s Next Generation Platform.
Finally, future solutions will have to be fully autonomous, allowing independent crash reconstruction and liability assessment to support new insurance models. In fact, the Octo Link Programme is device independent and drives value for OEMs and partners.
This is the road that Octo Telematics envisions to journey swiftly towards a future-proof automotive insurance market.
For further information: Octo Telematics