Car Insurance: The Industry Most Disrupted by Mobile Devices?

Contributor:

Patrick Molineux
Chief Strategy Officer
Financial Services
CSC

Most of the attention on mobile, reasonably, is given to personal mobile devices — the cards, phones and tablets that people increasingly use to transact financial services. We’re certainly seeing significant disruption of the payments industry, with mobile operators establishing themselves as part of the value chain. But, arguably, this is a disruption of the players rather than the process. The payment process may be faster, better and cheaper, but at its most fundamental level is the same. I reach into my pocket to wave a phone rather than open a wallet and dispense scruffy bits of paper. It’s a process transformation and a player disruption (simplistic, I know, but I’m making an argument here).

However, I wonder whether personal lines insurers face the most significant disruption, not as a result of mobile phones and tablets (transformative but not disruptive) but rather due to the gadgetry put inside insured mobile assets with wheels or legs. Take cars, for example. The car insurance industry is a big chunk of the global insurance industry. But mobile technologies now offer long-term line of sight to driverless vehicles and medium-term line of sight to cars that cannot be crashed because of collision-avoidance technology. Meanwhile, telematics is becoming increasingly mainstream with insurers around the world embedding devices like Progressive’s Snapshot to monitor driver behavior and adjust premiums accordingly.

What does this mean to the car insurance industry? Collision-avoidance technologies in cars should reduce the cost of claims and, thus, car insurance proportional to the percentage of vehicles that have them. Ultimately, this shrinks the size of the car insurance industry over time as national stocks of cars are replaced.

But the real disruption comes from driverless cars. If my car is driven by a computer rather than me, who pays for the risk of collision or injury? Me, the manufacturer of my car, the manufacturer of the software that controls the car or the manufacturer of the hardware that controls where my car goes? And what happens if I have too much to drink or fall asleep at the wheel, and the car goes haywire and hurtles toward the Atlantic or into a tree? Who is at fault?

So perhaps the most disrupted part of the financial sector as a result of mobile technology is car insurance. Not because of the mobile devices that we put up to our ears, but rather the mobile devices that we and manufacturers put into our cars.