Car gadgets expected to crunch insurers
A wave of gadgets is set to wipe $20bn off car insurance prices globally over the next five years.
Growing use of collision warning systems, blind spot information and sophisticated parking assistance will be so successful in cutting accidents that insurers will have little choice but to lower their rates, according to research from Swiss Re and Here, a mapping company.
The companies argue that if there was widespread use of the most advanced systems, accidents on motorways could almost halve and incidents on other roads could fall 28 per cent.
“The systems support the driver. Most accidents happen because the driver is not aware of a situation or is not concentrating on driving,” says Bernd Fastenrath of Here. “These systems help to prevent accidents by changing lane, for example.”
“For insurers there will be lower costs for claims on accidents but there will also be a reduction in premiums for cars with these assistance systems.”
At the moment parking assistance is the most commonly used of these so-called Advanced Driver Assistance Systems. But over the next five years other features including lane departure warnings, traffic sign recognition and automated headlight systems (that switch from high beam to low beam when another car is approaching) are expected to become more common.
Swiss Re and Here expect that there will be an average of 1.7 of these features per car by 2020 with most growth coming in North America and Europe.
“First the features come into the premium cars, but they are slowly dropping into high volume vehicles,” says Mr Fastenrath, adding that eventually some of these features will come as standard.
The automated systems will be combined with growing connectivity via either embedded telematics devices or smartphones that will enable drivers to receive real time weather and traffic information. Swiss Re and Here say that by 2020 more than two-thirds of cars sold worldwide will have some sort of embedded connectivity.
“Safety messages about obstacles on the road, traffic conditions and weather conditions mean that drivers and cars can adjust to those conditions earlier,” says Mr Fastenrath.
The predictions come amid growing concern in the industry about the impact of self-driving cars. In a report issued last month, Moody’s warned that fully driverless cars could have a big impact on profits.
It said: “It will be several decades before self-driving cars are widely adopted. In our projection, a majority of cars could be self-driving around 2045, and are likely to become nearly universal about 2055.
“Accident frequency will fall sharply over time, and will ultimately translate into significantly lower premiums and, consequently, lower profits for auto insurers.”
Car insurance is a big chunk of the overall property and casualty insurance market. According to Swiss Re and Here, motor policies account for 58 per cent of all P&C insurance premiums in emerging markets (where the market is growing strongly) and 38 per cent in more mature developed markets.