Is the Insurance Industry ready for change?

Insurance companies in the US are being forced to consider how their policies will change as cars everyday consumers drive becomes safer through Autonomous Driving Technologies.

One insurance company in the US (Farmers Insurance) in partnership with Tesloop (a ride sharing service that uses Tesla Cars in Southern California) have written a new Motor Vehicle Policy for Tesloop that has slashed 25% of the premium costs from their normal policies. This has been achieved through the re-evaluation of the Risk Factor.

This is being done as a “test case” to see how Insurance Policies can be designed and implemented for Autonomous Vehicle Technologies.

Insurance companies in Australia will also need to understand that Technology is advancing and with these advancements the traditional motor vehicle as they know it has changed. They will be forced to rethink their business models around motor vehicle insurance and adapt these models to the advancing technologies.

The current partnership with Tesloop and Farmers Insurance in the US is giving the Insurer the insights into the disruptions to their business models with the ever increasing amount of technologies contained within the modern day motor vehicle.

Tesla in Australia is already selling insurance as part of the sales process. This is all part of their global mission to include insurance and maintenance in the price of their product.

Reports emanating from the National Highway Traffic Administration (NHTSA) in America have indicated that crash rates for Tesla vehicles have dropped by 40% since Autopilot was first installed. It is envisaged that the crash rates could reduce even more with Tesla’s new Autopilot 2 Technology.

These types of price adjustments could hurt the Insurance Industry. One accounting firm has indicated that the personal motor vehicle insurance industry in America could reduce to 40% of its current size!

It will be interesting to see how the Australian insurers will adapt.