Companies Breaking Into the Insurance Industry

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The insurance industry has always been surprisingly stable and lucrative. Even following the events of a global pandemic, people still needed home and auto insurance. As such, it is never a surprise to see a new company breaking into the industry.

What may be more surprising is learning the companies most interested in doing so. While it isn’t unheard of for a car manufacturer to also try and dip into auto insurance, it isn’t necessarily typical.

Tesla (TSLA) and Insurance

This makes Tesla’s move an interesting one. TSLA announced the opening of its insurance division in 2019, with high expectations of the future income it would generate. It is likely that they are/were hoping that insurance sales would spike alongside their elective vehicles.

Currently, the insurance company is only available in three states (California, Illinois, and Texas). The plan will likely result in further expansion, but at the moment, options are limited. This means that funding is limited.

There are two significant boons for Tesla entering the market. The first concern is addressing the insurance of their cars. According to reports, the Tesla Model S is the most expensive car on the market to insure. Having Tesla provides the insurance would naturally allow a cost reduction.

Since the cost of the Tesla Model S is already prohibitive for many, cutting prices where possible impacts the second concern: sales. If one could reduce costs, including insurance costs, it would become a more lucrative venture for interested parties.

Porsche and Insurance

While Tesla may be the standout manufacturer offering insurance, they are far from the only ones to do so. In 2019, Porsche embraced the idea of providing auto insurance alongside its luxury models. As with Tesla, the states they’re currently working with are minimal: Illinois and Oregon.

The significant benefit to Porsche’s insurance model is that they have an innate understanding of luxury cars. More importantly, they understand that these cars are not on the road year-round. As such, they offer options that take miles driven into account instead of more traditional methods.

Mercedes Benz Deal

Mercedes Benz is another company considering auto insurance expansion, though they are doing things differently. They partnered with Liberty Mutual with discounted rates for their customers.

What Makes a Car Impossible to Insure?

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Have you ever heard of a car that is uninsurable? While rare, there are instances where a vehicle is not worth the risk for the insurance companies involved. There are dozens of different reasons why this may happen. 

Sometimes, a vehicle may ironically be considered too high value to insure. Other times, the car has a problem that keeps it from being insured. Please read below to better understand what it takes to create (intentionally or not) an uninsurable vehicle.

Why Insurance Companies Refuse Certain Cars

To run at peak efficiency, insurance companies must constantly run risk assessments. In other words, when they come across a car that is considered high risk to insure, they will be less likely to approve any application for coverage.

So, what makes a car risky in the eyes of an insurance company? There are a few primary reasons why insurance companies may deem the risk too high. For example, the value of the car (and thus potential replacement cost) is too high, or the vehicle could be considered a danger on the road. 

Reasons Cars Become Uninsurable

While the two examples above are the most common, there are actually a variety of reasons why insurance companies may not opt to cover a vehicle. Other potential causes include:

  • Altered/modified vehicles
  • Antiques/rare finds
  • Exhibition cars
  • Exotic or high-value cars
  • Grey market cars (cars imported into the US)
  • High-weight cars

This is by no means an exhaustive list of reasons why a car may be deemed uninsurable. The simple truth is that humanity is quite creative when it comes to developing new vehicles, and it does take time for an insurance company to establish policies to match.

Technology and the Uninsurable

There is one final reason why an insurance company may opt to avoid insuring a car. These days, self-driving tech is becoming more readily available. However, it has not yet been perfected. Until such a time when self-driving vehicles are deemed safer than human-driven cars, it is unlikely that any vehicle based on this tech will be considered insurable. Keep that in mind before splurging on a shiny piece of new technology.

Self-Driving Cars & Trucks in Business

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The demand for self-driving cars has been ever rising in recent years. Many factors go into this demand, including convenience and safety. Yet, many forget one other factor – the effect self-driving technology can have on a business.

Developing alongside self-driving cars is the concept of self-driving trucks. The economy is still heavily reliant on trucks as a delivery method for necessary products. With that in mind, it becomes easier to see how having a fleet of self-driving trucks may be appealing to businesses.

Economic Impact

According to experts, about seventy percent of all goods are delivered via trucks, generating billions of dollars for the economy. However, the venture is not without cost. Truck upkeep and driver wages are not insignificant.

It is believed that the cost of maintaining a self-driving truck would be less than the combined cost of maintenance and pay for a standard truck. Additionally, drivers can only legally drive so many hours in a day, where a self-driving truck would not have those issues.

The potential for increased profits is there – and businesses want in. Kodiak Robotics, Waymo, Volvo, Tesla, Embark, and TU Simple are all working hard to develop their own versions of self-driving trucks. 

Increased Safety

As with the need to develop self-driving cars for consumer safety, there is a safety concern for self-driving trucks. According to Professor Robert W. Peterson of the Center for Insurance Law and Regulation at Santa Clara University School of Law, over ninety percent of accidents are caused by user error.

Businesses are hoping to increase the overall safety of the roads – and their employees – by switching to self-driving trucks. It will also reduce the wear and tear that drivers must go through.

Other Initiatives

More companies than ever are experimenting with self-driving technology as a way of doing business. For example, Amazon spent some time considering this (along with drones) as a delivery method.

Now, Domino’s is testing out their own form of automated delivery: Nuro. Their goal is to have deliveries be easy, safe, and an overall enhanced experience for customers. However, not many customers will enjoy this particular experience right now, as it is still limited.

Walmart is another company testing the waters of self-driving technology. They’ve joined forces with Argo AI and Ford Motor to try and create a new form of a home delivery system. If it works, it will revolutionize the way people shop (and receive their goods). 

Can the Latest Tech Lower Your Car Insurance Rates?

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With the rise of safe driving technology, one question on everyone’s mind is how will this affect insurance rates? Many are hopeful that better collision prevention will, in turn, reduce premiums. While others are concerned that the increase in tech costs will outweigh the potential benefits.

These days, people have high expectations for what technology can do for them. People also expect it to help them save money – and there are precedents to back this assumption up. Better technology has allowed for energy (and thus cost) saving alternatives, among other options. 

According to a study run by PwC, up to forty-one percent of consumers would walk away from an insurance company that failed to offer high-quality digital capabilities. In other words, if their insurance isn’t going to work with their tech, they’re not interested.

Making Drivers Safer

People today have access to technology that makes them safer. Motion and range sensors combine to create collision prevention technology, while cameras help drivers watch their blindspots.

It’s easy to assume that the tech designed to make us safer actually works. Studies have shown that while some technology has worked hard to make us safer – other forms provide too much distraction. In other words – the technology is only effective when those behind the wheel are also trying to be safe.

Additional Expenses

Unfortunately, there is no simple answer to this question. Yes, driver safety tech can help keep people safe – and thus, theoretically should reduce car insurance premiums. However, upon closer inspection, there’s one glaring problem with this premise.

The technology used to make drivers safer does not come cheaply, which means that when accidents do happen, the overall repair and replacement costs are higher. This means that most drivers are not likely to see a significant drop in their premiums.

Reducing Costs

Thankfully, there are a few alternatives for reducing insurance rates. For example, drivers can opt into customized insurance plans. In other words, a driver grants permission to have all of their driving data compiled and turned into one concise plan – no need to pay or unneeded insurance.

A study from the University of British Columbia found that people are not only willing to have insurance companies monitor their driving for customized plans – but they’re safer drivers because of it. It turns out that knowing somebody is watching your every move is all it takes to make a driver just a little bit more cautious. 

Blockchain Data and Car Insurance

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The insurance industry has been working hard to stay up to date with modern technology. Already the industry is making use of predictive analytics to help create customized plans.

This raises the question of how blockchain technology can help the industry. A blockchain is a way to securely store information. The highlight of this method would be the inability to change data once it has been established. In other words – hacking and malicious attempts at alterations will not work.

Smart Contracts

Smart contracts are but one of the ways that blockchain data and car insurance companies have found a perfect balance. Contracts are a part of daily life – especially for insurance companies. A smart contract is simply a more advanced version of the original. 

In this instance, they are digitally signed and stored through secure digital means (blockchain data). All parties involved in the contract, including the neutral third party, can access this data.

Due to the digital nature of smart contracts, it allows for a certain amount of automation. A computer can look at the contract, and if the terms have been met, activate the appropriate next step.

Advantages of Blockchain Data

Many advantages come from blockchain technology, including the information already mentioned in the section above. Digital contracts allow for ease of access – both for the insurers and the insured.

In turn, this helps erase confusion, increase communication, and, more importantly – ensure accurate information. For example, fraudulent claims will dwindle, as all relevant data will be stored in one location. To put it another way, it’ll be simpler than ever to catch fraudulent claims. 

The customer will also have higher levels of protection, as the data will be stored with a neutral third party. This will help ensure that the insurance companies hold up their end of the deal and leave avenues for when things do not happen according to plan.

Insurance companies can use this ready access to data to store client details, going beyond what is typical these days. Data such as driving habits, traffic records, and accidents can all be easily (and safely) stored in one location. 

While that may not sound like a significant advantage – it is. All of the data being in one place would further encourage customized plans, which would once again benefit both parties.

Predictive Analytics and Car Insurance

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With the way technology has been improving, it would inevitably begin impacting every industry out there—even the insurance industry, where developments such as predictive analytics have been making waves.

Predictive analytics is a form of machine learning that uses data (usually in the form of statistics and historical data) and algorithms to identify patterns and future possibilities. When it comes to insurance, that can make a world of difference for insurers and clients alike.

How It Works

As a whole, predictive analytics has been a growing trend, with many different industries trying unique ways to apply the technology. Predictive analytics has become so common that anyone spending any time online has likely come across it. Predictive analytics play a part in ad generation, search engine optimization, and website recommendations. And it’s all based on an individual user’s history.

Predictive Analytics Meets Car Insurance

When it comes to car insurance, there’s a lot that predictive analytics can do to help improve the industry. For one thing, it can (and will) allow for a more personalized experience. Gone are the days when an insurance plan was one size fits all.

These days, machine learning can grind through a driver’s history and develop a custom insurance plan uniquely suited to them. For example, a safe driver with a record of following speed limits, wearing seat belts, and avoiding tickets can rest easy knowing that they got the best deal possible.

Applications of Predictive Analytics

The possibilities for predictive analytics don’t end there. That’s the beauty of this customization engine. Insurance companies can use this technology to compile crash data and even flag fraudulent claims. It all depends on the data they feed the program.

Marketing campaigns have already begun to make heavy use of predictive analytics, and soon insurance companies could be doing the same thing. Let’s go back to that online example from earlier. A person hops online, does some browsing, and calls it a day. The next day, they get an email advertising a sale on an item they were looking at. This is not a coincidence but rather a carefully orchestrated plan.

Insurance companies can do the same thing – marketing the right plan to the right clients and knowing how to best approach them. Some clients prefer to be approached via email, others via phone or text. Machine learning can help process that information and create a personalized plan for thousands of potential clients.

Auto Tech Driving Insurance Explained

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Our interactions with cars change every year as new technology comes out to improve the experience. As such, auto insurance must find ways to adapt right alongside the industry. This is no mean feat and takes a lot of careful planning. 

Most recently, auto insurance companies have begun to develop automated ways of measuring and creating new plans. There are many benefits to this feature, including highly customizable plans.

The Complication

There is one complication with the plan to go full automation when it comes to insurance: people’s willingness. According to CCC Information Services, Inc.’s Crash Course report, until recently, most drivers were unwilling to share such detailed and personal information.

What sort of information do these metrics require? The predominant concern revolves around mileage. New features allow for easy personal data collection, including driving details, travel speed, and location.

Up until recently, only 41% of those surveyed were willing to share their data. That number has gone up to 54% and is likely due to the changes that the pandemic brought with it. Primarily the reduced time spent in cars.

One of the main concerns from users, unsurprisingly, is the breach of privacy. Specifically, these features would require drivers to give up information such as where they at which times, which can be a deal-breaker for many. According to a study run by Pew Research Center, only 37% of Americans found the offer appealing, even when taking benefits into account.

Benefits

Despite these concerns, there are plenty of benefits that come with auto tech driving insurance. Primarily, the data used to create an individual’s plan would be based on their driving – and theirs alone.

Instead of filling out several complicated forms, drivers can instead give access to their data metrics, allowing insurance companies to create an accurate and detailed plan that fits the users’ needs. It sounds complicated, but in truth, it makes things simpler. 

This practice is called usage-based insurance. In practice, it works through an app on your phone, which then transmits data to your insurance company. Most companies experimenting with the tech provide rewards for using the app – rewards that get better the more you use it.

Insurtech Explained and What It Means for Car Insurance

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The advent of Artificial Intelligence (AI) is changing the way many industries operate; there’s no escaping it. Even the insurance industry is facing change, thanks to the creation of Insurtech, aka Insurance Technology.

What is Insurtech? 

Insurtech is a term for a broad range of technology, all of which is applied towards the insurance industry. More specifically, it’s the use of artificial intelligence and blockchains in the insurance industry. This applies to car, medical, life, and home. 

Insurtech was created to save insurance companies money, streamline the process, and make better and customized customer service. In the last few years, the Insurtech industry has boomed. New startups and older businesses alike are competing to create the best models, and it’s altering the way we look at insurance.

What Are the Different Types of Insurtech?

There are now several different types of Insurtech, a variety formed from the many different needs of the insurance industry. Each style has a different specialty, and there’s no need for mutual exclusivity between companies and types.

  • Artificial Intelligence/Machine Learning – Used for personalized services, competitive pricing models, predictive analytics, and chatbots.
  • The Internet of Things (IoT) – IoT is used for omnichannel communication and telemetry-based insurance policies and claim processing. 
  • Blockchain – Used to prevent fraud, create smart contracts, and help to track sensitive data.
  • Robots/Drones/Etc. – Can assist in designing programs, plans, find risk factors, operate where it is unsafe for humans, and create automation.

How Does Insurtech Work?

The end goal of Insurtech is convenience and efficiency. This technology has been designed to help both internally and externally. Meaning that the insurance companies and their clients both gain an advantage through its use.

Theoretically, Insurtech will make insurance more accessible, lower costs, decrease wait times, and allow for customized claims. All while reducing payroll costs, as there isn’t a person behind all of this.

What Are the Benefits of Insurtech?

Many of the benefits for Insurtech have already been mentioned above. They include: customized insurance policies, reduced run costs for insurance companies, better claims management, and better customer-facing tech, including apps and chatbots.

What Are the Concerns of Insurtech?

As with any rising technology, there will naturally be some concerns to go along with it. The dominant concern regarding Insurtech is privacy. Consider all of the private and sensitive information that insurance companies must collect and store. The introduction of any new technology always increases concern regarding the safety of this sort of information.

 

Personalizing the Auto Insurance Industry with the Help of AI

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Every day digital advancements change the way we look at and interact with the world. New ways of sharing information and collating data have made things in some ways simpler, even in complex areas such as auto insurance.

Advancements in AI (Artificial Intelligence) are the most likely to bring a great chance to auto insurance. Currently, we are looking at an insurance market that has changed very little over the years. The real question is, how much longer can stagnation last?

AI still has a long way to go before it is on par with the beings portrayed in science fiction novels. Still, there are plenty of ways for modern AI to help the insurance world. AI processes can help with pricing, handling claims, and fraud detection, just to name a few options.

The advantage of using AI to set prices comes with the ability to create individualized and personalized policies. An insurance company that employs this tactic will provide custom quotes curtailed to the clients’ needs, creating a competitive advantage. 

Artificial intelligence could easily customize these policies based on user location, marital status, family status, the likelihood of premium charges, driving history, and more. Most notably, it could also make sure of IoT (Internet of Things) to draw in more personalized data.

Given the potential power of AI, the level of personalization is limitless. The policy could go beyond personal records and look into the car the coverage is intended for. Here crash and injury data could quickly come into play, as well as automotive history.

As for handling claims? It wouldn’t take much effort to automate the handling of certain claims through the use of artificial intelligence. This would save time and money in the long run and give clients a faster customer service experience.

In turn, this would shorten the time required for settling claims. This will result in happier customers, but it will help limit fraud cases in the process. This is a vital element, as insurance fraud is currently costing companies around $40 billion per year. AI can easily detect fraudulent cases, diminish risks, and streamline the process for legitimate cases.

 

The Future of Car Insurance Beyond 2021

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The last year forcibly changed industries worldwide. No industry escaped, including the car insurance industry. While much of the world is gearing up for a bounce-back, all evidence indicates that the automotive industry will be one of the last to recover. 

According to a TransUnion survey, the impacts of the pandemic will linger well past 2021 for insurance agencies worldwide. Experts are even coming to believe that these changes may be permanent on some levels.

Digital Transition

Every industry has been working hard to adapt along with the discovery of technology. The pandemic forced this transition along faster, as general populations sought digital resources for their daily needs.

Bain & Company looked into how this might impact car insurance, and they found that the digital insurance sector had grown by around 20%. While that number may balance out after pandemic measures are reduced, it is just as likely that this has become the new norm.

Furthermore, people are seeking new avenues of finding, comparing, and choosing car insurance opportunities. The call to obtain quotes through websites has been steadily increasing. The insurance companies that meet those needs are doing better than those without.

Advancing Technology

Thanks to developments such as artificial intelligence, loT, and even self-driving cars, the automobile industry has been facing many technological advancements. As these technologies become more commonplace, insurance quotes and companies will have to adjust alongside them.

Theoretically, many of the advancements being made are helping to make the driving experience a safer one. 3D-LiDAR can detect potential collisions while assisting in smaller processes, such as parking. Removing the human element helps to reduce mistakes, and thus, accidents.

However, there are certain risks involved as well. This will require any insurance agency to seek the appropriate data to keep up with risk assessment modules. 

Generational Shifts

The generation dominating the insurance world will soon be shifting. For years it had been the Boomers and Gen X providing most clients in the insurance market. Naturally, with those generations came certain expectations, experiences, and regulations.

However, the number of Millennials in the insurance market has been steadily growing. Soon, their numbers will surpass those of their elders, meaning that the market will soon shift to cater to their demands and expectations instead. 

Millennials are part of the force behind the demand for better technology and online opportunities. Insurance companies will have to make an active effort to keep up with these demands or risk falling out of practice.