Times are changing for the auto industry, and the future may not be so friendly for auto insurers, says a report by consulting firm Deloitte. Changing customer needs and improvements to vehicle safety and technology could lead to a 30% decrease in premiums over the next 25 years.
The report, titled “Insuring the future of mobility: The insurance industry’s role in the evolving transportation ecosystem
,” predicts that the evolving needs of customers and product innovation will transform the auto insurance industry, offering new opportunities while simultaneously eliminating some traditional ones.
Deloitte’s actuarial practice made several models to determine how the future of transportation might affect loss events and total premium. The key factors for these changes are:
- Lowering of vehicle numbers as people adopt carpooling and ride-sharing
- Reduction in claims frequency due to partial or fully autonomous technologies
- Shifting from personal auto to commercial and product liability-type insurance for shared autonomous vehicles
The report also predicts that insurers and their distribution channels such as agents and brokers are likely to see reduction in personal lines for the next 10 years. The direction and rate of change will be affected by the following factors: regulation, social attitudes, technological development, privacy and security concerns, and key stakeholders’ level of resistance.
Insurers are advised to strengthen their commercial lines to avoid being at a disadvantage when the decline of personal lines intensifies. They also need to modify their product and service portfolios, as well as market approaches and business models to meet the needs of the evolving personal and commercial clients.