By Joyce Deuley
It appears that those “plug-in” telematics devices that Progressive had been “pluggin’” for years may have potentially brought about the insurer’s undoing. The increase in drivers that are more informed about their could-be hazardous driving behaviors has resulted in better insurance rates and less accidents, which is terrific, right? Perhaps not for the actual insurers.
The Detroit News released an article about how the auto insurance industry will be massively disrupted with the widespread adoption of telematics and other changes in the market, particularly driverless vehicles. According to Meyer Shields, a managing director at Keefe Bruyette & Woods analytics firm, the increased level of safety on the roads due to autonomous driving will negatively impact insurance providers whose main offering is auto insurance; those that have moved onto other offerings—such as home or health insurance—will not be as deeply affected.
But wait, there’s more…In addition to the reduced need for insurance coverage, websites that compare and rate insurance providers will also negatively impact insurance giants. These sites allow for customers to review and use discussion boards to make more informed decisions about the type of coverage that fits their lifestyles and their wallets. Myers states that, while this method of shopping around is more popular in the U.K. the U.S. market may see some uptick, “As these platforms become better known, and more recognized brands sign up [such as State Farm, Geico and Allstate], there’s reason to expect these options to gain traction,” and ultimately, “drive down” the costs to policy holders—meaning benefits to customers at the insurer’s expense.
However, insurers need not be too worried—yet—(we’re lookin’ at you, Progressive). If, despite Google and Apple’s intention to enter the autonomous vehicle market by 2020, the Autonomous Vehicle Revolution won’t come about for another 10-20 years, then insurers have the ability to shift their business models to adapt and become more reflective of current market trends. But, can these giants move fast enough to get new models and policies in place to maximize the impending shift? Much like a classic Cadillac, large, legacy insurers take time to turn around, and—funnily enough, accidents may occur. And, while Progressive may be losing points in the market currently, Flo has yet to croon a farewell—it will be interesting to see how insurers figure out how to balance the value of telematics and the coming Revolution, placing us on safer roads, the likes of which hadn’t been seen since before cars were invented.