Autonomous cars are slated to bring down the number of accidents and injuries on the road – and it's easy to suppose they'll reduce claims costs, too. Not so fast. There's a bump in the road, and its name is severity.
"A new report has analysed the impact of driverless cars on the incidence of fatal traffic accidents, and says that simply by taking human emotions and errors out of the equation, we could reduce deaths on the road by 90 percent," said Bec Crew at Science Alert.
The report Crew mentioned, published in June 2015 by McKinsey, predicted that driverless cars will make waves across "society as a whole" in a role that "could be profound."
But decreasing traffic fatalities is only one part of the puzzle. True, "blind-spot monitoring, forward-collision warnings and lane-departure warnings" are likely to result in a major reduction in accident frequency, but it's not at all clear that these components will reduce the cost of accidents, as Insurance Information Institute suggested they may. In fact, the opposite is more likely.
Last Tuesday, The Wall Street Journal published an article about the invisible price tag on autonomous tech. "New cars loaded with high-tech crash-prevention gear are having a perverse effect on car-insurance costs: They are soaring," said contributor Christina Rogers.
Part of the problem is where the crash-prevention tech is located. The “sensors, cameras and radars” that help prevent collisions are located on parts of the car that are particularly vulnerable during a crash: fenders, bumpers and external mirrors.
And they're not cheap. Their "repair costs can be more than five times that of conventional parts," Rogers said. For example, the mirror on a 2015 Mercedes-Benz ML350 costs $166 to fix. But if it has collision-avoidance technology? Make that $925.
According to WSJ data, the rise in average damage-repair cost has been getting more dramatic year over year. In 2010, costs climbed by about half a percentage point. By 2016, the rate of increase had risen to nearly 4 percent.
True, the price of new tech tends to fall over time, and if it brings down traffic fatalities and injuries – especially as deaths from texting at the wheel continue to increase – it may be worth it. Yet to say that a decrease in frequency will necessarily translate to a decrease in claims costs (and premiums) would be simplistic – at least in the short term.
"We are nowhere near the inflection point," said Justin Herndon of Allstate. At this point, "there is really no other place for premiums to go but up."
Only time will tell, but with this data in mind, it seems that insurance industry disruption may look different than first suspected. Perhaps the massive rate decrease won’t happen after all. Whatever the future holds, one thing is for certain: Insurers need a highly adaptable policy administration to keep up with the rapid pace of change. Silvervine insurance software delivers. Request a demo to learn more.
The FedNat Insured Web is a great tool for our insureds!
They like having a centralized location to view policy info, make payments, upload policy documents, and elect to become paperless to receive a discount.
The insureds also can file a First Notice of Loss for a claim and access exiting claim info. Silvervine recently enhanced the site which allows insureds to upload policy documents directly to their policy. The uploaded docs go directly into our workflows and save a lot of manual effort on our part.
From my visits with agents, the agents appreciate the app for the amount of time saved on having to download and attach photos directly to the policy.
The app can also reduce the amount of staff required for a busy office to fulfill underwriting requests for photos.
When training agents they are amazed at how quickly the photos attach directly to the policy. After taking photos using the app and before they make it back to their desk, the photo is already attached to the policy. They also like the ability to attach additional photos for pre-existing damage.
Customer Service is seeing an improvement with retention as the text message definitely triggers phone calls from insureds to make payments.
The insureds love the fact that we notify them on their phones because they state that sometimes they don’t receive their mail for various reasons.
The insureds are paying more attention to the texts then to their actual mail. We try to set all of our customers up on that option if we notice that they are not currently enrolled, as it builds great customer relations as well as retention.
As a company we have adopted the use of Policy Scan for all our policies, and our agents have adopted the use of the app as well.
Not only is it easy to use, there is also no more worrying about losing photos, having to store photos or photos being attached to the wrong policy.
With Policy Scan we have increased efficiency in our workflow and reduced our exposure on the risk.
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What started out writing one product, one line in one state has now grown into mulitple products, multiple lines and writing in multiple states. We have over $95 million in annualized premium in-force and we expect to grow by 20% during the next year all serviced by Silvervine.
Silvervine was our insurance software system of choice when we started the company in 2006. Silvervine enabled us to begin business within a few months of licensing the company. Today, we are one of the top 20 homeowner’s writers in Texas and SIlvervine’s solutions have been an integral part of our success.