January 17, 2013

Sometimes, in this business, one can be surprised about how certain ideas germinate and grow. For example, when Anthony O'Donnell posted a blog on a report from Celent's Donald Light about how there could be a deep drop in auto insurance premium due to "telematics, collision avoidance, automated traffic law enforcement, and, to a lesser extent robot cars" leading to safer driving, I thought of it more as an interesting thought experiment than a looming danger.

But it's clear the idea has taken some root within the industry. Earlier this month, writers from PwC and Donald Light again debated the issue on our site.

And at Tuesday's Property/Casualty Joint Industry Forum, Brian Sullivan of Risk Information said during a panel discussion, "It's impossible for anyone to look at the data and say there won't be fewer accidents than before. The technology is getting better and drivers are getting safer. I think this business is shrinking: Fewer accidents means fewer exposure."

That remark prompted a response from State Farm CEO Edward Rust, Jr., in a follow-up panel featuring insurance CEOs. Rust said that the insurance industry has long been in favor of building safer cars that better protect occupants during a collision. "More people today are alive because of that technology," he added, relating a personal story about being hit head-on and surviving due to safety features in his car.

Despite all that, "I don't see the risk being mitigated so much that the premium falls significantly," Rust added. " The cost to repair a vehicle that has been in an accident is much greater. It's not your Grandpa's Olds."

Of course, it sounds outlandish that the auto insurance industry could significantly shrink or even vanish completely considering its place in our culture: There are more cars on the road every day worldwide; the industry spends billions on advertising. But the same thing was probably said about many products over the course of history. Only time will tell.

ABOUT THE AUTHOR
Nathan Golia is senior editor of Insurance & Technology. He joined the publication in 2010 as associate editor and covers all aspects of the nexus between insurance and information technology, including mobility, ...