Insurers that want to take advantage of emerging opportunities in the autonomous vehicle (AV) market will need to upgrade their back-end systems beforehand. They’ll need a core platform with the necessary data analytics capabilities to handle the vast amounts of data generated by AVs.
Autonomous vehicles, often referred to as self-driving cars, have yet to hit the mainstream market. However, ongoing advancements in this technology suggest that the future of driverless vehicles may not be far away. According to a recent estimate from McKinsey & Co., autonomous driving could create hundreds of billions of dollars in revenue for the auto industry by 2035.
The continued evolution of this market will shift how we view transportation and related industries, including auto insurance. So, as consumers and auto manufacturers adapt over the coming years to these changes, auto insurers will need to make some adaptations of their own.
Let’s look more closely at the role of advanced insurance core systems in the future of autonomous vehicle coverage, and why insurers will need to leave their legacy systems behind if they want to remain competitive in the new auto insurance landscape.
The Challenge of Insuring Autonomous Vehicles
Traditionally, auto policies cover the policyholder and any other named drivers listed on the policy. With autonomous vehicles, the driver is the technology and systems controlling the vehicle, making it more complicated to determine fault and liability.
For example, if a vehicle’s sensor is faulty and causes the vehicle to crash, should liability for damages fall on the insurer or the component manufacturer? This standard will likely be set by the industry as the space continues to grow, but there are still uncertainties about how this will play out.
Unique Risks and Coverage Needs of AVs
Insuring autonomous vehicles presents several challenges for auto insurers. Those that decide to cover AVs will need to adjust underwriting practices and take an entirely new approach to assessing risk and pricing policies. Factors like a policyholder’s driving record or age won’t be as relevant as they are in current underwriting models if there’s no driver behind the wheel.
Here are some of the unique considerations for insurers offering AV coverage:
- Cybersecurity risk: AVs mitigate certain risks associated with conventional driving, but their systems are subject to hacking and other cybersecurity threats, which adds complexity to AV policies.
- Higher repair costs: The advanced technical components in AVs are expensive, so potential repair costs for these vehicles will likely be higher than for conventional vehicles, impacting how insurers price these policies.
- Limited history: Without comprehensive historical data on claims, accident rates, and associated costs of covering AVs, it can be difficult for insurers to price premiums accurately.
- Regulatory requirements: The AV market is still in its infancy, though federal and state legislators may eventually announce minimum car insurance requirements for AVs as they have with conventional vehicles.
Limitations of Traditional Core Systems for AV Insurance
When it comes to back-end technology and platforms, insurers could impede their ability to enter this new market if they continue to rely on legacy core systems. These platforms can be clunky and outdated, and lack the flexibility and data intelligence tools needed to assess the unique risks of autonomous vehicles.
Similar to telematics devices in conventional vehicles, the sensors and software on AVs continuously produce data, though legacy systems may not be able to receive and analyze this information in a way that’s helpful for insurers’ risk management practices. Insurers may need to make significant modifications to their existing systems or implement an entirely new platform to accurately underwrite and price AV policies.
Modern Insurance Core Systems: Powering Seamless AV Coverage
Advanced insurance technology solutions are much more equipped for the evolving world of auto insurance than their legacy counterparts. Versatile insurance core systems will be essential to manage the complexities of AV insurance, ensure scalability, and provide an enhanced policyholder experience.
Adaptability and Flexibility for Evolving Technologies
The primary advantage of an advanced core system is that it’s more agile and adaptable to emerging technologies, new lines of business, and changing insurance workflows. The AV space is still developing, so as this technology evolves, regulations change, and insurers begin to extend this type of coverage, they’ll need a system they can adjust and re-configure as needed to meet the new auto insurance demands.
It’s also beneficial to have a core system that can handle complex policy admin and billing, for instance, to offer flexible policies and dynamic rates tailored to the level of autonomy and technology in an AV.
Real-Time Data Integration and Risk Assessment
Advanced platforms will allow insurers to monitor AV data in real time. This will make it easier to assess AV driving performance and adapt underwriting models and risk assessments in response.
These capabilities will be especially useful in the early stages of AV coverage deployment, since insurers don’t have access to historical driving data, claims patterns, or other data on AVs to aid in underwriting and risk management.
Prepare Your Business for Growth with Insuresoft
For P&C insurers looking to innovate and accelerate growth with expansion into new lines of business, Insuresoft offers one of the market’s top core insurance systems. Our end-to-end platform is agile, scalable, and customizable to your unique operational needs.
Designed to expertly support policy processing, billing, claims, intelligent data, and more, Insuresoft enables an insurer’s unique brand promise to shine, helping them differentiate themselves in the market and accelerate growth.
Most other vendors require insurers to use separate systems to manage different insurance functions and lines of business. But Diamond Platform is an all-in-one solution that gives insurers and policyholders the power to compete and win in today’s complex digital world.
Contact us today to learn how Insuresoft’s advanced core tech gives you the edge in the modern insurance market.
