Ahead of Insurance Innovators: Fraud & Claims in London next March, we sat down with one of our speakers, Chris Moore, to kick start the conversation around innovation and the future of motor claims.

(Isabella Chatterton-Daniels) As an expert in forward-facing enterprises, what would you say were the critical success factors for insurers looking to stay at the cutting edge of innovation?

(Chris Moore) Insurers need to transition away from the traditional buyer-supplier model and embrace strategic partnerships with their clients. To do that Insurers need to exercise flexibility, agility, and dynamism. The World is rapidly evolving and we must react to that by evolving our products so that they remain fit for purpose in managing the risks that our clients face both today and in the future.

I think too often Insurers try to innovate in isolation. They internally try to create product to solve what they believe are the major emerging risks on the horizon. Ultimately to be successful I believe that true innovation and problem solving needs to be done in partnership with your clients and/or brokers.

Culture plays a huge role here. You must embrace a way of working where you are open to change. Where you encourage your clients to approach you with new problems and collaborate to find unique and fit for purpose solutions. To establish such a working culture and create the right solutions, Insurers may need to change their organizational structure. The world is embracing an extremely fast paced, connected and digital revolution, and the skill sets now required to create insurance solutions for these new risks has evolved and expanded. We have seen this in the rapid growth in the hiring of actuarial and data scientists. To create solutions, we need to include these wider range of skills and that requires a far flatter structure than the traditional hierarchical vertical structures of old.

(ICD) From pay-per-mile to peer-to-peer insurance, the motor insurance industry is rapidly developing. What do you see as the most exciting trend revolutionizing the industry?

(CM) For me the most exciting trend revolutionizing the industry is the ability to deploy truly data driven underwriting.  With advancements in the automotive industry through connected cars and telematics, we now have huge amounts of data available to Motor Insurers that previously did not exist, enabling risk assessment at a level of unprecedented granularity. It is this new data that underpins the ability to usage-based pricing (pay-per-mile), but I think that is only the beginning of the revolution.

Certainly, it is an advancement for pricing for usage rather than ownership. This is especially important as we see the momentum for car sharing gather momentum. Granular risk assessment, however, does not stop at a per mile rating. We can start rating how the vehicle is being driven, where is it being driven and at what time of day.

We can then look to how this new ability to assess risk on a moment-by-moment basis can inform and empower better risk management. When we start utilizing behavioral based rating, we can start influencing behavior via gamification or via driver tips etc.  If we start using geospatial rating, we can rate risk based on the routes driven. Imagine embracing a navigation system where it shows you the quickest route but also the safest route, which transpires into a lower insurance cost route. This is the future of connected, data rich mobility.

(ICD) Is the road map to autonomous vehicles a predictable one given the evolving regulation?

(CM) I believe there are elements of the future autonomous vehicle (AV) world that are predictable and others that are a little less clear. We must all accept that autonomy will be a huge part of our future. It will transform so many industries, not just transportation. I think too often when we discuss autonomous vehicles, we think about RoboTaxis. Whilst I think that will be a large part of the disruption that autonomy will bring to transportation, I think that will be localized heavily to highly urban areas. I do not think that AVs will be the complete death of human operated vehicles and in the short -term there will still remain high levels of vehicle ownership (albeit that may be far more shared in the future). I think we will first see meaningful AV disruption in the trucking space and last mile delivery space.  We will also see it in manufacturing, mining, shipping, and aviation (autonomous drones etc.). Arguably the on-the road autonomous vehicles have the hardest challenge of all as they have to be programmed to deal with erratic and unpredictable human behavior. The early adoption may take the form of highway driving in autonomous only lanes to avoid as much interaction with human drivers as possible.

One of the areas that still requires huge development if we are to embrace AVs is the insurance requirement for this new risk. Simply adopting the traditional motor insurance solution will be a mistake as it will not be fit for purpose.

(ICD) How are autonomous vehicles set to disrupt the auto insurance industry? And what should insurers do to prepare?

(CM) This technology will transform the auto insurance industry.

AVs will have a large effect on commercial motor fleet insurance and will affect personal auto insurance as over time the increased adoption and scope will diminish privately owned cars and slowly reduce the market premium for personalized motor.

AVs will also have a huge effect on the distribution of motor insurance. This is largely related to how AV companies plan on structuring their product and the how they envisage the insurance working. I believe the companies driving this evolution will offer their product as ‘autonomy as a service’. As such, it is likely that these companies will not sell autonomous vehicles but rather offer them as a service and that service will come with embedded insurance.  We can therefore expect a shift from thousands of motor clients to now a handful of extremely large AV clients.

Finally, the insurance product itself will require a huge transformation. Traditional motor insurance is designed for human driving and thus is an accident-based policy. There are arguments that any incident involving an AV will not be an accident, so how can it trigger coverage? Is it even covered under a Motor policy? Many believe that it should be covered under a Public Liability policy or a Products liability policy. What about Cyber? How is that covered?

Our view is that we need to stop making the age-old mistake as an industry of forcing square pegs into round holes. Why does the insurance solution for AVs need to sit within any of the insurance products mentioned above? A new risk requires a new insurance solution. We believe we need to create an Autonomous Vehicle Liability product. The challenge with that is creating a product that will be uniformly accepted by the entire insurance market that will be subject to different legislation and insurance requirements depending on territory.

Want to hear more from Chris? Join him at Insurance Innovators: Fraud & Claims – 7 March at the Guoman Tower Hotel, London. Chris will be delivering his presentation ‘From automated lane control to driverless cars: what does increasing vehicle autonomy mean for claims?’ – this is not one to be missed!