Car insurance industry gone by 2030, academic predicts

The car insurance industry will cease to exist by 2030 according to a new book written by a Massey University lecturer.

The prediction is just one of a number proposed by Michael Naylor, a senior lecturer in insurance at Massey's business school, who has analysed how a range of technologies will change the insurance industry in the coming decades.

Naylor, who has taught financial and insurance advisers for 20 years, says a perfect storm is coming and the industry is in for a major shake-up.

"There is a perfect storm of technological advances which are about to combine, and disrupt both the insurance industry and the adviser/broker industry.

"The majority of current companies and advisers are technological laggards and will require immense transformation before they will be in a position to combat these threats."

Naylor says the industry is wide open to disruptive new entrants and it will look very different in 20 years time to what it does today.

"The big transformation will probably come from the entry of tech-savvy external firms, which will do things completely differently - the 'ubers'.

"The majority of existing firms will probably go bankrupt due to their inability to transform themselves into a client-centered model, while survivors will be so transformed that they may be unrecognisable."

Naylor says insurers need to change their view of their business as a provider of insurance products to being a data company with real-time links to customers, specialising in personal services.

And that will also have a major impact on insurance consumers.

"In the future, all insured objects will give constant, real-time feedback to the insurer's data centre - and that includes people. Wearable technology can provide minute-by-minute blood pressure readings and tell if your blood chemistry indicates an illness," he says.

"Through the connection of objects to the internet it will be possible for insurers to know how healthy the food in your fridge is or how often you exercise. Imagine how accurately they can then predict your health risk for insurance purposes."

Naylor says consumers will have to agree to share this kind of information but those who don't face potentially higher premiums.

"...you'll be classed as high-risk and your premiums will be very expensive."

Naylor says the car insurance industry will probably be the first to sector to face major disruption.

"Once networked, autonomous cars are widely available, it's been predicted that car crashes will reduce by 80 to 90 per cent.

"This development is not as far away as you might think - Volvo, for example has an aim of eliminating car crashes by 2020."

Naylor believes car theft will largely become a thing of the past as voice and face recognition technology makes them nearly impossible to steal, leaving insurance only for damage caused by things bumping into the car or extreme weather events.

"The result is car insurance premiums will fall drastically, probably by as much as 90 per cent by 2030."

While many might view the report as speculation Naylor says there already examples of innovative insurers using technology overseas.

British insurer Drive Like A Girl monitors the drivers it insures via a telemetric device that sends real-time reports, including alerts of any crashes.

He says the company is popular with young drivers who can prove they shouldn't have to pay the high rates normally imposed on them.

Naylor's book 'A Perfect Storm in Insurance: How to Survive the Looming Waves of Disruptive Technology' can be purchased as a paperback or downloadable PDF from: https://sway.com/tOcPLREeEb0fFaQe.