The Future of Insurance - Pt. III

“The only constant is change.” – Heraclitus
The future of insurance will be greatly affected by everything, and in my opinion, nothing. Insurance deals with the sudden and accidental loss both in your car and in your home. There are emerging technologies that will make for a “smart” house or they tout “accident avoidance.” It is important to recognize that it isn’t called a “brilliant” or “genius” house. Maybe they should call it “Just smart enough.” The auto technology is called “accident avoidance,” not accident prevention or elimination.
When losses occur, there can be two sides to claims. The first is when property gets damaged. There are new water meters that register how much water you use and when you use it throughout the day. If you spring a leak and extra water starts flowing the water meter shuts off the water in the house until you identify what is happening. Basically, you do not come home to an indoor pool. This is terrific and reduces water claims, but technology will never reduce lightning, wind, or hurricanes. Will the new technology reduce the cost of your insurance? Maybe. Will the cost of adding this new technology to homes increase the cost of home ownership? That’s almost a guarantee.
Self-driving cars. Back-up cameras. Accident avoidance radar. These are all wonderful innovations. They will REDUCE the likelihood of a claim, but not eliminate it. Trees will still fall on cars. Deer will continue to run into the sides of vehicles and no technology in the world can stop that. In spite of all of these advances, the frequency and severity of claims is on the rise. The cost of all of this technology has increased the average cost of an American made car to just over $28,000. Technology and safety features drive some of this increased cost, but the accidents just keep occurring. The costs of repairs of these increasingly advanced technological vehicles will continue to climb and continue to drive up the cost of insurance. The collision and other than collision costs will be directly affected.
 Even when “self-driving cars” do show up on the road, we will not escape being liable for things that happen with the cars. This is the other side of the coin when it comes to losses. These are the liability claims that will continue to occur with people texting while they are driving, or walking out into traffic while they are on their phones. All of those nifty words like reduction, avoidance, and prevention never translate to ELIMINATE. Until then, expect the cost of your insurance to continue to be subject to rising due to the amount of money that is paid in claims.