At a recent wedding, I found myself seated next to a R&D executive from one of the largest auto insurance providers. Gave me an opportunity to find out how technology was changing their business. Three interesting takeaways:
- Usage-Based Insurance: They are very enthusiastic about the ability to better track your actual driving habits and have a pilot going where consumers install a small “black box” which reports data back to them about driving speed, time of day, number of miles and other incidents such as “hard stops.” Folks who participate in the program get personalized insurance rates as opposed to actuarial table averages. One challenge to rolling this out more broadly is selection bias – it rewards good drivers but if only good drivers opt-in, premiums will go up on bad drivers who are no longer being subsidized. There’s a lot of nuance here in terms of being able to steal customers from other companies, the value of decreasing the risk in your model, etc.
- Self-Driving Cars: They know these are coming but aren’t really thinking yet about insurance implications. I wonder whether the first self-driving car owners will get a discount on insurance or pay a premium? ie seen as a risk or safety precaution
- Car Sharing, P2P Driving: Similarly they’re aware of services such as Lyft and Relay Rides which have different risk profiles for car owners than the standard soccer mom. In the future there’s room for a modified hybrid commercial/personal use policy which could be offered to owners in these marketplaces.
In SV we’re surrounded by folks who are trying to build the future from scratch but never pass up the opportunity to chat with someone smart in an established business. Their perspectives can be great fodder.