Every year finishing with a zero creates a good moment to reflect: to find out who got it right and who got it wrong, when trying to predict where the world would be in the end of that decade. As 2020 and a new decade unfolds, we looked at some forecasts related to the connected car and insurance dating back to half a century ago, when the first personal computers were reaching the market.
2020 is the last year of a decade that witnessed a revolution in vehicles, with the consolidation of the connected car and gigantic progress towards self-driving vehicles, with new types of risk. Another revolution took place in the insurance sector, with professionals getting unprecedented access to customers’ data and the analysis derived from it.
But, to what extent have the forecasts come true?
Five years ago pundits estimated that by 2020 the first autonomous vehicles would be on the road, transporting thousands of passengers. Self-driving cars have been in test but have not yet reached the open road. Before they do, there are regulatory and safety matters to be finalised.
However, they are much closer than another forecast, from 1964, which also predicted that we wouldn’t be driving our own cars by 2020.
Based on a study prepared by the Rand Corporation, Nobel Prize winner Glenn T Seaborg wrote: “By the year 2020 it may be possible to breed intelligent species of animals, such as apes, that will be capable of performing manual labour. During the 21st century, those houses that don’t have a robot in the broom closet could have a live-in ape to do the cleaning and gardening chores. Also, the use of well-trained apes as family chauffeurs might decrease the number of automobile accidents.”
In 2015, the founder of Tesla, Elon Musk, predicted that electric cars would be able to do 746 miles on a single charge by 2020. The model with the longest range – produced by Tesla – can do 375 miles, less than half. Will the industry be able to double that capacity in one year?
As for connected cars, in 2015 forecasts predicted that by the end of the decade 250 million would be in circulation. This one got it way off the mark. Today there are about 50.0 million, and the forecast for next year is 63.4 million cars with embedded connectivity. As for data and the amount of new vehicle data coming available for insurance, connected cars are forecast to start generating data at the rate of 25 gigabytes per day per vehicle, rising to 300 terabytes, which is the data estimated to be generated by a single autonomous vehicle per year.
Like all forecasts, the further we look into the future, the greater uncertainty and the wider are the range of views from the experts.
According to one leading forecast, 33.6 million fully autonomous vehicles (SAE Levels 4 and 5) will be sold annually by the year 2040. SAE Level 4 vehicles, featuring semi-autonomy, are already on the market, although the regulations don’t yet permit their full features to be used live on the road.
Another forecast predicts annual sales of 740,000 autonomous-ready vehicles in 2023. It’s believed that growth will predominantly come from North America, Greater China and Western Europe, as countries in these regions become the first to introduce regulations around autonomous driving technology.
Personalisation and new insurance models growing
The issues of highly-complex vehicles, with regulation and new insurance models including pay-how-you-drive and dual risk for personal and product liability add up to a lot of uncertainty currently for the vehicle makers and insurance providers.
“There are no advanced autonomous vehicles outside of the research and development stage operating on the world’s roads now,” said Jonathan Davenport, principal research analyst at Gartner in a November 2019 statement.
“There are currently vehicles with limited autonomous capabilities, yet they still rely on the supervision of a human driver. However, many of these vehicles have hardware, including cameras, radar, and in some cases, LIDAR sensors, that could support full autonomy. With an over-the-air software update, these vehicles could begin to operate at higher levels of autonomy, which is why we classify them as ‘autonomous-ready’.”
The car is increasingly part of the inter-connected ecosystem of the Internet of Things.
Apart the excessive optimism of some projections, it is undeniable that in the last few years there has been amazing progress in telematics (in terms of cost and data accuracy, data availability). This is bringing about new opportunities for insurers, and benefits for consumers, particularly because the technology allows for tailoring policies to a driver’s performance.
Usage-based insurance (UBI) has been solidly growing year by year. According to the consultancy Ptolemus, globally in 2018 there were 25 million active UBI policies, with Europe (especially UK and Italy) and North America accounting for the majority of the market. Based on current trends the likely outcome for 2019 is for 30 million UBI policies globally.
The new products leading the growth will be pay-how-you-drive (PHYD), pay-as-you-drive (PAYD) and manage-how-you-drive (MHYD). Telematics connectivity, which is constantly evolving and becoming more sophisticated, is the true force behind these new insurance products. The integration of Advanced Driver-Assistance Systems (ADAS) – present in 60% of today’s private car fleet – is not only making driving easier and safer, but the data from it will also contribute to making insurance prices more accurate.
According to our LexisNexis Risk Solutions driver research in the UK, millions of motorists have positive views towards telematics insurance products and they’re simply at the point where the right product benefits need to sold to them, explained and offered to them.
Personalised insurance will expand, becoming a bigger chunk of the book of business. Insurers who know how to offer UBI will lead the market.The ‘network effect’, where the technology costs for the insurance provider reduce and start to scale, will only continue.
The year 2020 will also witness a revolution in the use of data generated by connected cars, with greater collaboration between auto OEMs and insurance companies. Currently, 87% of the global automakers already have or have announced data-sharing programmes. Among the ones already sharing, 60% are sharing data with insurers.
Within this scenario, at LexisNexis Risk Solutions we have established as one of our major goals for 2020 to help insurers take UBI more to the mainstream and to the mass market.
We want to help them find out how they can leverage the new vehicle technology to price better and create new insurance products. In order to do that, among other things, we are bringing to the European market LexisNexis® Vehicle Build , a new service that is an insurance risk classification based on ADAS performance derived from each specific automotive brand, compared to other brands and other vehicle features.
But we want to deliver more than the tremendous analytical capacity of this unique new product. One of the things we have learned is that it is essential to explain the benefit to the consumer.
We want to support insurers in that front as well. It is part of the journey towards assisted driving, where more and more risk attributes for insurance underwriting are going to be coming from the vehicle, and not the ‘person’ risk or the aggregated risk across groups of driver profiles.
Finally, a fact, not a prediction that will take place in 2020: The Paris Climate Change agreement moves into a new phase of enforcement against national commitments, with the goal of keeping global temperature rise below two degrees Celsius compared with pre-industrial times. The demand will grow for a global fleet of intelligent cars, conducted by conscious drivers, less pollutant and safer for everybody. Let’s make it happen! Happy 2020!
Click to download more information about LexisNexis® Vehicle Build and our ADAS classification system.
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