The Future of Car Insurance Technology

Tyler Wade
by Tyler Wade December 12, 2018 / No Comments

It was 2015 when Marty McFly went back to the future, and flying cars were the norm. We’re not flying yet, but one of the oldest industries in the world, Insurance is adapting to modern trends and technology to keep pace with the evolving risks. Ratehub.ca did a survey of about 1,000 Canadians asking their feelings towards the shift, and despite advancements in technology, Canadians seem a little wary of where the innovation may take us. However, younger generations show a willingness to embrace technological changes when shopping for insurance.

In a world with personalized information at our fingertips, the majority of Canadians (46%) still rely on direct communication (phone or in person) with their current insurance provider or broker to decide which insurance products to buy. 43% also look for recommendations from friends and family. When broken down by age category, it’s the boomers (55%) who rely mostly on their current insurance provider. Those numbers, although slow to change, are on the decline as the younger generation takes their business online.

I use websites of insurance providers and/or price comparison sites like Ratehub.ca
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
54% 44% 39%

 

The future of insurance product discovery may encourage more people to go online for product discovery as the demographics get younger. Why wouldn’t they? With price comparison sites available to deliver several personalized car insurance quotes to you in minutes, it’s much easier than reiterating all the same details to multiple different insurers, in person, and at various locations, or spending hours on the phone to find the best price available.

After an insurance provider is selected, these generational differences still hold true. We asked what the preferred method of communication was with an insurance provider and the majority of Canadians (37%) said both using the providers’ website and calling them on the phone was still their preference. However, when we extrapolate the data further, it’s again the younger generation bucking the trend.

I want to be able to get all the information I need from their website
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
30% 22% 12%
I only want to use the phone
10% 16% 27%

 

The younger generation feels the information required should be available on the website. The importance of a personal connection increases with the older generations. Does a personal relationship still matter? Is it still relevant to have your broker at your beck and call?

Well, we asked how important it was that your insurance provider has a mobile app, or at least a mobile-responsive website. 47% of Canadians said it wasn’t important for their insurance provider to have an app, but again, when we dig a little deeper, the sliding scale between generations appears.

It’s important that my insurance provider has a mobile app or mobile-responsive website
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
70% 50% 27%

 

The numbers seem to indicate the increasing importance of a digital connection for the younger generations despite 24/7 phone support from many providers. In fact, 29% of millennials thought an insurance provider having an app was very important while 73% of boomers said having an app would not affect their decision.

The millennials may be on to something. A mobile app can come in many forms from different providers. Some providers allow you to access your pink insurance sheet on the app in case you’re pulled over and can’t find it in the glove box – this avoids a potential minor penalty on your insurance. Other apps allow you to file a claim online – you can take photos of the damage and fill out the necessary information like license plate numbers and contact details which can seem daunting to remember in the confusion after an accident.

Other apps offer telematics – a way for an insurance provider to give you a more personalized quote based on your driving behaviours. Telematics measure how you handle a turn, how hard you brake, and how many kilometres you travel. It can be a great way to save money because currently, an insurance company has to generalize and use historical data on your demographic’s driving history, which can lead to higher auto insurance quotes for younger generations.

If you’re a young male, for instance, despite a clean driving record and being a good driver, you may pay higher insurance premiums based on other young males being more prone to taking risks, like speeding. With that in mind, we asked if Canadians would be willing to install a mobile app or device to allow their insurance provider to track their individual driving behaviours. What if these devices or apps allowed them to lower your insurance?

Only 1 in 4 Canadians (24%) said they’d be willing to do it, even if it did lower their premiums. Many had privacy concerns, including 33% of millennials. The number only got worse in older generations with over 40% of Gen X and Boomers saying they were concerned about personal security. However, the sliding scale shows up again as we look at it across generations.

I’m willing to allow my insurance provider to track my driving behaviours if there’s an opportunity to reduce my premiums.
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
28% 23% 19%

 

Is this because the younger generations typically pay more for insurance and want to prove they are statistical outliers? It’s important to note older generations also benefit from longer driving histories, loyalty discounts, and even membership (alumni, corporate, or union) discounts. The younger generation often needs to be creative when seeking lower car insurance premiums.

Insurance companies and car manufacturers are adapting and investing in autonomous vehicles. Intact Insurance recently poured $3 million into a self-driving car start-up that runs a taxi service in a gated retirement community in Florida. Automakers, like Volvo and Mercedez-Benz, are experimenting with insuring their fleets against accidents for their autonomous vehicles where no human was responsible for the collision.

Canadians, however, are still concerned about their safety, with 34% saying they would not be willing to ride in a self-driving car once legal. Nearly 50% of boomers said they would not regularly ride in a self-driving car, but the future may be a little more optimistic depending on how safe these cars will be.

I might regularly ride in a self-driving car depending on their safety
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
30% 27% 20%

 

But what if humans aren’t driving anymore? What impact will it have on insurance premiums? With fewer cars on the road, there would be fewer collisions which should reduce car insurance premiums. As ridesharing, urbanization and active forms of transportation take hold, the insurance industry will need to adapt. What did Canadians think when asked how self-driving cars would affect their car insurance premiums? 42% did not know, but the younger generations are optimistic.

As self-driving cars become more widespread, my insurance premium will go down.
MILLENNIALS (aged 18-34) GEN X (aged 35-54) BOOMERS (aged 55+)
35% 22% 16%

 

We don’t have flying cars, but there is a lot of research and development in autonomous vehicles from both manufacturers and the insurance industry. Waymo, Google’s autonomous vehicle driving project, is testing cars on the roads in Arizona right now and their testers are amazed by the progress saying it feels more like a human, and less robotic, with each ride they take. Will we need to compare car insurance in the future or will insurance be up to the manufacturer? Millennials seem ready, or at least willing to try, to live in a driverless future and adapt to the future of insurance.

 

Photo by Samuele Errico Piccarini on Unsplash

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