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Cars that jiggle you awake or alert you when you drive out of your lane represent just the beginning of technological changes that will make car accidents less common and, eventually, change how car insurance is priced, bought and sold, say industry analysts.
A recent article in Insurance & Technology magazine, "The Reshaping of Auto Insurance" by Marik Brockman and Anand Rao of PricewaterhouseCoopers (PwC), reviews several trends that they believe will significantly transform the way car insurance works.
These trends include:
1. Risk shifting: Advanced technologies such as telematics, vehicle-to-vehicle communication, lane detection systems and automatic braking will shift responsibility for accidents from driver error to mechanical malfunction. (See: "
As economy sinks, pay-as-you-go insurance soars.")
"In turn, this would shift the key buyer from the end-consumer to the car manufacturer, and fundamentally change the entire value chain, from product definition to pricing, marketing, distribution, underwriting, service, and claims," says the report. In this scenario, carriers would sell policies either at the dealership, or perhaps try to increase market share by "co-marketing with the manufacturer and/or dealer," says the report. (See: "
Cars to predict red-light runners soon?")
2. Risk sharing: Social networking creates new pools of drivers to share group discounts.
"There are new carriers that combine social networking with insurance by connecting customers to form insurance networks that promise significantly lower premiums. These carriers claim that their models allow insurers to access new customers virally, decrease process costs and reduce claim ratios," according to the report. While, on the one hand, this represents the potential for lower rates for more groups, it also could make insurance more affordable for some and therefore lead to more insured drivers say the authors.
3. Risk slicing: The growth of car sharing, which means more car insurance policies that will follow a pay-per-use model instead of 24/7 coverage.