The era of IoT and reinventing the insurance industry
Authored by: David Horton, Synechron Digital
If you remember the 80s TV series Knight Rider, it was about a guy and his self-driving car which had an Artificial Intelligence called KITT and some cool secret agent-like gadgets (for you millennials, think Google Car with Amazon Alexa built by James Bond’s Q). The hero of the show, Michael Knight could connect and talk with the car via his smartwatch and give KITT some instructions on how to stop the bad guys – though from time to time, the car would disagree with him and do what it felt was statistically better.
Today, the technologies of science fiction from Knight Rider are fast becoming mainstream, and the insurance industry is faced with a glut of new issues and challenges caused by the ever evolving world of connected devices, artificial intelligence and autonomous technology. Consider a scenario where KITT makes a decision and causes a car accident that results in an insurance claim. Who is liable? Is it Michael Knight, the car’s regular driver/passenger, is it ‘Knight Industries’ who owns the car or is it the programmer who developed the car’s AI? Today, if your car has a self-parking feature, have you considered whose fault it would be if the car knocked over a child whilst parking or scratched another car whilst performing the maneuver? This is one of the major challenges facing insurers today and we have already seen UK’s first personal driverless car insurance policy launched by motor vehicle insurance firm Adrian Flux.
If analyzing the risk associated with the above scenario wasn’t complex enough, consider that in the future, driverless cars may well be a shared asset amongst a number of people. According to best-selling futurist Brett King in his latest book ‘Augmented’, it is likely that driverless cars could be part-owned by a number of people who use the car when they need to, but then expect it to earn an income throughout the day via some Uber-like job responsibilities. The car is likely to have a mobile wallet of its own and could in all likelihood fund its own refueling, maintenance and insurance premiums through the revenue it earns during ‘work’ time. If the car was to have an accident, the question of liability would be somewhat more difficult to answer. The crowdsourced liability coverage of all the owners is one possible answer, but as with all technology-driven debates, it gets more complex when you have to consider who is responsible for things such as the car’s software updates, security patches, firewall rules, Operating System management, GPS navigation coverage or if the car has been hacked. The reality is that the insurance industry has already started anticipating this new connected world we will live in, and many insurers already provide discounts for cars fitted with assistive technology such as ABS which is proven to reduce the risk of accidents. Just as is the case with new Fintech, the InsurTech startup space is attracting a huge amount of investment from the likes of big insurers such as American Family, Aviva, AXA and Generali and even the non-insurance tech goliaths such as Google, Bain and Khosla, who see a bright future for many fledgling IoT firms working on insurance solutions.