March 22, 2016 by Greg Meckbach, Associate Editor
Auto insurance providers cannot afford to wait 10 years to adjust their business for autonomous vehicles, but driverless cars do not necessarily pose a threat to personal auto insurance providers, the Royal Bank of Canada’s head of home and auto insurance suggested Tuesday.
Tim Bzowey, head of home and auto at RBC Insurance, was this year’s speaker at the Insurance Institute of Ontario’s annual At the Forefront event in Toronto. (RBC has agreed to sell RBC General Insurance to Aviva Canada Inc.)
Bzowey alluded Tuesday to the autonomous vehicle pilot launched January 1 by the Ministry of Transportation of Ontario. While Ontario will require autonomous vehicles to have a driver capable of taking over, Bzowey also alluded to published reports that Google Inc. wants the United States Congress to create special powers that would give the search engine firm permission to bring to market a self-driving vehicle that has no steering wheels or pedals.
The Associated Press reported last week it had obtained a letter from Google to U.S. transportation officials proposing to give the U.S. government give special, expedited permission to Google.
“If you have no control over the vehicle, the whole notion of a personal rating …. falls away,” Bzowey told attendees Tuesday during At the Forefront. “What’s clear, to me anyway, is that this whole line of business can effectively go away and it doesn’t have to matter for us. It actually doesn’t matter.”
He pointed to examples of innovations that created new opportunities.
“The personal computer was going to eliminate paper,” Bzowey said during the presentation, titled When Things Don’t Go Bump in the Night: Our Future With(out) Auto Insurance. “It didn’t do a very good job of that. You have example after example of innovation and it creates new opportunities. So while one door closes, another one opens, and for me, it’s our willingness to grasp those new opportunities that come forward.”
One such opportunity is in product liability coverage.
“Over time, [auto] coverage needs will migrate from personal liability to product liability as the vehicle does more of the driving,” he said. “Personal lines insurers will need commercial expertise to stay in the game. They will also need richer data and more informed research and advanced analytics.”
Vehicle sales “will plummet” as more consumers gravitate to ride sharing services, he suggested.
Today’s auto insurance providers “could offer” expertise in claims management and other administrative services for a fee, he noted.
“Let’s face it, if you had your choice, would you really want most of your revenue coming from a product where the product is regulated, the price is largely regulated, it’s more or less commoditized, and it’s really tough to articulate a value proposition where we are all selling more or less the same thing?” he asked.
Pointing to Netflix as an example, Bzowey suggested that innovations that disrupt industries are sometimes years in the making.
“By the time the streaming service arrived on the scene, the behavioural shift in how we consume content was already well under way,” he said. “In my view, the genesis of the disruption was the introduction of packet networking in the 1960s – the precursor of the Internet.”
He noted that during the past two years, the Canadian broadcasting industry “was forced to play catch up” with online services such as Netflix.
“A major part of the reason disruption is so jarring is because it seems so sudden,” he said. “Disruptive technology, however, is often an overnight success decades in the making.”
He suggested that the move towards autonomous vehicles “is all unfolding right now, and when we read surveys polling our industry, what we tend to say is, ‘Well, it’s way down the road,’ and I worry for us a little bit, that if we think we can wait for 10 years to get started, that’s going to be the real risk, because regardless of how it unfolds, 10 years from now to start will be too late.”