Today, most people are driving in semi-autonomous cars, or semi-self-driving vehicles, whether you realize it or not. So you may have nice specs, alloy rims and some cool new tricks: contactless keys, dynamic cruise control, parking assist, self-correcting lanes, a bunch of other mini-innovations that improve the driving experience for you personally and anyone driving with you or around you. These “minivations “ are just the start.
We know that roughly 93% of all vehicle accidents are caused by human error. Almost $1 trillion a year is spent on auto repair. Sit back and question that for a second, and that’s when you realize that all of this money – nearly $1 trillion! – is being dropped right into the pockets of the auto repair companies and the physical parts manufacturers.
Traditional original equipment manufacturers (OEMs) are showing a glaring absence of innovation when it comes to preventing deaths. There are roughly 30,000 deaths per year due to auto accidents in the U.S. alone. To repair the auto industry and its surrounding ecosystem, the loss of lives must be addressed.
How? Through autonomy.
If you can take the 93% of human error caused by accidents down to 20%, 10%, 5% and ultimately under 3% with a (level 2, 3, 4 and 5 autonomy) vehicle, what will happen? First, you save lives (and the costs of healthcare). Second, you collapse an entire business model. You effectively shine light on the inefficiencies and economic costs absorbed by individuals.
See also: Which to Choose: Innovation, Disruption?
This is where our favorite subject enters: insurance. Traditional insurance. The intangibles and untouchables: The Benjamin Buttons of Innovation!
Enter simple math. Look at the premiums you as an individual pay relative to the cash outlay that the insurance companies must make due to accidents. Do you see it now? To say that the business models of the incumbents in auto insurance will shift dramatically is an understatement.
This concept – a company without a tangible product that makes money off the liabilities they have on their balance sheet by means of your deposits – is going to pay for stagnation by means of obsolescence.
Now a reversal occurs – individual empowerment amid institutional disempowerment. The next generation of insurance companies (insurance-as-a-service, insurtech, ethical autonomy, you name it) will naturally, inevitably and ultimately rise to the top of the pack and take share away.
It is only sensible, therefore, to presume that the future of auto insurance is fascinating in a world where the metadata becomes statistically significant as it intersects with the data of connected vehicles. Why? Because now I can just pay as I drive. A true service (finally!). A pay-as-you-go business model that is as exact as it is precise. So, I – as an individual, an owner, leaser or driver turned rider – am no longer an “average” anymore. This is the concept of hyper-personalization, hyper-humanization and hyper-empowerment. There is an excellent example of hyper-personalization where I know precisely how many miles I actually drive, and the only premium I pay for insurance is for those miles. Furthermore, what if I as the user can actually obtain insights into my driving behavior (i.e. hard brakes, speeding, etc…),further influencing coverage premium and empowering me to drive behavioral change (no pun intended) with analytical insights and recommendations.
In fact, the business model has already been created in form and substance. It exists today – there are insurance companies offering that solution as we speak, and I suspect it will increasingly become the standard. It will be interesting to see which insurance companies become print newspapers, which ones become blogs and which ones have left ancient history to trade perhaps one fiscal year for the opportunity to pioneer the next frontier.
But before we embark across the Rubicon, let’s take a brief step back. By 2020, we will live in a world with 50 billion connected products. The enormity is surpassed only perhaps by the complexity.
So if you are at a company right now that is just starting to feel pretty good about your position along the intelligence of things continuum, really good about your digital marketing team’s evolution, your grasp on social media/SEM/SEO, your grasp on building a multi-channel experience, your grasp of what your customer wants, enjoy the feeling –you’re about to be disrupted. Amazon ring any bells?
See also: How to Respond to Industry Disruption
And you’re going to get disrupted in a way that’s staggering in its infinite nature, with infinitely more data points, infinitely greater opportunities and, as a result, infinitely more options amid a sea of competition, which makes you feel infinitesimally small. Suddenly. This competitive force has built such a commanding, unexpected lead. Yes, a good, old KO before you even heard the bell go off. You will likely default, and it will be too late to pivot.
For the lucky, the ability to slip into obsolescence and appreciate the nostalgia of the past will do. (Of course, not the positive vibe-nostalgia, the punch-drunk love of sentimental warmth. Nope, as you become a relic of history, the nostalgia will be more like the Greek word root for nostalgia, which translates to pain, or more specifically the debilitating and often fatal medical condition expressing extreme homesickness).
Why will you get disrupted? Because we’re going to fast forward parabolically toward predictability and optimization. And that is precisely when machine learning takes place — that is when the machines become smart. As machines become more intelligent, they start to recognize patterns. Then they start to actually give you advice, input. Next, they start to predict what the outcomes could be, output. I/O. That, well, leads to artificial intelligence.
To be continued….