Motor Insurance in the future and autonomous vehicles

MOTOR INSURANCE IN THE FUTURE

AND

IMPACT OF AUTONOMOUS VEHICLES

LIMA Programme

2020

“One of the most visible impacts of

COVID-19 is empty roads. Many of us

have embraced the technology movement

and have gone online. The question

remains whether this is a once-off shock or will this trend partly exist in the future?

Furthermore, how will COVID-19 impact

Motor Insurance and, looking to the future

of Autonomous Vehicles?”

Tashia Bhogal

Senior Casualty Treaty Underwriter

Munich Reinsurance Company of Africa Ltd.

24 August 2020

Tashia Bhogal

Motor Insurance in the future and

Autonomous vehicles

524 August 2020Motor Insurance in the future and Autonomous vehicles

Discussion points

• Covid 19 Motor Observations

• Claims Frequency and Claims Severity

• Usage-Based insurance and Behavioural Modelling

• Autonomous vehicles

Picture: Getty Images


Kick-off

Compared with pre-corona times, what percentage do you currently utilize your car?

Chat function

• 0%-30%1

• 31%-60%2

• 61%-90%3

• 91%-120%4

• 121% or more5

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Covid 19 Motor Observations 1

24 August 2020 8Motor Insurance in the future and Autonomous vehicles

Covid 19 Motor Observations

Source: The Floow

Daily distance driven


Covid 19 Motor Observations Composition

Does less mileage mean proportionately lower risk/ and therefore lower premiums?

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Covid 19 Motor Observations

▪ Reduced KM per trip ▪ Reduced number of trips per

user

▪ Reduced number of users

driving

Getty ImagesGetty Images

Getty Images

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Claims Frequency and Claims Severity 2

Image: monsitji / Getty Images

Claims Frequency

↓ Less vehicles on road during strict lockdowns (more people WFH).

↓ Ban on alcohol.

↓ Less theft of vehicles (most people home with cars parked there and increases in traffic control/road blocks).

− Increased reporting lag.

− Reduced claims handling workforce.

↑ Tendency toward driving vs. flying for local holidays (thereto, more local vs. international holidays).

↑ Less experienced drivers on the road



↑ Increased high speed claims.

↑ Supply chain disruption and supply-shortage inflation ⇢more work for reduced staffed panel beaters ⇒ increased prices.

↑ Increased moral hazard following difficult economic situation/economic distress (claiming for unjustified/faked losses on MOD) ⇒ similarly, increased fraud.

↑ Inflation on cost of parts due to depreciating ZAR.

↑ Aging vehicle population

13

Claims Severity



Other

14

➢ Increased lapses/Higher Churn

➢ Shorter retention period

➢ Reduced new car sales

➢ Change in sales and distribution channels => Shift to online

➢ Increased use of AI image sensory loss assesment



Market Reactions

Is this a once–off event or a transformation?

What will remain with us, long term?

We need to react better to our customer everchanging needs.

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Usage-Based Insurance and Behavioural

Modelling 3

Usage-Based Insurance

USAGE-BASED

MODELS

“Pay As You Drive”:

• One major factor: e.g.: km driven• Price varies with usage (e.g.: number of km driven)

“Pay How You Drive”:

• Driving score based on a number of behavioral factors: e.g.: braking, acceleration, cornering etc.

• Price discounts based on score• Other rewards/services (gamification)

• Powered by telematics technology

24 August 2020Motor Insurance in the future and Autonomous vehicles 17

18

We offer a free trial of our smartphone-as-a-sensor

solution “RE_drive”

We have the right technology

Publicly available on the App Store (iOS) and Google Play Store (Android)

Usage-Based InsuranceRE-Drive_Munich Re app



Behavioral Modelling

▪ Our traditional risk models need to be merged with demand model.

▪ Price optimization at a single customer level

▪ Advanced renewal considerations

Journey towards technical excellence

▪ Afford more flexibility

▪ React to changing circumstances movement to higher/lower LSMs, credit scoring

▪ Signal vs. noise


Summary

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Our future - Looking through the binoculars

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Thriving for digital transformation

What does our world post

Covid look like?

Is traditional motor

coverage still relevant?

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Autonomous Vehicles 4


Autonomous vehicles-technology

Source: Munich Reinsurance America, Inc., 2016,;The Drive, Here’s How the Sensors in Autonomous Cars Work, 03/27/17


Autonomous vehicles-SAE/NHTSA Levels of Automation

Source: NHTSA, “Automated Vehicles for Safety,” accessed 10/19/18

Autonomous Vehicles- 2015–2022 estimated timeline

24 August 2020 25

Source: Favaro FM, Nader N, Eurich SO, Tripp M, Varadaraju N (2017) Examining accident reports involving autonomous vehicles in California. PLoS ONE 12(9): e0184952. https:/ / doi.org/ 10.1371/ journal.pone.0184952

Motor Insurance in the future and Autonomous vehicles


Impacts to society, accelerating mobility ecosystem and

impacts on insurance

Impacts to society

▪ Safety

▪ Mobility

▪ Environment

▪ Ownership → MaaS

▪ Employment

Accelerating Mobility Ecosystem

▪ Regulation and Government

▪ Public Attitude

▪ Technology advancement

▪ Cyber Security

▪ Valuation and Employment

Impacts on insurance

▪ Regulation and

Government

▪ Public Attitude

▪ Technology advancement

▪ Cyber Security

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Source: Deloitte, “The Future of Mobility,” 5-14-19Pictures: Getty Images


Our exciting future

Changin

g I

ndustr

ies

Hotels

AVs could reduce

single-night stays

Parking Garages & Lots

Demand for long-term

parking might decrease

as AVs move

continuously between

various places

Car Dealers

Consumers may be

seeking on-demand

usage or a subscription

model instead of buying a

car

Healthcare

AVs could function as a

diagnostic checkup site

for passengers to receive

simple healthcare

Interior

design/manufacturing

Companies will specialize

in vehicle-interior design –

work mode, lounge mode

24 August 2020

Tashia Bhogal

Q&A

Thank you

Your feedback matters

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Autonomous Vehicles

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Motor Insurance in the future and autonomous vehicles