By J. Bruce Cochrane

If you’re a forward-looking independent agent, over the last few years you’ve been diligently launching your blogs and your Facebook accounts, putting online auto quoting systems in place, and engaging with your customers via a plethora of mobile devices. Good for you. But if you thought that the chief challenge Google posed to your agency was how to get at the top of the search results, let me introduce you to Google’s game-changing driverless cars. Here’s my prediction: By the year 2020, the auto insurance market as we know it will be in rapid free-fall.

Driverless or autonomous vehicles — robot cars for short — are no longer the Flash Gordon fantasy stuff of the future. The future is now. These vehicles are equipped with sophisticated collision avoidance systems that interact with their surroundings using radar, GPS and computer vision. Early test vehicles have logged more than a half million driverless miles without a single accident. Correction. There was reportedly one accident, but it occurred when a human took over the controls.

And then there’s automated traffic law enforcement, with video cameras going up at intersections across the country to ticket stop light runners and government traffic safety programs all designed to modify driving behavior and drive down collisions, bodily injury and deaths. Who could be against this? Everyone wins! Except insurance agents.

We’ll all benefit by safer roadways and the heightened convenience that this new technology enables, but what happens to your agency revenue model when faced with the virtual elimination of risk for one of your cornerstone lines? With collision risk near zero, premiums will plummet and commissions evaporate. At that point it’s likely that auto coverage will be commoditized, a “throw-in” or an “add on,” perhaps purchased with a vehicle as a type of extended warranty? At what point on the premium minimization / commoditization curve is the agent’s role deemed superfluous? What happens when what agents need to charge their customers for the services they deliver costs more than the actual premium?

If you think we’re years away from this reality, think again. Nevada, California, and Florida have recently passed laws permitting driverless cars, and a half-dozen other states are lined up to get on this highway to the future. Google co-founder Sergey Brin predicts that, “driverless cars will be a reality for ordinary people within five years.”

Finally, there’s government intervention. If government can create a medical insurance “exchange”, how far of a stretch is it to envision lawmakers creating an auto insurance exchange? So, the auto insurance market will free fall. The only questions are when, how fast, and how far it will fall? Change happens with blinding speed. Things we thought would “always be” can be erased in the blink of an eye by disruptive innovation. And the most costly disruptions of all occur when things we take for granted stop working. Are independent agents prepared for the kind of reinvention it will take to succeed in the insurance world of tomorrow, which is fast approaching? Stay tuned for Part Two.

About Oak Street Funding

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