Will driverless cars be good or bad for insurance?

Automated vehicle technology could drastically reduce the number of accidents on our roads, and insurers are at the heart of making that happen. In addition, driverless vehicles could impact society in a number of positive ways – providing modes of transport for those currently unable to drive, tackling congestion, lowering emissions and reforming city planning.

Motor insurance has been compulsory in the UK for more than 80 years, but the industry has only made an underwriting profit once since 1993. We should be welcoming any disruption with open arms – and with insurers leading the charge in driverless, it puts us very much in control of our destiny.

The insurance industry has always supported innovations that help save lives. We’re learning that potential life-saving benefits could come from removing distracted humans from driving. And risks related to cars will still need to be managed, even if the potential liability shifts from driver to manufacturer.

While it’s still too early to know exactly what impact driverless cars will have on our industry, we know that we cannot sit and wait for this change – or any change – to happen. Carriers need to understand what’s coming and develop strategies that help agents serve their clients as the world around us evolves.

We believe we will see a seismic shift from traditional personal lines policies to a future in which personal and commercial lines will blur and combine very closely as car-sharing and ride-sharing begin to change lifestyles.

For the players who are extremely focused on personal [motor] policies and don’t have commercial lines capabilities, without a strategy to adapt, driverless cars represent a long-term existential crisis. For those who have strong commercial lines capabilities – knowledge on how to underwrite and price product liability – and who are dynamic in their thinking, the change driverless cars represents is potentially very good.

Ironshore sheds light on trials and trends of terrorism risk insurance.

Global terrorist activity is an alarming feature of modern society. Our media is awash with news of political skirmishes and terror attacks – just last week in Barcelona and Finland as the most recent examples.

Such social instability has nurtured a highly competitive market for terrorism risk insurance in the US and worldwide. It’s a market that has grown quickly in the US, considering its limited capacity in the wake of the World Trade Center attack in 2001.

In 2002, the Terrorism Risk Insurance Act (TRIA) was signed into federal law by President George W. Bush. It provided a federal “backstop” for insurance claims related to acts of terrorism and encouraged growth in the market by enabling insurers (and the industry) to manage their terrorism risk exposures.

“The introduction of the TRIA backstop encouraged property insurers to return to accepting terrorism risks and this created substantial new capacity with a connected reduction in pricing,” said Quentin Prebble, Global Head of Terrorism at Ironshore. “The ‘stand alone’ market continues to exist as it provides greater assurance to buyers by providing coverage without the requirement of Government certification of the loss/incident in question as an Act of Terrorism.”

The uptake of terrorism insurance has increased internationally as the product has become more affordable. Coverage conditions have broadened to include things like active shooter, threat, non-damage business interruption, limited cyber and denial of access cover. There has also been an increased uptake of political violence coverage as opposed to the more limited conditions of a ‘stand alone’ terrorism policy.

“The main area where there continues to be a coverage shortfall is in the area of nuclear, chemical and biological coverage,” Prebble told Insurance Business. “This is largely the result of there being a very limited reinsurance market for these exposures. The management of the accumulation of risk in urban areas from these exposures in particular remains problematic for insurers.”

There are other difficulties for insurers and brokers in the terrorism insurance space. Reduced pricing and broader coverage, coupled with an increased frequency of loss/incidents have decreased margins significantly, according to Prebble. For brokers, the reductions in pricing have made terrorism risk cover easier to sell but retention of business has become more challenging.

The industry also faces the issue of changing terrorism trends. In the past few years, the media has reported on multiple vehicle attacks involving civilians, a trend that is likely to continue according to Prebble.

“In addition to the increase in the incidence vehicle attacks there is the realistic possibility that drones will feature in attacks in the future. Effective geo-fencing at airports and where there are large gatherings of spectators in particular will be increasingly important in the future,” he said.