How will changes in auto affect the insurance industry? A Q+A with Direct Line’s Dan Freedman

“The winners in this changing landscape will be those that get the customer experience right” says Direct Line’s Dan Freedman

We had the chance to chat all things auto at the MRS Automotive Research Conference with a panel of experts including Direct Line’s Director of Motor Development, Dan Freedman. We caught up with him to hear his views on how changes in automotive are affecting the insurance industry.

Auto conference

Dan Freedman, Direct Line (centre left) with Orlando Woods, FreshMinds, Andreas Strasser, Volvo and Bianca Abulafia, FreshMinds (left to right).

Q: Dan, thank you very much for joining us today. Can you tell us how changes in the automotive industry have historically affected the world of motor insurance? Is this beginning to change?

 A: Whilst the automotive industry has always been centred on the next model, the motor insurance industry has to focus on the whole car parc, which includes cars that are up to 15 years old. As a result, new embedded car technologies take up to 10 years to fully impact the insurance industry. This has historically given insurers time to assess and respond to new automotive innovations.

However, as innovations increasingly move from hardware to software, the pace of roll out into the car parc increases (e.g. Tesla Auto-pilot OTA update) and I expect we’ll see the pace at which insurers need to respond to new in car technologies accelerate too.

As an aside, it’s worth also considering that where technologies can be deployed as an aftermarket fitted solution, e.g. telematics black boxes, insurers have been able to drive innovation at a faster pace than the automotive industry. For example, UBI and Roadside diagnostics services. These are two areas of innovation that the insurance industry and, in particular, Direct Line Group are leading on.

Q: You mentioned innovation. What are the key automotive trends that are driving innovation in motor insurance?

A: The first is telematics, which is a really exciting area of opportunity for us. Direct Line has been at the forefront of telematics for a number of years, using the data to bring our customers better and fairer rates. But where telematics gets really exciting for insurers is having the ability to use that data to shape new products and services and to predict when individual customers might be ready to adopt these.

The other big trend for us is autonomous driving. Again this is a hugely exciting development but it’s one that throws up a number of significant challenges for insurers. As we start to see a reduction in the number of accidents on the roads, how do we evolve our business model? And do we start to rethink who and indeed what we insure?

With these fundamental challenges in play we’ll see insurers considering new routes to market, alternative distribution and pricing models. Plus we anticipate a rise in partnerships with traditional automotive manufacturers as well as with new and emerging challengers.

Q: You mentioned partnerships between automotive manufacturers and motor insurance providers being a key area for the future. What kind of partnerships do you see emerging?

A: I see huge potential for collaboration between OEMs and insurance providers in sharing data. In fact, I don’t see this being optional; when driverless cars become mainstream, OEMs and motor insurers will have to share data to be able to understand how these exciting technologies reduce risk and to establish liabilities when autonomous cars crash.

Direct Line Group is building relationships with OEMs to make this a reality. And as an industry, through initiatives such as the Automated Driving Insurance Group, we are looking to influence standards and regulations to ensure that vehicles with these new technologies retain access to competitive and relevant insurance products.

Q: Finally with the automotive landscape undergoing such fundamental changes which brands do you think will ultimately reign supreme?

A: For me, the winners will be those that get the customer experience for these new products and services right. I think we all collectively have work to do here. Delivering a great customer experience is the key to success for any business and the automotive industries are no exception.

Want to find out more about the future of automotive?  Stay tuned for our interview with Volvo’s Head of Automotive Research and Strategy, Andreas Strasser, coming next week.