Autonomous Cars Won't Impact Insurers Anytime Soon
Technologies like vehicle monitoring are impacting auto insurers today, but fully driverless cars are too far away to create problems.
Brett Horn: Most people think of auto insurance as a very mature, a very staid industry, and to some extent that's true. But technology has and will continue to play a major role in determining competitive dynamics in this space. The rise of the Internet allowed Geico and Progressive to take a lead in the scalable direct channel and allowed both those firms to develop narrow moats around their business. It also gives them greater growth prospects going forward given the ongoing shift toward that channel.
We think the next leg of technological innovation will come from telematics. Telematics allows insurers to directly observe driving behavior and exponentially increases the amount of data that they have to underwrite with. Progressive, we believe, through its pioneering efforts in this area, has an opportunity lock up a disproportionate share of safe and very profitable drivers. On the flip side, Geico has largely ignored telematics, and we think it runs a risk of adverse selection as a result if it waits too long.
Brett Horn does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.