AAA, Part 3

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Insurance Industry Disruptors

According to McKinsey, digital disruption is cutting through the noise in the insurance sector. Some disruptors in the US home and auto insurance industry include smart homes and smart technology, as well as autonomous drivers.

Smart Homes and Smart Technology

  • Smart technology is turning houses into smart homes and causing disruption to the US home insurance.
  • Products like internet-connected doorbells, security systems, and sensors are altering the landscape for home insurers and their clients.
  • Internet-connected doorbells are increasingly becoming a means to curb burglaries.
  • For instance, a doorbell system has a motion detector that captures videos of persons approaching the door and sends them to the cloud. This smart technology dramatically lowers the chances of home break-ins.
  • Real-time weather data is proving crucial in auto insurance in preparation for natural disasters.
  • Smart technology is disrupting the pricing of risks and premiums chargeable in the home insurance. Insurance policyholders are asking to pay low premiums to reflect increased home security.
  • The presumption is that smart technology in smart homes reduces the probability of risk occurrence, and prices for risks should be lowered.
  • Also, smart technology is forcing home insurers to look for ways to reduce costs and chances of loss as they strive to meet their customers’ demands for lower premiums.
  • Insurance companies are responding to this disruption by using the Internet of Things (IoT) to price risk, minimize prices, and roll out new products.
  • For instance, American Family Insurance is offering its home insurance policyholders a $30 discount and an opportunity to get a 5% deduction in their premiums once the Ring doorbell system is installed in their homes.

Autonomous Drivers

  • Self-driving capabilities are sophisticated, hence disrupting the US auto insurance.
  • It is anticipated that by 2025, most customers shall have entirely embraced self-driving vehicles.
  • Advanced Driver Assistance Systems are positioned to increase, and sensors will become pervasive to driving.
  • Autonomous drivers are causing a shift to mobility on demand. This is disrupting the regular pricing of risks and the determination of premiums.
  • Autonomous vehicles are affecting the amount, type, and buying of automobile insurance. This is because autonomous vehicles are eliminating human error, resulting in fewer claims and less fraud.
  • With self-driving capabilities, clients are demanding increased discounts on premiums to reflect safe driving. This is causing the failure of substantial insurance policies in force.
  • Auto insurers are investing in integrated data-connected sensors and forecast facilities to enhance their preparation for natural disasters. This is because insurers understand that it is natural factors, like weather, rather than human errors that will result in claims in autonomous driving.
  • As the disruption caused by autonomous drivers continue into the future, insurance companies will be forced to expand their insurance ecosystem to comprise both driver-based and vehicle-based systems.

Research Strategy

To find information about disruptors in the US home and auto insurance industry, the research team consulted industry reports, surveys, reliable articles, websites, and expert analyses. Disruptors were defined as things that are significantly changing or are anticipated to alter the operation, expansion, and approach in the US home and auto insurance sector. Based on the criteria and from these resources, smart homes/smart technology, and autonomous drivers were identified as disruptors in the US home and auto insurance industry.

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