The financial implications of technological advancements in motor insurance

Abstract

Purpose: The objective of this dissertation is to assess the recent technological advancements that are impacting the automotive industry and their financial implications on motor insurance in Malta. An insight into the local perception towards these technological advancements will also be obtained and recommendations for improvements in the underwriting procedures of motor insurance companies in Malta will be provided. Design: To achieve the objectives of this study, semi-structured interviews were carried out with professionals from the Maltese insurance industry that have a vast background in motor insurance whilst questionnaires were held with members of the public so that the recommendations provided can be backed up by the necessary data. Findings: The findings reveal that there are only a couple of motor insurers that offer the use of telematics and that one of them indicated that their company’s profitability from the motor insurance portfolio has improved due to TBI. Electric vehicles are being rated using traditional underwriting factors and the perception towards autonomous vehicles is that they are very far off into the future. Moreover, data from the questionnaire showed that young drivers are highly attracted towards telematics and a positive perception towards electric vehicles and a negative one towards autonomous vehicles was discovered. Conclusion: The study concludes that technological advancements impacting the motor insurance industry have rendered certain underwriting procedures obsolete. Hence, it is vital for insurance companies to recognise the real risks that they are being exposed to so as to issue policies at a more appropriate price. Value: The study aims at creating awareness of these technological advancements and their financial implications in motor insurance and for insurance companies to recognise the risks that these generate and how to improve their underwriting procedures so as to ensure that they survive in a highly competitive market.