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February 6, 2016

Future Changes of Insurance— How It Will Affect Your Business?

Technology and society seem to be evolving at an ever-accelerating pace.  Just consider the following:  Twenty years ago few people had cell phones; the internet was used only by academics and the only way you could send a document electronically was by facsimile machine, which required a person to load the document page by page for several minutes in order to transmit it.
Today, almost everyone has a smart phone, and many people have two or more cellphones.  The internet has become an essential part of life for everyone and every business.  And the facsimile machine (aka: Fax machine)—although still in use—is fast becoming obsolete as it is easily surpassed in efficiency by copying and emailing documents in a matter of seconds.
Who could have foreseen how rapidly technology would change our world?  As fast as things are changing, there are indications that they will evolve even more quickly in the future.  Keeping this in mind, let’s take a look at how things might change in the world of insurance.  If you can anticipate the changes that are coming with insurance, you can save yourself and your business a lot of time and money.

Automobiles
There are many changes occurring now that will change the way automobile insurance markets operate in the future.  Physically, cars are getting more expensive while at the same time they are getting lighter.  The expense of installing many new technological innovations like GPS and back-up cameras into vehicles drives the cost of the cars up.  In addition, in order to make cars more fuel efficient, manufacturers are using more aluminum in place of steel in many cars.  This can lower the weight of the car by several hundred pounds, enabling the engine to work more efficiently and return higher gas mileage.  But the extra electronics and the cars built of aluminum also mean that when a vehicle is damaged in an accident the cost to repair it is higher.  Recent studies by a number of manufacturers and insurance companies indicate that switching to aluminum costs upwards of 20 percent more when the vehicles are involved in an accident.  Rates will have to increase to offset the increased accident cost.
Another factor that will impact insurance rates is “autonomous” or “self-driving” cars.  These cars are also more expensive, but the real question is who is responsible when an accident occurs while the vehicle is driving itself?  Typically, the driver of the vehicle is held responsible for damage that occurs when they are driving the car.  Who is responsible for damage when there is no driver?  Who pays for the loss if the accident occurs as a result of a software problem or a breakdown of the self-driving vehicle?  The insurance industry has not yet determined how this will work.  The issue will get more complicated when an autonomous company-owned vehicle is involved in an accident while being driven by an employee.  There are a number of issues that will need to be addressed with the widespread introduction of these new vehicles.

New Technology
There are a number of issues that arise because of new technology.  Drones have become the hottest new “toy” for many individuals and businesses.  They provide a fun and inexpensive way to get “airborne” to take pictures, survey areas from the air and even make package deliveries, as Amazon is now attempting.  But how are drones being insured?  Although insurance companies have jumped on the bandwagon and offer a number of “drone-specific” policies, many drone owners do not currently have coverage for their drones.  Some are under the mistaken impression that their liability for damages or injuries from drones is covered by their current business or homeowner policies.  Unfortunately, this is not accurate as most policies exclude coverage for “aircraft” and drones are considered by most to be aircraft.  Drone owners need to take special steps to insure their drones and activities related to them.
Cyber insurance is also necessary because computer hackers have become very active in recent years.  Although we have heard of the cyber attacks on large companies like Target and Home Depot, many hackers are focusing their efforts on small businesses.  Travelers Insurance states that 50 percent of small businesses have been subjected to a hacking incident.  As more business entities make use of the Internet and the Cloud, they will be even more exposed to cyber warfare.  Business owners need to review their electronic activities and determine what steps they should take in order to protect their business, including buying insurance coverage.
There are many changes occurring in the insurance market today, and the changes are evolving more quickly each day.  In order for a business to stay ahead of the game, it needs to have an aggressive and comprehensive insurance program.  Finding a broker who stays up to date on changes in the industry and with insurance coverage is essential for success.  Western Growers Insurance Services represents many of the best insurance providers the market and can assist members with any of their insurance needs.