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In the age of the internet, is it the poor who will be poorer?

Here’s a good question for you: if cars self-drive, what happens to motor insurance?

The reason I ask the question is that I saw this really cool app in Ukraine from Privatbank last year that allows me to drive into the gas station and refuel my car, without having to open the door.

So what you might say?

The so what is that, in the Ukraine, the winter is pretty brutal. 

You’re talking -20 degrees or less.  So getting out of the car is a big deal as it’s way cold.  Therefore, the bank did a deal with the gas fuel providers to create an app where you just drive in and touch the app for €20 of fuel, and the station attendant does the rest.  Let the gas station company employee freeze their butt.  We stay warm and toasty in the car.

So that’s pretty cool, but I replied: so what happens when your car talks to the gas pump?

This is the internet of things age, and the idea of machine-to-machine commerce is near upon us.  So why should I have to think about driving into a gas station and having some human freeze their butt off, when my car and the petrol pump can do all the talking to each other.

In the age of the self-drive car, we should have the self-refuelling car too.

This vision then says that the car drives into the gas station (whilst we still need gas, as mine will probably be a Tesla and using the national grid for power), and tells the pump it needs €20 of fuel.  The pump auto inserts into the gas tank nozzle of the car and hey presto, away you go.

But if my car is intelligent to drive itself and refuel itself, why would it ever be stupid enough to crash?  The car should now know what’s around and be able to navigate any danger, using its smart sensors.

So we now have cars that drive themselves, refuel themselves and never crash.  If the cars never crash, why do we need car insurance?

Car insurance was only provided because us dumb-ass speed freak fast and furious testosterone fuelled males wanted to go around showing off whilst our female counterparts … oh, I’m not going there.

Look, what it comes down to is that if we will soon live in age where everything has sensors and nothing ever crashes, and then the whole nature of insurance changes.  We already have companies that only insure you for when you actually drive, like insurethebox.  These companies put technology into the car to monitor your vehicle usage so that you pay as you go, literally, and these black box based systems are just going to be more and more common.

Take the example of the house insurer I was talking to the other day.  They were trialling a system that would have sensors in all of your windows, would know if a window was open or shut, would know from in-house sensors if you were in or out, and would intellisense what to do.  This is not just for protection from criminal access but, in the example they gave me, would automatically close the window if it knew it was open and you were out of the house.

Alternatively, you could change settings to only close if you were out of the house, and there appeared to be a threat either by forced entry or from an imminent rain shower.

In other words, your house is smart; your car is smart; everything is smart.  In this age of machine-to-machine connectivity and communication, the whole nature of hazard changes from the traditional moral hazard of where you live to the new connectivity hazard of how well your assets are plugged into the network.

That means that connecting your assets to the network will be your method of reducing risk, lowering premiums and ensuring you are better protected.  Unfortunately, it probably also means that those who cannot afford the latest gizmos will be the least protected.  That’s the poor.

The poor will pay higher premiums and have more hazard and exposure than the rich but then, hasn’t it always been this way?

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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  • oblivia

    Insurance against hacking?

  • Machines will still fail, crops will still have a bad year, freak snow events will happen. Insurance has a place in a world governed by Chaos and quantum mechanics.
    I suspect for the IoT to really reach that level of possibility two things will have to happen
    1) Humans will have to find something else to do with their time – unlikely
    2) The economics of insurance and bid / ask on commodities will be managed by machines – likely
    The fact that #2 is likely doesn’t obviate that #1 will become likely. The industrial revolution can / could have replaced most jobs already. Do we need McDonalds staff at a drive thru in an age where machines can build a car?
    Do we need shop assistants in the age of credit cards and barcodes?
    There’s a lot that could be automated that hasn’t been. There was a case I’ll look up, of Ford workers in the 1930s dropping to 6 hours per day and a 4 day week. By the 1940s they were back to 8 hour days and a 5 day week, because their wives were sick of them being at home, and peer pressure from friends who worked longer. Even though the pay was the same.
    We’re a species that would rather feel useful, than be useful and often we can’t see how that affects our decision making in the economy.
    The outcome is either some giant welfare state without a social stigma (possibly like Wall E), or communities of engaged individuals challenging themselves physically and mentally like happy children for life.
    We’re basically going to become the pets of our own machines if you follow that line of thought. Before we get there though, there will be two types of people. People who tell machines what to do, and people who get told what to do by machines.