HUK-COBURG: Innovation and Change in the Automotive Insurance Market using Artificial Intelligence (AI) and Telematics

Abstract

The automotive insurance market is undergoing fundamental changes with the advent of novel Insurance Technology (InsurTec), mobility initiatives such as autonomous vehicles, car sharing and subscription models for new cars, and the emergence of new forms of insurance such as short-term cover, pay per use and advanced analytics, which can encourage drivers to improve their driving behaviour. The traditional forms of insurance and information exchange are being augmented or replaced by behavioural insurance that uses telematics and Artificial Intelligence (AI) to analyse and interpret the wealth of big data that is generated from car driving behaviour. This case study discusses the changes and innovations in HUK-COBURG’s operations and business model, including risk profiling, evaluation of driver behaviour, data analytics, ethical considerations of behavioural insurance, the business case for telematics and HUK’s implementation philosophy for new technology and AI. The main conclusions are that incumbent insurance firms must respond to new competitors, market changes and AI technology by embracing digital transformation and developing new forms of insurance that exploit big data and AI capabilities. In behavioural risk the nature of the product is changing from a static product to a dynamic relationship where value is co-created between the customer and the insurance firm. The implementation challenges are outlined, and the new skills required in areas such as data science, digital and organisational transformation, and analytics capabilities are described.