Insurance Satire - The End of the Road for Auto Insurance

Taken from Insurance Journal...

 

How Profit Took a Back Seat and Technology Drove the Business Off a Cliff

The auto insurance industry is dead.

The last non-renewal notice has been sent, the last credit score has been calculated, and the last tee time made by a personal lines marketing rep has been moved up.
It wasn’t just one thing. It was a steady parade of hi-tech gadgets and gimmicks, an ironic turn for an industry banned from whiteboard sessions.
The collapse of the once-proud $100 billion industry is being felt in the city, Hartford, where Stragglers Insurance began it all back in 1897 by writing the first auto policy for an Ohio driver.
“Hartford is the new Detroit,” said Mayor Pedro Seguro on Fox News.
While for years economic and social forces have been putting dents in the industry, technology is what finally caused the engine to seize.
“When technology got behind the wheel, insurance underwriters were relegated not just to the back seat but to the trunk,” said Clive Anwell, Giant Auto Group of America (GAGA). “The industry was taken for a ride by tech and safety geeks.”
First came seat belts, which reduced deaths by 50 percent. Then came air bags, which lopped off another 20 percent from mortality statistics. Make-up mirror windshields and built-in beer coolers with freshness expiration alerts further contributed to the reduction in accidents and insurance sales.
But even though deaths were on the decline, insurers were buoyed by the fact that there were still accidents. They believed that drivers would still buy coverage for repairs and injuries, especially to their pets.
Then along came the one technology that is most responsible for putting the nail in the tire of the insurance industry: the driverless car.
That’s right, cars that drive like teens and seniors have been doing for years. No hands, no eyes, no clue. But these real driverless cars never hit anything. They are, in fact, guaranteed not to be in accidents.
When the first robot-made self-driving cars rolled off the Giggle/GM/GE (3G) assembly line in Flint, Michigan in 2012, Motor Friend named every self-driving model its Car of the Year and other auto trade press agreed.
“With their cute engineering and huge marketing budgets, the driverless car is biggest thing since the Yugo,” said Mindy Mork, editor of Car and Drivel.
Sales were helped by endorsements from Blind American Drivers and Kids4Cars.com.
Today 80 percent of the cars on America’s roads are original self-driving cars or cars that have been re-engineered with chips to be self-driving. The other 20 percent are 30-year old Toyokias with 5 million miles on them on average.
Now 3G is just one of a dozen manufacturers of self-driving cars including Hondai, Toyokia, Fordisney, IBMW, and Volksapple.
Just a few years after the bankruptcies of General Motors and Chrysler, the driverless car industry has put America back on top again in auto manufacturing.
“They didn’t build this new industry; tax breaks did,” proclaimed President Ryan Paul.
Safety and consumer advocates joined forces to put the brakes on the insurance business. Ralph Nader Ginsberg declared the vehicles “safe at every imaginable speed” and vowed to write a book about them as part of his next presidential campaign.
“Even a dummy can drive one of these,” said crash engineers at the Insurance Institute for Highway Robbery.
State and federal transportation departments stopped keeping records of car crashes because the incidences became too few and far between to justify the effort. They have, however, continued to report a rise in deer-on-deer crashes.
With accidents virtually eliminated, and premiums down to pennies, the insurance industry just ran out of gas.

Running on Empty

A 2013 report by the Latin American singing sensation and think tank Celena found that auto premiums accounted for 39 percent of the total premium for U.S. property/casualty insurers in 2011 but by 2013 this had dropped to three percent.
Celena found that auto liability premiums fell from 25 percent of total industry premium to one percent and auto physical damage from 14 percent to -20 percent, meaning insurers owed consumers money.
Warner Buffer saw the tank was nearing empty before others did. That’s why he sold Gecko Insurance several years ago. But even he is surprised at how quickly the entire car insurance business crashed and burned.
“Because I am in Nebraska, I missed how fast it was happening,” said Buffer. “I thought it would take a decade or more before it really caught on but I guess with social media word travels super fast nowadays.”
His Gecko was the first to falter. As technology became faster, Gecko’s promise that 15 minutes would save customers 10 percent, became 12 minutes will save 25 percent, then 5 minutes will save 50 percent. When it got down to one minute, Gecko, now owned by Giggle, began offering “car insurance” for free with the purchase of a self-driving Giggle vehicle.
Only Giggle wasn’t really offering insurance to car owners, it just gave people replacement parts and cars.
After Gecko fell, it wasn’t long before Ahstate, Impressive, State Barn, Hartworm and others began realizing how little they could charge customers whose premiums were now individualized, determined by credit score, shoe size, nose hair length and their own driving habits.
Hartworm was the last to go, kept on life support by its senior citizens insurance program that insured the Baby Boomers who were still prone to getting into accidents. But as these customers died off, there were fewer seniors to take their place and Baby Boomers had used up all of the reserves for themselves anyway.
In addition to technology, politics had some effect. When Congress repealed the health insurance mandate in 2013, it also set a timetable for states to repeal their state auto insurance requirements. Thus in a strange public policy twist, car insurance, which was no longer necessary, was no longer required either.
Insurers also helped drive their own industry into a ditch.
Insurers’ total reliance on predictive modeling led them to write only married tee-totaling actuaries with credit scores above 780, thereby severely limiting their markets.
The industry’s ballyhooing of black boxes also backfired. It turned out that most people really are excellent drivers and accidents are, in fact, almost always the other driver’s fault. As premiums reflected good driving behavior, they shrank to next to nothing.
Also demographic changes have been a factor. Millennials never got the knack for driving for several reasons.
Some teens say tougher teen driving laws took the fun out of driving for them. “What’s up with all the restrictions? I can’t drive with my friends, or at night, or with my cell phone or a beer? Whatever,” said 17-year old Ken Barbie of Peoria, Ill.
Also, up to their eyeballs in college debt, very few youngsters could get approved for a car loan. So they tend to walk, bike, hitchhike or take public transit or just stay home with their parents.
“It’s not something I have ever felt a need for,” said 22-year old Sandy Slacker of Houston when asked if she had a driver’s license. “I mean, I have no intention of ever voting so what do I need a license for?”
Finally, rising gas prices and the sharing economy have also played a part.
No longer does every family have multiple cars; rather people share them like they used to share passing lanes. A dozen families may use a single Chevy Volt.

End to Misery

Some people are glad to see the industry go. Bobby Hunterman, former Texas commissioner who now works at the People’s Insurance of China, said the auto insurance industry deserved to die due to its “disparate treatment” of low-to moderate-income families and its refusal to provide them with free insurance. “Let ‘em drive off into the sunset. Who cares?” he said.
Insurance economist Dr. Robbit Hurtbig, a staunch defender of the industry, seemed surprisingly nonchalant about the demise.
“It’s an industry that never really knew how to turn an underwriting profit,” Hurtbig said. “So maybe it’s just as well it is now out of its misery. RIP.”
But in Hartford the pain is real. A march to mark the passing of the industry had to be canceled due to lack of insurance for the antique cars used in the ceremony.
Mayor Seguro said positive-thinking residents in his city take some comfort in knowing that Detroit has enjoyed a resurgence thanks to the very forces that have now run over the Insurance City, so there may be a future for them down the road, too.
“I believe Hartford’s future is in newspaper publishing,” the Mayor said.
Former Gecko owner Buffer appeared nostalgic. “I do miss the little green guy and his funny accent,” he said. “Maybe he’ll catch on at Lloyd’s.”
Meanwhile, as insurers scramble to find new markets, and some talk of a bailout, they are facing more unsettling news. Production of driverless boats and planes has begun and Congress has its eye on repealing the workers’ compensation mandate still in effect in most states.
As lights were turned off at insurance companies across the country, famed poet Mayah Ungalue suggested that how America handles this loss would reveal much of its character. “I’ve learned that you can tell a lot about a country by the way it handles three things: a rainy day, no insurance and tangled Christmas tree lights,” she wrote.