Tech not impacting SA insurance premiums, yet

Cape Town – Even though technological innovations are changing the way things are done in the insurance industry, these advancements are not likely to impact insurance premiums.

According to Mpumelelo Tyikwe, Managing Director at Alexander Forbes Insurance (AFI), in most cases insurers adopt a “wait-and-see” approach to make changes to rates given the history of claims experience.

“No technology is likely to impact insurance premiums suddenly,” he said. Technology has improved risk in the past and will continue to do so. “But don’t expect sudden rate changes because generally rates respond to experience measured over time,” he said.

Technology advances such as 3D printing, drones and self-driving cars are just innovative and different ways of doing things which have been done for a “very long time”, said Caroline Theodosiou, director and litigation and dispute resolution lawyer at corporate law firm, Norton Rose Fulbright.

“The one example is that they use 3D printed parts in aeroplanes. This shows while it is a different way of doing things, it is the same thing we have been doing forever.” We have always been manufacturing parts, we have just been doing it differently, she reiterated.

When it comes to assessing the underwriting risks of driving a vehicle, it is assessed according to what the likely cause of the accident or loss is going to be, she said. Usually the cause of an accident could be a human error or the risk of the car malfunctioning. With self-driving vehicles, the chances of human error causing an accident may reduce.  

“You need to assess these risks and then price them differently. You can only determine how to price them once you have experience from the market,” she said. “From the underwriting perspective, there is a learning curve coming.”

The risk of a self-driven car is different to a risk when it is driven by a person. “It is not something new. We have always assessed a car by looking at what is the cause of an accident, whether it is the driver or the car.” The tools used to assess liability is still the same, said Theodosiou.

There is just a change in perspective in terms of what causes an accident. It does not change the law or how liability is assessed, she said.

“Self-driving cars are not here yet and no one can say how quickly that will change the game,” added Tyikwe. It is likely the introduction will be slow in South Africa. “The vast majority of vehicles out there will not have it and so the full changeover of the national fleet can take 15 years or more.”

Theodosiou said it is likely that insurers are pricing 3D printed parts. When it comes to drones, they require significant regulation and legislation before being implemented in South Africa. In this regard South Africa can benefit from the knowledge learnt by other countries, she said.

“Because we are slightly behind the technology curve, it means we get to learn from the countries which are pricing for these things and we get to learn from the international markets.” A lot of insurers have partnered with firms in the UK and are learning from these global insurers, she said.