Market Regulation Seminar May 10, 2017

Automated Vehicles and Their Potential Impact on Insurance

Agenda Key Survey Findings Insurance Considerations Telematics as applicable to Automated Vehicles Questions

50% of Senior Management ranked AV to be Highly Important How important are autonomous vehicles to you when compared to other emerging issues? 50% of Senior Management ranked AV to be Highly Important

Which of the following do you think will be the greatest barriers to adoption of autonomous vehicles? (Please select up to two) Further segmentation of the results show that larger companies believe that regulatory roadblocks are the greatest barriers while medium to small size insurers believe that consumer acceptance will be the greatest hurdle

How do you think autonomous vehicles would significantly affect the insurance industry? (Please select up to two) Which type of laws do you presume will be best poised to address liability for damages related to accidents involving autonomous vehicles? Many also believe that a hybrid of product liability and traditional auto liability may best address AVs Many respondents note that a shift of exposure from PL to CL is inevitable thus insurers will need to innovate to reflect the needs of the market

How would autonomous vehicles likely affect your business model? “Alter current product offerings to better account for the risks involved with autonomous vehicles” “Develop other products to supplement traditional auto insurance” “[We’ll] watch the industry respond” “We already created two new business models / units”

What potential opportunities do you see from autonomous vehicles What potential opportunities do you see from autonomous vehicles? (Please select all that may apply) ISO will be considering potential coverage solutions to help address the changing needs of the insurance market

What is your company doing to prepare for the changing landscape in the insurance industry with respect to autonomous vehicles? (Please select all that may apply)

When do you anticipate autonomous vehicles will have a significant impact on your business?  Within 5 Years 6 – 10 Years 11 – 20 Years Over 20 Years Professional Staff 24% 48% 23% 5% Management 19% 52% Senior Management 13% 40% 37% 10%

Top Strategic and Operational Considerations 1 Unclear determination of fault or other regulatory/legal issues 2 Security issues such as cyber threats and privacy concerns Survey participants considered these strategic and operational considerations to be the top priorities related to automated vehicles 3 Unclear future with respect to pricing, underwriting, claims handing, etc. 4 Voluntary assumption of risk by auto manufacturers

State Financial Responsibility and Compulsory Insurance Laws Owner of a car to carry liability insurance Auto insurance first line of coverage for an injured party

Some Insurance Considerations Gradual adoption of autonomous vehicles Mix of traditional, semi- autonomous and autonomous vehicles on roads Consumers understanding of the difference between various new technologies Traditional vehicles with aftermarket autonomous add-on

Automated Vehicles and Telematics Does UBI for AVs make any sense? Transitional rating Manual driving before 100% fully autonomous vehicles are prevalent Accurate account of manual vs automated usage

Automated Vehicles and Telematics Fully autonomous vehicles in a partially autonomous world Road-specific risk Conditions Driver behavior Premium could potentially differ by route

Questions/Comments?

Millennials and Their Potential Impact on Insurance

Agenda Research & Thought Leadership ISO Millennials Survey Questions

Millennial’s Potential Impact on Insurance View all See all Millennial’s Potential Impact on Insurance As Millennials make up about 40% of the US population, their needs and desires as consumers are likely to have lasting implications on the insurance industry. They’ve typically elected a lifestyle that postponnes many significant life decisions…………….

Research & Thought Leadership moving back home renting in cities auto/home purchases declining taking advantage of ridesharing and homesharing LOVE social media Millennials are either moving back home with their parents or renting in urban areas. According to census data, roughly 40% of millennial men and women were living at home in 2014. In addition, one study found that millennial car purchases declined 30% from 2007-2011. A 2014 survey by Nielson found that 62% of millennials prefer to live in cities, increasing the renters market. The growth rate of US citizens renting increased 600% between 2005 and 2010. In contrast, first time home buyers numbers are at their lowest since 2002. There are many potential reasons for this. It could be their inability to find jobs in a recovering US labor market or their significant student debt. Some attribute the rise and fall of the dot.com bubble coupled with the great recession to a fear of spending beyond ones means This has resulted in diminished investment in debt-inducing goods such as cars and homes and provides a great opportunity to utilize ridesharing and homesharing And of course, social media. I could have written more there but I think you know what im going to say. Social media is extremely influential in the decision making of millennials and portable electronics are important, giving real time updates of anything imaginable. What does this all mean for insurance? We don’t know yet. Its possible that a decrease in home and auto purchases could have significant impacts on personal lines of insurance. Or that ridesharing, homesharing, social media provide unique opportunities for personal lines carriers to meet this niche demand.

What does this all mean for insurance?

ISO Millennials Attitudes and Usage Survey: Goals Research on coverage needs and attitudes was lacking Surveyed ~600 millennials to investigate: coverage needs understanding of insurance contracts and practices consumer attitudes

ISO Millennials Survey: Results 1/3 want to customize coverages

ISO Millennials Survey: Results Many younger millennials plan to obtain insurance in the future 58% plan on obtaining HO insurance, 33% plan on obtaining renters insurance and 40% plan on obtaining auto insurance

ISO Millennials Survey: Results 55% of renters do not have renters insurance Why?

ISO Millennials Survey: Results 22% of millennials who don’t own/lease or drive, are interested in named non-owner coverage

ISO Millennials Survey: Results Younger millennials are more concerned with liability and first party property damage while driving than older millennials

ISO Millennials Survey: Results ~1/3 are satisfied with the understand- ability of their insurance policy

ISO Potential Product Initiatives: Personal Lines Programs Limited personal property coverage attached to Auto Policy Additional Named Nonowner coverage options Updated Renter’s option

Questions/Comments?

Contact Information Meghan Alpert Meghan.Alpert@verisk.com 201-469-2714 Carly Seaman Carly.Seaman@verisk.com 201-469-2708

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