Author: Chris Boggs

A futurist I am not. And I can prove it.

When I was about 10, I saw my first car phone. I remember telling my dad they would never catch on. But to be fair, the gentleman had to contact an operator to gain access to a landline before a call could be made. If technology did not improve beyond that, then I think I would have been right.

I, like most of you, must wait to see what is going to happen before I can make a solid prediction about what is coming. And because I am required to wait, I'm sometimes behind. However, I have tried to be ahead of the curve on a few occasions; a couple example articles include:

• The Pimping Economy; and
• Who Is Liable When No One Is Driving?

Despite my relative ignorance of the future, I think I must take the opportunity to pontificate on the future of this industry. “Things" are changing too quickly for us to sit and wait for the future to get here. We are now required to get out ahead of this industry.

What will the industry look like in 10, 20 or 30 years? Basically, can our wildest imaginations even comprehend what insurance will look like for the next two or three generations of insurance professionals? I don't know, but let's give it a try.

By 2050…

Auto insurance will not exist. Every vehicle will be autonomous – removing human actions, reactions and errors. Without humans in control, no party simply riding in the vehicle can be held legally liable for any accident that might occur. Any injury or damage caused by an autonomous vehicle will be classed a products liability claim and pursued against a party other than the passengers of the vehicle (i.e. the manufacturer, programmer or even municipality). Part of this future includes:

• Governmental involvement: The government will enact regulations that disallows the use of vehicles in any mode other than fully autonomous. Like in Back to the Future 3, any car not already fully autonomous must be retrofitted for compliance (yes, I know in the movie they were flying cars).
• Specialized driving facilities: Men (and some women) love their cars. They purchase classic cars and fast cars to drive them, not to have the car take them for a ride. But because of government intervention, the only place these cars will be allowed are on “private" roads and tracks. Waivers and releases will be required before use of these tracks is allowed; and these may be mutual waivers between and among drivers. Will the current auto insurance model work in these situations? Not likely as there is a specific “racing facility" exclusion in the current PAP. Also, underwriting and pricing will be different because of the smaller number of homogeneous exposures.

The need for aviation liability and aircraft hull coverage will increase. In fact, this will be the new auto market where GEICO, Progressive and others can save you hundreds of dollars on your aircraft liability coverage. Why is this the new auto market? Because cars will be able to fly, but they will not have full auto pilot mode because there are too many variables in a three-dimensional space such as is found in flight. This means humans will be in control at least some of the time. And with a much larger number of craft in the sky, accidents are more likely than now.

Artificial Intelligence (AI) will create the need for claims consultants. Most claims (maybe as much as 90 percent) will be handled by AI rather than humans; because of this the claim description will become one of the most important facets of the claims process. To garner coverage, the claim description will have to be written in such a way to trigger coverage. This means the loss description will have to be written by someone who understands the policy language and can describe the loss in such a way that it fits within the parameters of coverage. Enter the claims consultant who can trigger coverage.

Agent involvement and needed expertise will necessarily increase because the industry will, antithetically, become more complicated for consumers. Berkshire Hathaway has opened the door to a new consumerism with its new THREE policy. Although industry opinions vary regarding this new product, the brilliance of Buffett's attempt is that consumers will have the power to understand the coverages they buy. Why will this increase agency involvement? Because if/when the THREE policy concept takes hold, the consumer will push for such a product.

“OK, Boggs, I still don't see how this will trigger an increase in the need for agency involvement." Fair enough, allow me to expound on this thought. Consumers will require a THREE-type policy, one easily understood; carriers will each develop their own version. The result, over 200 different policy forms with no standardization or precedence upon which to judge which form is better than the other.

Are you beginning to see it? Consumers will have the ability to easily read and understand the policies, but they will not want to take the time to compare all the forms. The agent will be relied upon the recommend the best coverage. While this is supposed to be the agent's job now, the insured can't really check behind them in the modern market. In the future market the consumer can check on the agent. Agents will have to become form and coverage experts (what a concept) or risk some major errors and omissions (E&O) problems.

It's amazing to think that the future will be about coverage rather than price. How ironic!

Workers' compensation will be unrecognizable compared to today. Although workers' compensation (WC) has fulfilled its intended purpose for over 100 years, WC will cease to exist in its current form. The differences will be:

1. Workers' compensation will be nationalized; no more state-to-state differences.
   
2. Medical cost coverage will become part of health insurance guaranteeing 24-hour protection for all workers.
3. Employers will be required to provide medical coverage for all employees (no number thresholds in any state). However, only 75% of the employee's health/injury premium will be paid by the employer; employees will share in the cost.
4. Like the current health insurance system, payment of medical costs for work-related injury will be subject to deductibles and possibly co-pays. The employer will be responsible for most of these out-of-pocket costs. An endorsement can be purchased to cover these additional costs.
5. Indemnity benefits for lost wages will be an optional coverage. Employers can purchase indemnity benefits coverage or self-insure the exposure.
6. Disability benefits will be an endorsement to the optional indemnity benefits coverage or a stand-alone coverage.
7. Death benefits will be replaced by double-indemnity riders on the employee's life insurance policy.
8. Employers' liability (EL) will be unnecessary because the health insurance coverage extends to the family for consequential injury claims. Loss of consortium claims will be paid by the optional disability benefits coverage. Further, since it's 24-hour coverage there is no need for dual capacity protection. Lastly, the third-party-over protection provided by the EL will be managed by an endorsement to the commercial general liability policy.
9. The “employee vs. independent contractor" debate will end because everyone will be required to have a health/injury policy.
10. For rating purposes, there will only be six class codes: 1) construction; 2) manufacturing; 3) transportation; 4) administrative; 5) retail and service; and 6) other.

A result of this change is that the overall cost to the employer drops. Why? Because without workers' compensation, there are no court battles over whether the injury occurred in the course and scope of employment. When an injury occurs, the medical policy pays. An unintended consequence is that many television stations close due to lack of revenue because the work comp attorneys stop advertising.

Cyber coverage will be unobtainable at any price. Protections promised by the blockchain and any future encrypted cyber storage “facilities" prove ineffective against hackers. Norton, McAfee, Avast, Bitdefender and others give up trying to defend against hackers and become hacker “mobs" promising to protect you if you pay them, otherwise, “well, you don't want to know the 'otherwise.'"

These “mob hackers" will become the only “insurance" anyone can get. And these organized mob hackers are so ruthless, no one, not even the Russians, is willing to step into their territory. Because they are the best hackers, they can find the person or persons responsible and make them “disappear" forever (figuratively and literally). Capone would be proud.

The need for animal liability coverage will increase beyond farmers and ranchers to homeowners. For various reasons the use of gas-powered lawn equipment is eventually banned. Electric push mowers aren't powerful enough to cut thick grass and riding electric mowers are still quite expensive. To keep the lawn under control, homeowners purchase goats and other grass-eating animals. These animals can be quite troublesome when they escape the confines of the yard; and the homeowner is responsible for any damage they do.

What kind of changes do you foresee? Tell me about them and I will put them in a follow-up article. Maybe we can change the industry faster than it is used to changing.

Last Updated: June 7, 2019