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From Vizuri's Experts

Insurers Faced with Hard and Fast Decisions as Tesla Teases Self-Driving Cars

Editor's note: With the announcement that Tesla is offering insurance products for its vehicles, the importance of agility and accuracy when it comes to assessing risk cannot be understated. Insurers should take this as their cue to merge their expertise and experience with decision-making that matches the speed of innovation.

They say that change doesn’t happen overnight, but for Tesla, maybe it does. While you sleep, your car may be learning how to drive itself.

The Washington Post reported: “Tesla is racing to be first to the market with a self-driving car made for the masses, promising to send as soon as this year an over-the-air software update that will turn hundreds of thousands of its vehicles into robo-cars. But its push to put untested and unregulated features in the hands of its drivers is putting industry executives and regulators on edge.”

Why untested, and, perhaps most importantly, why unregulated? The National Highway Traffic Safety Administration (NHTSA) claims that existing regulations suffice:

“In response to concerns the agency hadn’t taken an aggressive enough role in regulating self-driving technology, NHTSA said it had ‘broad authority’ over safety-related defects through existing federal motor vehicle regulations. The agency pointed to its authority to force recalls in cases where vehicles pose unreasonable risks, for example. The agency said it would assess Tesla’s vehicles according to its normal protocol once the technology became available.”

As a technology solutions provider, we understand too well the feeling of wanting to stay on the leading edge. But the announcement of Tesla’s proximity to creating the first truly self-driving vehicles has been met with not only anticipation, but also uncertainty. No one knows when this technology will hit the market—but when it does, it could feel very sudden.

Auto insurers have been preparing for the potential of autonomous vehicles, but if there is anything this announcement teaches, it is that the pace of innovation cannot always be exactly predicted, timed, regulated, or controlled, especially since a single global software update could potentially turn a normal car into an autonomous one overnight. Industry innovation equals change and change equals risk passed on to insurance companies. Now, new risks can appear without warning.

Since insurers must assess that risk as comprehensively as possible in the face of countless unknowns, what can they turn to that will be flexible and fast when it comes to processing rapidly changing decisions, risk variables, and findings on the reality of risk?

Through our experience with insurers for whom this is a special priority, we have found success with two-pronged automation that uses case management decision processing and microservices architecture that matches the speed of innovation with an equally innovative approach.

Automation for decision-making

For more agile and less burdensome decision-making, we recommend case management with a rules engine at its core that incorporates symbolic AI into the decisions process. This facilitates not only automated decisions, but also full transparency into the decisions process, unlike a machine learning approach. Make sure to check out the resources linked above to learn a little more.

This case management approach accepts that the only constant is change. Instead of the underwriting process moving between defined start and end points via a predetermined path as seen in traditional business process management, case management allows the decision to move between non-linear points, gathering information, and eventually arriving to a decision or recommendation based on the available information.

The rules engine automatically applies information to an insurer’s risk thresholds so that the end decision has taken into consideration both new information and established underwriting rules.

In conjunction with case management, insurers can apply established business rules and risk thresholds to new autonomous vehicle technology. The ability to pivot quickly and seamlessly in uncharted waters will determine who sinks and who swims. Case management with automated decision-making can make insurers more agile and comfortable with rapid changes.

When Tesla flips the switch on automated cars, our approach will make the most of available information for the most informed decision that adheres to the risk tolerances of the insurer.

Automation for infrastructure

Another change that insurers have struggled with is migration to the cloud, and while we are tackling rapid changes, we shouldn’t forget innovation happening in IT infrastructure. Infrastructure, like hybrid cloud, is ever-changing and often proprietary.

Hybrid cloud provides both a great example of and an urgent call for smart, future-proof modernization strategies. To flexibly migrate to the cloud, we promote a modern microservices architecture that also easily integrates into legacy systems.

Overall, insurers that use microservices and case management will be more agile when Tesla comes out with fully self-driving vehicle technology. But there is also a lesson here: whoever can most ably face the speed of future innovation will lead the pack. This includes Tesla’s self-driving cars, but also extends to other future developments in vehicle technology, customer expectations, and the IT infrastructure that supports insurers’ ability to deliver the right product fastest.

Our approach is about not just tomorrow’s self-driving cars. It is about future-proofing insurers with the realization that innovation is happening more rapidly and frequently than ever before.

If you are interested in our approach, we recommend taking a look at the modernization handbook we created especially for insurance companies. Download it now and read the chapter on case management for a view of how microservices work and feed into ad hoc decision processes.

Ben-Johan van der Walt

Ben-Johan van der Walt is a Software Architect/Engineer with over 20 years of experience leading successful projects of various sizes and scopes. He is a seasoned professional, with outstanding project planning, execution, mentoring and support skills. He is always ready for a challenge.