Imagine a world driven by autonomous cars. You simply input your destination into an app, fasten your seatbelt and enjoy the ride.

It might be here sooner than you think.

A recent Strategy Meets Action (SMA) report, “Changing Auto Insurance Landscape: Influencers Driving Disruption and Change,” identified four impending disruptions to the auto insurance landscape: shared transportation, connected vehicles, Google- and Apple-connected car apps and autonomous/driverless vehicles.

These technological progressions and integration into the auto world will disrupt business models, products, pricing and customer assumptions while redefining insurance products and services. “When you combine them all, you have game-changing effects because it’s not any one of those—it’s the combination,” says Denise Garth, partner at SMA. “That’s what’s been really different for the industry to grasp.”

Potential Impact

According to SMA, by improving safety and reducing risk, connected car and mobile apps could reduce auto premiums by 25%—a $31.9 billion decrease in direct written premium. Similarly, new features for autonomous and driverless vehicles could reduce accidents by 25%, while the “sharing” economy, with a 28% decrease in licensed drivers aged 16-34 and 80% of vehicles driven 50 miles or less per day, could reduce premiums by 10%.

Collectively, that puts 60% of existing revenue into play, not including other services or products. “What you may have to do is rethink how you’re going to generate revenue differently than in the past,” Garth says. “And that gets down to the bottom line of a different kind of business model.”

While connected vehicle telematics are fairly familiar—think OnStar, in-dash infotainment systems and navigation tools—it’s the potential for more that insurers need to consider. The goal of connected and autonomous vehicles, Garth says, “is to make the vehicle smart and address driving situations with technology.” In turn, that “reduces risk and the potential of an accident or injury,” she explains.

The next step is integrating apps with telematics and usage-based insurance for more cost-effective solutions. Google and Apple announced their respective connected car technologies, Android Auto and CarPlay, last year. The benefit here is data—Garth says independent agents need to think about how clients will be able to “leverage the information coming off these devices to be able to reduce or eliminate risk.”

Meanwhile, the emerging “sharing” economy has marked a larger societal shift from ownership to access. Shared transportation emerged full-force through ride-sharing services like Lyft and Uber, decreasing the number of potential drivers and car owners—especially in the millennial age group. “An increasing number of individuals are moving away from ownership to utilizing these services as a more cost-effective mode,” Garth says.

What It Means

Insurers are already responding to the sharing trend—both USAA and Erie Insurance recently announced relevant coverages—but are they prepared for further advances? “Even with the shared economy, we’ve been slow to respond,” Garth says. “The shared economy has been around now for four years and really taken off in the last two.”

The SMA report recognizes that “these broader and deeper connected capabilities are disrupting a decades-old assumption that vehicles are just transportation to a destination”—and that “time spent in a vehicle can create a broader set of value-added experiences.”

Consider the 2008 economic collapse, when car sales plummeted and vehicle retention increased. “What’s interesting is that the auto companies were in a dire strait, but they also used that period of time to leap-frog their technology for autonomous and driverless vehicles,” Garth points out. “In many ways, we leap-frog a generation of vehicles directly from what we had right in the middle of the crisis to what’s now coming off the lines today.”

The COO of Ford, Mark Fields, remarked at the 2015 Consumer Electronics Show that he views the company as a mobility company rather than an automotive company. “That’s a pretty profound statement because it completely changes your perspective of what are you going to sell and offer to customers,” Garth says—the company is no longer just selling a car, but rather a long set of services designed to maintain a relationship with an individual driver.

SMA’s report cites Guy Fraker, CLO at AutonomouStuff, who says to watch out for declining premiums: “We are more inclined to suggest this degree of impact may take on different forms, such as shifting from a personal lines individual policy to some form of commercial manufacturer’s liability or possibly a new form of warranty.” The versatility of technological products available creates an ideal environment for shifting approaches to insurance—putting each phase of the vehicle life cycle up for grabs.

“The needs are there, but we aren’t responding as adeptly and as quickly as we need to,” Garth says. “Connected cars have already been around for some time, but now they’re going full force ahead with different manufacturers. And major insurers are planning on autonomous vehicles within the next three to five years. It’s not going to take 10 years for people to swap over.”

Morgan Smith is IA assistant editor.