To those outside of the industry, there is a perception that insurance is dull and boring, behind the times technologically — and certainly not a field anyone would consider for a career.

But they are so wrong.

Insurance is a vibrant, challenging industry where the risks and rewards constantly change and the primary focus is to make a positive impact in the lives of those who need assistance following a devastating loss. It is the only career option that offers a 98% chance of employment after college for students who choose risk management or other insurance-related majors.

Related: Insurance is a great career. How can we let college students and graduates know that?

At the recent J.D. Power Insurance Claims Edge conference in Chicago, 10 factors were identified as having a major impact on the auto and property and casualty segments in the next three to five years.

Here is a look at the 10 factors that will affect the business of insurance:

1.  Technology

Technology is a huge driver of customer satisfaction, from how well a driver's phone syncs with an auto's systems to how easy it is for policyholders to contact an insurer online or with a mobile device to get a quote, file a claim or track it throughout the process. A J.D. Power study earlier this year found that how well drivers' technology synced their vehicles was a key determiner of whether or not they would purchase the same car the next time.

Cellphone use continues to play a major role in accidents — accounting for 26% of all motor vehicle crashes in 2014, with 5% of the crashes involving texting and 21% involving people who were talking on the phone. In the five seconds it takes a person to take his eyes off of the road while texting, a car can travel 403 feet at 55 miles per hour — longer than the length of a football field. While most people don't text at this speed, even at 20 miles an hour, a car can still travel about 100 yards.

Despite cellphone use restrictions and texting bans in almost every state, drivers continue to talk and text, and this will be an issue for insurers. Technology will remain a challenge as it continues to change and allow people to do more on mobile devices.

Related: New definition of auto reliability: It's all about the technology

2015 Ford F-150 (Photo: Thinkstock)

2. Aluminum and composite cars

Fuel economy mandates are forcing manufacturers to use more aluminum in cars. By 2025, cars will go from having 343 pounds of aluminum to 550 pounds. Currently, aluminum is used primarily for wheels and engines, but that is increasing to include trunks, hoods, doors and in some cases, the entire body.

Earlier this year, Ford introduced an aluminum version of the F-150 pickup truck. Audi, BMW and Mercedes have also recently introduced aluminum vehicles. This increased use of aluminum poses some interesting issues for insurers in terms of claim severity and repair costs.

The Highway Data Loss Institute conducted three separate analyses of crash data supplied by companies to estimate the effect of aluminum on repair costs and claims. Using large luxury cars from BMW, Mercedes and Audi from 1997 to 2013, they examined the differences between aluminum cars and their steel counterparts.

Mercedes Benz S-Class (Photo: ThinkStock)

The first analysis examined the Audi A8, BMW 7 and the Mercedes Benz S-Class and was based on 67,756 collision claims. They found that overall claim severity for aluminum Audi A8 cars was 14% higher compared to their steel counterparts.

The Audi A8 repairable claims were also 13% higher than comparable vehicles. The odds of an Audi being a total loss were only 1.12 times higher than for the BMW or Mercedes. Salvage rates for all of the cars were under 10%.

(Photo: Thinkstock)

The second analysis compared the Audi A6, BMW 5 series, Mercedes Benz E class and Jaguar XJ for model years 1997-2013 and involved 281,000 collision claims. The analysis compared low component use of aluminum for items like the engine block, hood and fenders; significant usage for the roof, rails, suspension and doors; and high use in vehicles that were almost completely composed of aluminum.

Claims severity was 20% higher for high aluminum content cars compared to 9% for medium-use vehicles. Repairable claims were 19% higher for high-use vehicles versus 5% for medium-use autos. The odds of a vehicle being a total loss were 1.19 to 1.24 times higher depending on the aluminum (high vs. medium) content.

A third analysis compared the BMW 5 series (model years 2004-2010) and conducted a specific point-by-point comparison of side, front and rear impacts for aluminum cars. In front-end collisions, impacts for aluminum vehicles cost 20% more than steel vehicles. There was a 10% decrease in collision costs for rear-impact crashes, but the study organizers said this wasn't statistically significant, nor were the side-impact figures. They concluded that aluminum vehicles had higher collision claim severities than steel cars and the more aluminum used, the higher the claims.

As more body shops become equipped to repair aluminum vehicles, this could drive repair prices down. Currently, there are significant costs for training and set up since aluminum vehicles must be repaired in a facility separate from steel cars because the aluminum particles will break down steel. Aluminum repairs also require different tools and techniques, which add to the costs.

See related story: 3 key things that the insurance industry needs to know about aluminum vehicles

(Photo: Thinkstock)

3. Millennials

Fewer millennials are buying cars, which translates to fewer insurance policies. They have a lot of ride-sharing options or they live close enough to work to take mass transit, walk or ride their bikes. In addition, public transportation apps are changing the way people get around.

Transportation network companies such as Uber, Zipcar and Lyft are springing up in cities around the globe — creating a new transportation option, as well as coverage issues for insurers. Technology is changing the ride options for millions of consumers as smartphone users can access a number of transportation options:

• Car sharing: Consumers reserve cars for daily or hourly use. An example of this is ZipCar.
• Peer-to-peer sharing: Individuals who have cars can be paired with individuals who want to rent them. An example of this is RelayRides.
• Ride sharing: Smartphone app links drivers and riders in real time and the driver receives a small per-mile fee to help cover expenses. An example of this is Carma.
• Ride sourcing: Passengers arrange rides with their smartphones. Examples of this are Lyft and Uber.
• Taxi hailing: Passengers call and find taxis and limos with their smartphones. An example of this is Curb.
• Bike sharing: GPS and RFID are used to track bikes and there is a service charge for trips based on distance. The bikes can be used for commuting, errands and short trips. Examples of this are Citi Bike in New York City and Capital Bikeshare in Washington, D.C.
• Static data: Provides bus schedules and route maps on mobile devices.
• Real-time transit information: GPS helps riders use their smartphones to determine how long they'll have to wait until a bus or train arrives.
• Multi-modal trip planning: Apps pull together information so travelers can find the fastest, cheapest and most convenient mode of transportation. An example of this is RideScout.
• Virtual ticketing: Apps allow riders to purchase their tickets on their smartphones so they don't have to wait in lines or carry cash/

All of these options will have some sort of affect on car insurance, including who is insured, who isn't, who is liable in case of an accident and what coverage is required.

(Photo: Shutterstock)

4. Self-service insurance

Mobile apps are changing the way insurers provide services to their customers who can now purchase insurance online, file a claim or follow their claim as it progresses through the process.

Insurers such as USAA, Allstate and State Farm have apps that allow customers to send photos of claim to an adjuster who guides the policyholders on what pictures to take so they can file the first notice of loss even faster and more completely. The apps can also provide feedback, driving tips and other helpful information to help insureds reduce or manage their risk.

Policyholders are demanding access to insurers and information via their mobile devices on a 24/7 basis, and for insurers, the challenge involves meeting those needs without losing the personal interaction with customers.

(Photo: Thinkstock)

5.  Autonomous cars

Self-driving cars are closer to becoming a reality. Google has been testing vehicles for several years and expects to introduce a working car by 2020-21.

Volvo, Toyota, Mercedes and Audi are all testing autonomous cars as well. Some will be fully autonomous and others will allow drivers to go back and forth between automatic driving and allowing the human driver to have control.

Since Google introduced their prototypes, they have traveled 1.2 million miles on public roads, obtained a top speed of 25 mph and can actually be summoned by a smartphone. Volvo expects to have its cars tested on city streets by ordinary drivers by 2017. But all of this autonomy raises several interesting issues for insurers:

• Will car insurance become obsolete?
• With several manufacturers willing to accept liability for accidents involving their technology, the responsibility shifts away from the driver to product liability for manufacturers, which in turn will affect insurers.
• Given the number of recalls the industry saw last year for air bags, ignition switches and other parts, this opens up areas of subrogation for suppliers whose parts are defective or malfunction for some reason in autonomous vehicles.
• There is increased dependence on telematics to get information from the auto and on a driver's habits. How will the industry protect that information from being hacked and used in a way it shouldn't? The National Association of Insurance Commissioners is forecasting the use of telematics to grow to 20% in the next five years.
• If the driver can switch back and forth from the car being autonomous to the driver being in control, who will be liable if there is an accident — the driver or the car?
• The average car has 40-50 computers running 20 million lines of software code, which is more than a Boeing 787. What would prevent a disgruntled employee from commandeering a car and making it stop, accelerate or turn into oncoming traffic, knowing that the company would be held liable?

Manufacturers need to be aware of the vulnerabilities associated with autonomous cars and consider how to address them. Insurers should consider how they will provide coverage to manage the risks with these vehicles.

See related story: Autonomous vehicles could shrink U.S. personal auto insurance sector by 60%

(Photo: Shutterstock)

6. Product recalls

In 2014, more than 16.5 million vehicles were sold, but it was a record-setting year for recalls with 63.7 million vehicles recalled. The previous record was 30.8 million in 2004.

The top manufacturers with recalls included:

• General Motors — 26.8 million.
• Honda — 9 million.
• Chrysler — 8.8 million.
• Toyota — 5.9 million.
• Ford Motor Co. — 4.7 million.

High-profile recalls:

• GM's ignition switch — 16.2 million.
• Takata airbags — 20.8 million vehicles.
• Electrical issues/stability control/lighting — 4.9 million.
• Brakes — 4.7 million.

With self-driving cars, product liability could significantly increase for manufacturers and their insurers.

See related story: 1.4 million GM cars recalled for fire risk … again

(Photo courtesy of Spike)

7.  New technology

When it comes to new technology for property adjusting, there are a number of exciting options from companies such as Spike, Spex and Livegenic that allow adjusters to use tablets, cellphones and other mobile devices to quickly and effectively adjust losses.

New technologies are particularly important because they will help to mitigate the major talent shortage the industry will experience in the next three years when 25% of claims adjusters and managers retire. This will mean more self-adjusting by insureds who send information to office adjusters. For field adjusters, some of the technologies that will affect how they will collect information include Google Glass, drones and maybe even robots.

(Photo courtesy of Erie Insurance)

Google Glass

Erie Insurance is partnering with Google on a pilot program to test the use of Google Glass in the field.

The company and its adjusters are providing feedback on what works, what the product is missing and how it can be improved with the next generation of Glass. Eight adjusters used Google Glass and found that it allowed them to have important information right before their eyes and policyholders could see that the company was investing in new technology to provide excellent customer service and stay on the cutting edge of an ever-changing industry.

Strategy Meets Action, an insurance strategic advisory firm, published a blog on the impact of wearable devices, drones and other technologies that will affect the industry and encouraged insurers to start experimenting with them, make them part of innovation labs, launch pilot programs and even consider investing in some promising technologies to get them to market faster.

(Photo courtesy of Donan)

Drones

The Association for Unmanned Vehicle Systems International predicts that by 2025, drones will create 100,000 new jobs and generate $82 billion in economic activity. Insurers should approach them from two perspectives — how can we use them and what new business opportunities do they provide in terms of liability coverage, data protection, property damage and other endorsements needed for this new industry?

Drone technology works well for claims inspections, particularly those with high or steep roofs, after a major catastrophe and where adjuster safety could be an issue.

There are also several risks that could threaten the drone industry:

• Negligent or reckless pilots: Those who don't follow the FAA rules, don't have proper training or disregard normal safety guidelines.
• Inconsistent regulations: This could create coverage issues for insurers — such as a drone colliding with a commercial aircraft and causing it to crash.
• Poor enforcement by the Federal Aviation Administration: The industry is growing so fast that there aren't enough regulators to provide oversight, plus the FAA has delayed the expected release of its new drone regulations.
• Vulnerability to a cyber attack: Unencrypted data could be stolen or compromised and hackers could jam or manipulate the controls of a drone, making cyber security part of the risk that needs to be considered by underwriters.
• Privacy infringement: This involves taking pictures over a large area and scaring people who may not recognize a drone.

(Photo courtesy of Donan)

Robots 

Robots can gather information from areas where it's too dangerous to send an adjuster, but timely information is needed especially for cause and origin or subrogation determinations. They can be used for fire investigations and building collapses.

8. Natural disasters 

All things considered, it has been a fairly mild year for catastrophes. Insurers saw their profitability increase 97% in the first quarter of 2015 as compared with the same period in 2014, which saw growth of 95.7%. However, flooding from Hurricane Patricia, heavy rains in North and South Carolina, and wildfires earlier this year have already caused an estimated $24 billion in property losses.  

This chart illustrates the estimated insured property losses in the U.S. for the past 10 years:

(Photo: Thinkstock)

9. Cyber security/fraud

In 2012, insurers wrote $850 million in cyber coverage. By 2014, that figure had risen to $2.5 billion with global losses of $445 billion. Approximately 90% of the cyber premiums are written in the U.S. and Moody's Investors Service predicts that gross written premiums will total $2.75 billion this year in the U.S. alone.

According to Travelers Insurance, 50% of small businesses have been hacked and 60% of the attacks last year struck small to medium-size businesses. There are at least 34,529 known computer incidents each day, and much of the information is sold on the Dark Web. All data has value and some information such as social security numbers or health care records, command higher prices than cell phones or passwords.

Ransomware and social engineering fraud are two newer versions of cyber fraud insurers and businesses should be aware of them when creating a cyber risk management program.  

Related:  Social engineering scams: How hackers are stealing from your clients and Cyber crime: The gift that keeps on giving

(Photo: Shutterstock)

10. Emerging risks

There are a number of emerging risks that insurers would be wise to monitor because of increased threats associated with them. Legalized marijuana, drugged driving and fracking are three of the biggest risks that will affect insurers and require specialized coverage in the coming year.

Drugs — both legal and illegal — are impacting Auto, Property and Workers' Compensation insurance. Approximately 40% of fatally injured drivers tested positive for drugs — almost the same number as those testing positive for alcohol. Testing for drugs is complicated because there are 430 specific drugs or metabolites in the national highway safety fatality database. The National Highway Traffic Safety Administration found that 22% of all drivers in a recent roadside survey tested positive for drugs or some type of medication.

As more states legalize marijuana, it will begin to impact employers as well as multiple insurance lines, and create some conflicts between individual states and insurers because of the lack of federal regulations.

(Photo: Shutterstock)

Fracking

From 1975-2008, Oklahoma had one to three 3.0 magnitude or larger earthquakes in a year. That figure rose dramatically to 40 a year beginning in 2009, when the state allowed fracking. Currently, Oklahoma has more 3.0 or greater earthquakes than California, and this year is on pace to endure close to 1,000 earthquakes. There is a concern that the increase in moderate-size earthquakes could raise the risk of larger ones in the future.

Where the injection of fracking waste water has stopped, so have the earthquakes. Another concern involves large oil storage tanks that were located in Oklahoma after 9/11. So far no damage has been reported by the companies that own the tanks, but businesses around the fracking fields have been advised to update their emergency disaster plans just in case a leak or something worse occurs.

Other factors that could affect the industry include an increase in mergers and acquisitions in insurance and other industries. Consolidation has benefits, but also involves initial expenses as the companies combine resources and workforces, merge work styles and environments, and create fewer options in their respective marketplaces.  

Decaying infrastructure because of aging and poor maintenance will affect property and casualty covers, and possibly involve environmental damage because of aging pipelines that fail.

Sinking cities because of groundwater mismanagement could result in damage to buildings, foundations, substructures, gas pipes and increase the potential for large property and casualty claims.

Risks from extreme weather and wildfires will also continue to increase as their frequency and severity have global implications on supply chains, as well as property and casualty claims.

As insurers and risk managers know, the challenge will be identifying the coverage gaps associated with many of these factors, as well as the opportunities these factors present. One thing is certain, it will never be boring.

Related: What 2016 will bring for the P&C industry