Billionaire bets on a world without car crashes

This article first appeared in The Edge Financial Daily, on February 13, 2018.
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IT has almost become a refrain: just what is Masayoshi Son up to? After ploughing money into companies as diverse as Uber Technologies Inc, office rental specialist WeWork Cos Inc and fintech lender SoFi, the billionaire chief of Softbank Group Corp is in talks to buy as much as a third of Swiss Re, a 155-year-old reinsurance giant.

As ever with “Masa”, this has prompted lots of head-scratching, with some commentators saying he wants access to the insurer’s cash — a la Warren Buffett — and others reckoning that he would like to create “the iTunes of personal finance”. There is also a chance that he just spies an undervalued asset. 
But there is something else people seem to be missing here: Cars. 

While Son’s seemingly random holdings perplex analysts, one consistent theme is his backing of the ride-hailing giants. SoftBank is among the biggest investors in Uber, China’s Didi Chuxing, India’s Ola and Singapore’s Grab. 

And it just so happens that the US$700 billion (RM2.77 billion) motor insurance market is reinsurers’ most important business line, Swiss Re has said. So you can see why it might be useful to make introductions between the insurance folk and the ride-sharing apps, especially as the latter will be at the vanguard of self-driving cars.

The roll-out of autonomous motor vehicles is probably the greatest risk facing the insurers, since people expect it will eliminate most road accidents. As the number of claims declines, so will the primary insurers’ business, meaning there is less to reinsure.

As the industry tries to adjust to the self-driving future, the information gathered by Uber and its ilk could prove extremely valuable. Autonomous cars will spew out as much as four terabytes of data an hour. Getting those data before rivals might give a reinsurer a critical edge, letting it price offerings to primary insurers more accurately.

Much like the black boxes that insurers install in cars to measure on-the-road behaviour, in exchange for lower premiums, Uber already gives drivers automated feedback on whether they are braking too often or accelerating too hard, for instance.

There is the possibility too that SoftBank might be interested in tailoring insurance apps for gig economy workers such as Uber drivers (at least until they are replaced by robots).

From the perspective of Uber, Didi and the rest of the ride-hailers, seeing Swiss Re’s reams of risk data from different geographic regions could help them decide where and how to deploy autonomous fleets.

None of this guarantees that Son really will create something meaningful from bringing together insurance and high-tech. While his Vision Fund website talks loftily about the strength of its “ecosystem”, there is little evidence so far of his portfolio companies collaborating. He has yet to prove that he has a true visionary rather than someone who got lucky with his stake in Alibaba Group Holding Ltd. 

But Swiss Re does not look a bad bet financially. And if SoftBank does seize the chance to do something radical on car insurance, so much the better. — Bloomberg