By: Luke Jones, Published on September 14, 2016 06:18 PM, Last Update on September 16, 2016 12:50 PM
The impact of autonomous vehicles on the car insurance industry in Ontario and Canada is a hot topic, one we have covered frequently on these pages. It is widely predicted that the global auto insurance market will decline drastically in the wake of driverless cars and their subsequent popularity. The United States, one of the largest insurance markets, is a good study case for showing how autonomy will hit insurance providers.
Aon Benfield, the global reinsurance intermediary and capital advisor of Aon plc, has launched a report that shows that motor insurance pure premiums will decline in the U.S. by more than 40% by the time autonomous vehicles “reach full adoption in 2050”.
The Global Insurance Market Opportunities report, titled Riding the Innovation Wave, was published this week. This is the 11th edition of the report that looks into areas where innovation can spark growth, or indeed decline, in the insurance industry.
In the study, Aon Benfield takes a modest model for autonomous growth, but says even at this rate pure premiums for auto insurance could fall by 20% by 2035, and by 40% by full adoption in 2050. Driverless vehicles are expected to hit the market next year. Initial models will not offer full autonomous, a development that is unlikely to arrive for at least five years.
However, over the next two decades, the popularity of driverless vehicles is expected to increase rapidly. By 2050, most vehicles on the roads will be autonomous, which will have a profound on the global auto insurance market.
“Yet for the insurance industry, these risks also present opportunities for growth if the right combination of capital plus data and analytics can be brought to bear,” the report said. “Even autonomous vehicles may have an insurance upside, as the decline in personal motor premiums could be partially offset by a rise in premiums for the car manufacturers and the technology companies on whose networks the driverless vehicles operate.”
The report predicted an 81% reduction in claims frequency. One of the benefits of autonomous vehicles is that they are expected to make roads safer. Over 90% of all collisions are caused by human error, self-driving vehicles remove this factor. With accidents falling, insurance companies will be able to lower premiums for customers.
Insurance models will also change, with liability moving away from the consumer and onto manufacturers. How insurers adapt to this will be key in the coming years.
“Adoption of autonomous vehicles will of course be affected by many variables, such as regulatory challenges, cost to the consumer, safety, vehicle ownership preferences and the technology itself,” Paul Mang, CEO of Aon Analytics, said in the release. “However, we as an industry need to act quickly to ensure that we have the products available to align to the new paradigm; if we fail to do so, we only invite disruption.”