By: Luke Jones, Published on March 8, 2017 07:45 PM, Last Update on March 13, 2017 10:47 AM
The concept of autonomous vehicles impacting the auto insurance industry is not new. It has been widely predicted that insurers will need to adapt when driverless vehicles start to sell. A new report by Fitch Ratings said on Wednesday that autonomous vehicles will completely transform the car insurance market due to liability reverting to manufacturers in the long term.
It has recently been reported that shared liability between customers/drivers and manufacturers will be a likely scenario as driverless tech moves towards full autonomy over the next decade. However, over the long term (once autonomy is achieved) fitch says manufacturers will assume the majority, if not all, of the liability.
Insurance companies will have to diversify and find profit from other places as opposed to simple consumer-based coverage policies. Fitch predicts that companies that do not adapt will ultimately go out of business. However, the company says the change will happen over many years and the transition could even find new opportunities.
The report was titled Driverless Cars to Transform Motor Insurance. One of the big questions surrounding autonomous vehicles is how liability will be decided.
“As the transition progresses, we expect to see risk coverage shifting from personal motor insurance policies to commercial product liability,” Fitch said in the statement. “Early indications of this trend can be seen in the [United Kingdom’s] regulatory proposals, which would require compulsory motor insurance for self-driving vehicles but would enable the insurer to reclaim costs from the manufacturer if a crash was caused by technology failure.”
Fitch predicts the effects of the prediction will not come for at least a decade. In the meantime, insurance companies have the chance to get their shop in order. Recorded data could be an avenue for companies to explore:
However, Fitch believes it will take at least a decade before these effects become notable and far longer for a full transition. Over the next 10 years, the most notable effect in the insurance industry will be a reduction in claims frequency due to the increased use of semi-autonomous driver aids such as emergency braking systems, the ratings firm predicted. This should put downward pressure on insurance prices, although it will be partly offset by higher repair costs.
“We believe early movers in telematics technology could be at an advantage here as they have already established processes for handling the large datasets that will be needed,” Fitch concluded in the statement.