July 5, 2017 by Staff
By the year 2050, autonomous vehicles could cause the car insurance market to shrink by 71% and change the type of coverage that’s most commonly sold, according to a recently published report from KPMG.
That would result in a loss of US$137 billion from the current auto insurance marketplace, which produces US$247 billion in premiums, states the report, which is solely based on a study of the U.S. marketplace.
From the archives: How driverless cars will change insurance
KPMG’s predictions are based on the consulting firm extending its actuarial model by 10 years. The report suggests that the technology behind driverless cars is developing more quickly than previously expected, which will cause steeper declines in car insurance. “New business models bring about a decade or so of a ‘chaotic middle’ as insurers adjust their strategies and operations as autonomous vehicle technologies significantly deplete the need for personal auto insurance,” says Jerry Albright, principal in KPMG’s actuarial and insurance risk practice, in a press release.
This is because the new extended actuarial model sees a 90% reduction in auto accidents by 2050, as pickup of driverless cars accelerates and results in fewer claims. However, the press release says, this will be offset by increased repair costs and by vehicle manufacturers assuming more risk and associated liability.
From the archives: Autonomous vehicles: picking whom to injure
The change in the type of insurance drivers need for these particular vehicles will also provide car manufacturers an opportunity to sell insurance directly to drivers, thereby taking market share away from traditional insurers, according to the report.
In addition, by 2024, the majority of urban driving will be done on-demand rather than with a personal vehicle, leading to an increase in demand for fleet coverage rather than personal auto insurance. “As a result, products liability coverage and other new types of insurance are expected to pay a greater share of claims resulting from roadway accidents,” says a KPMG press release.
This story was originally published by Canadian Insurance Top Broker.