Johannesburg - Self-driving cars could in the longer term translate into significantly lower premiums and profits for insurers as the number of accidents declined dramatically, according to Moody’s Investors Service.
A new report titled, “P&C Insurance – Global: Self-driving cars could send auto insurance industry skidding”, released by Moody’s yesterday said self-driving cars were also likely to force automotive insurers to rethink their business models.
Decades away
However, the report said widespread adoption of this technology was decades away, which allowed insurers plenty of time to adapt and accident avoidance technologies in the near term would have a more immediate, positive impact on the insurers.
Jasper Cooper, Moody’s Investors Service assistant vice-president, said the widespread adoption of self-driving cars raised questions of what an automotive insurer’s role would be in a world with far fewer accidents. “Regulators, lawmakers and courts will have to determine how liabilities are shared among insurers, automobile manufacturers, and technology companies,” she said.
Accident avoidance features in vehicles, such as automatic braking, adaptive cruise control and lane departure prevention, are becoming more prevalent and will lead to a lower accident frequency over the next five to 10 years.
Automakers, such as Ford, Nissan and Tesla, have also announced plans to introduce self-driving cars in the next few years, which could initially be optional on luxury vehicles.
Cooper said automotive insurers would also face higher repair costs from embedded cameras and sensors, which were often located in or near bumpers.
But the Moody’s report said that once self-driving cars were mainstream, accident frequency would fall sharply translating into significantly lower premiums and consequently lower profits for automotive insurers.
Industry uncertainty
Moody’s said the industry impact could be dramatic over the very long term given that personal vehicles were the largest property and casualty (P&C) insurance line in many countries, including the US. It said insurers had time to innovate and diversify to stay competitive in a potentially narrower market despite the uncertainties self-driving cars cast over the automotive insurance industry.
Moody’s expects significant industry changes, including consolidation, failure and the potential rise of new entrants as self-driving cars transform the industry.
BUSINESS REPORT