U.S. property/casualty insurance carriers could see significant short-term financial gains from insuring autonomous vehicles before likely long-term personal auto premium declines after the technology becomes more commonplace, according to a new industry report.
Coverage for autonomous vehicles will bring $81 billion in new premiums to the U.S auto insurance industry over the next eight years, the Accenture/Stevens Institute of Technology found. What’s more, risks related to cybersecurity, software and hardware, and the need for additional public infrastructure coverage will drive those gains, the report noted.
“Insurers are bracing for long-term declines in auto premiums as new and safer autonomous vehicles gain adoption, John Cusano, an Accenture senior managing director and global head of the company’s insurance practice, said in prepared remarks. “However, our research suggests that auto premiums will increase before they decline on this trend, so insurers that can navigate the changing technology environment could win market share.”
Stevens Institute of Technology reached that $81 billion figure by developing several models to evaluate the impact of autonomous technology in insurance, and then applying them to different scenarios and insurance products, using parameters set by Accenture’s Insurance and Connected Transport teams.
The main findings:
- Cybersecurity, product (software and hardware) liability and public infrastructure insurance for autonomous vehicles could reach a total of $81 billion by 2025.
- Premium growth will come before a likely decline in industry revenue beginning in 2026. With that in mind, as roads get safer and policies shift from consumers to autonomous vehicle manufactures and other service providers, insurers will see reduced demand for personal insurance.
- Premium declines will stem from safer roads and the shift of policies from consumers to autonomous vehicle manufactures and other service providers.
New business lines that will evolve from autonomous vehicle technology will include, according to the report: cyber security (protection against remote vehicle theft, unauthorized entry, etc..); product liability for sensors and software algorithms; and public infrastructure, which would cover items including cloud server systems that manage traffic and road networks, plus the failure of external sensors and signals.
The report estimates that auto insurance premiums could drop by as much as $25 billion by 2035, covering 12.5 percent of the total market, thanks to the rollout and likely expanded use of autonomous vehicles.
Autonomous Vehicles Coming Gradually
The adoption of autonomous vehicles will be in multiple stages, according to the report, moving over time to partial autonomy and the full autonomy with option for a human to take over driving if needed, to full autonomy where humans will just ride along without a steering wheel.
Insurers who act now to explore those opportunities will be able to maximize their gains in the new and evolving market paradigm. Carriers that want to get ahead of the competition now should develop their expertise in big data and analytics, start the actuarial and modeling process now for autonomous vehicles and explore corporate partnerships, according to the report.
Insurers who mostly depend on revenue from personal automobile insurance policies may need to explore new business models, such as transforming into large commercial carriers that write policies on a small number of super-large risks, the report argues.
“Thousands of auto insurers will be replaced by a much smaller number of commercial carriers,” according to the report. “For the remaining players, this will entail major changes in areas including product development, policy administration and distribution.”
The full report is called “Insuring Autonomous Vehicles: An $81 Billion Opportunity Between Now and 2025.”
Source: Accenture, Stevens Institute of Technology.