The impending arrival of self-driving vehicles may shrink the multibillion auto insurance industry.
According to business advisory firm KPMG (PDF), self-driving vehicles could reduce the incidence of collisions per vehicle by up to 80 percent, which would equate to a 40 percent reduction of auto insurance industry loss costs by 2040.
The report also predicted that as collisions become less common, the severity of each collision will become more costly. The average cost of collision will grow from less than $15,000 to greater than $30,000 by 2040, the report estimated. Though the report concludes that the industry won’t be impacted “significantly” for at least a decade, the landscape will begin to shift dramatically after that.
Opinions on the impact of self-driving cars on the insurance industry vary. Of top insurance executives surveyed, 97 percent said self-driving vehicles will have no impact on their industry by 2020, while 58 percent believe the industry will be impacted by 2025. Leaders also admitted, however, that they weren’t knowledgeable about the technology — only 29 percent claimed to be “very knowledgeable” about self-driving vehicles, while 23 percent claimed little or no knowledge on the topic.
Some, like Deutsche Bank, predict a more aggressive timeline where collision-free vehicles enter the roadways within the next 10 years, with the possibility of obliterating the auto insurance industry within 20 years. Other analysts focus on the liability shift of self-driving vehicles that puts the liability of the less common but more expensive collisions onto the manufacturers, rather than the consumers, resulting in rate increases that offset the reduction of collision incidence.