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Driverless Cars Not A Threat To Auto Insurance Industry Yet

Over the last few years, there have been several reports that have appeared to suggest that the auto insurance industry could be under a major threat from the influx of driverless cars in the near future. Last year KPMG published a report predicting that by the year 2040, the auto insurance industry would have shrunk by a whopping 60%.

This is a mammoth figure, especially given the fact that the automobile industry is expected to continue growing in tandem with global adult population growth and urbanization. Apparently, the KPMG report pegs this number on the expectation that accident frequency could decline by as much as 80%. At that rate, most insurance companies would be looking to offer competitive auto insurance discounts to motorists. It will be a market where premiums are low, which means that companies will be chasing in order to grow the auto insurance pools.

The report notes that with 90% of motor vehicle accidents caused by human error, driverless cars could reduce the number of accidents happening per year, thereby leading to lower loss costs in the personal auto sector. The report predicts that this could lead to a $75 billion drop in the current annual loss costs of $125 billion to about $50 billion.

Now, by looking at those numbers, it would be ideal to say that driverless cars could be a threat to the auto insurance industry in the near future. In addition, it’s not just about the reduction of the number of accidents per year. It’s also about the challenges of drafting those insurance policies.

Currently, it is pretty easy to draft policies and premiums because, as it is noted in the KPMG report, 90% of accidents are due to human error. With...