Self-driving cars will send insurance premiums plummeting
Posted by Unknown
on Thursday, 14 January 2016
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Self-driving cars will send insurance premiums plummeting
 Self-driving cars could help consumers by ushering in an era of faster
commutes, safer travel, and greater independence. But the greatest
benefit may be for their wallets. They'll enjoy far cheaper car insurance premiums.
A white paper released by consulting firm KPMG predicts big savings for car owners when autonomous cars are mainstays on American roads. In equal turn, the white paper projects big headaches for insurance
companies. As accident rates plummet, the personal car insurance
business could shrink by more than 60 percent from its current size.
"The elimination of excess underwriting capacity could bring severe
market issues," KPMG said. "Our belief is that the disruption to
insurance carriers will be profound, with a select set of winners and a
broad set of losers."
The findings are noteworthy because the insurance industry's role in a self-driving car
era has been a big question mark, both in how liability for autonomous
accidents is determined and how the industry adjusts to an upended
business model. Sixty-eight percent of insurance executives polled by
the firm believe the legal system will largely sort out those questions –
but KPMG says those executives are going to be caught flat-footed in
the interim by a transformation that's quickly approaching.
Early-adopting consumers will accelerate their purchases of cars with
preliminary autonomous features as early as 2017 and the impact will be
felt in the insurance company. Already, front-end accidents have dropped
7 to 15 percent in vehicles equipped with collision-avoidance systems,
according to Insurance Institute for Highway Safety statistics. That trend will continue.
Over the next 25 years, there will be an 80 percent reduction in
accident frequency, resulting in a mere 0.009 incidents per vehicle on
an annual basis, KPMG projects. That will result in a "new normal" in
the insurance industry that will arrive sooner than many anticipate.
The paper's authors project all new cars
sold will be autonomous within the next 10 years. In one of the more
interesting findings, they also report that non-autonomous cars will be
capable of being retrofitted with autonomous features by 2025. A quick
fleet conversion would seem to allay at least a few of the concerns some
transportation officials have about how autonomous cars interact with
human-controlled ones on US roads.
As vehicles make more decisions, the potential liability of software
developers and manufacturers will increase. That's a potential area of
growth insurance companies. Commercial fleet companies, in particular,
may need new types of coverage. But overall, KPMG says loss costs will
drop from approximately $120 billion per year today to less than $50
billion per year by 2040. Those savings will be passed along to
consumers.
"It would be naïve to think that premiums will stay the same while losses drop," the paper said.
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Labels: Insurance
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