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Vehicle Insurance in the Era of Autonomous Vehicles

The insurance industry must begin developing strategies for the future of driving

The convergence between mobile technology and automotive innovation is revolutionising the way we drive and commute and this will clearly have a vast impact on the insurance market. In fact, a white paper recently released by KPMG claims that “the conversion to autonomous vehicles could bring about the most significant change to the automobile insurance industry since its inception.”

The Automobile Insurance in the Era of Autonomous Vehicles white paper has analysed the feedback of senior insurance executives, whose companies provide a total of US$85 billion in commercial and private vehicle insurance policies, identifying the most significant trends in the insurance industry. In particular, the paper highlights eight core elements that will drive transformation and create a new standard for the insurance industry: integrity of technology, capability accessibility, legal responsibility, infrastructure availability, regulatory permission, mobility services, data management and consumer adoption.

Significantly, the paper highlights that only 29% of the interviewed executives believe they possess the necessary understanding and knowledge about autonomous vehicles and only 10% claimed to have already begun developing a strategic plan to address the impact of transport innovation.

This gradual adoption of increasingly smarter – and eventually autonomous – vehicles means that there will be a net drop in vehicle accidents, especially considering that 90% of accidents are the result of human mistakes. The removal of human error from the equation could lead to a scenario in which the insurance market shrinks to 40% of its current size. And this, in turn, will severely affect the market, changing its business models and introducing new competitors, further compounding its turbulence and speed of change.

The simplest solution may be for insurance to cover vehicles, rather than drivers, while another possibility envisions a government tax to be imposed on all autonomous vehicles to ensure insurance coverage. It is clear, however, that the insurance market must begin to address this new scenario, develop new strategies and actively transform these upcoming obstacles into new business opportunities.

As always, disruption will be profound and will reward the most innovative solutions. It is time for the industry to don its thinking cap, downshift, step on the gas pedal and seriously address the future of vehicle insurance.

For further information:

  • Octo – What We Do
  • Will 2016 Be a Pivotal Year for the Auto Industry?
  • Telematics Trends for 2016

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