Ratings agency Fitch said driverless cars will revolutionise motor insurance and insurers who fail to adapt to the technology will fade away.
According to the ratings agency, the potential widespread adoption of autonomous vehicles will completely transform the motor insurance sector in the long term as liability shifts towards manufacturers while the traditional risk pool shrinks.
However, Fitch clarified that the shift to driverless cars will take many years and the transition will create new opportunities for insurers, particularly for companies that can take advantage of the projected massive increase in data to price risk more accurately.
“We think it will take at least a decade before these effects become notable and far longer for a full transition,” Fitch said. “Over the next 10 years, the most notable effect in the insurance industry will be a reduction in claims frequency due to the increased use of semi-autonomous driver aids such as emergency braking systems.”
As the transition to self-driving cars progresses, Fitch expects to see risk coverage shifting from personal motor insurance policies to commercial product liability.
Fitch also predicts that the gathering and analysing of driving data from autonomous vehicles will play a key part in the development of insurance products. The agency says underwriters and actuaries will have greater ability to understand and price risks due to recorded data from driverless cars.
“We believe early movers in telematics technology could be at an advantage here as they have already established processes for handling the large datasets that will be needed,” Fitch said.
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