Driverless cars could wipe out US$20bn in premiums

Driverless cars could wipe out US$20bn in premiums | Insurance Business

Driverless cars could wipe out US$20bn in premiums
With driverless cars soon to dominate the roads, Craig Ridley, managing director of Accenture Financial Services, said this could have a surprisingly dramatic impact on a diverse range of industries, it has been reported.

The transition to autonomous vehicles is expected to not just transform how people think about transportation, but will also disrupt business models across multiple industries, including traditional insurance models, Asia-Pacific Banking & Finance (AB+F) reported.

Despite the rapid progress of driverless technology, the impact of this transition on the banking and financial services sector has been largely left out of the equation, the report said.

“Recent research by Swiss Re and HERE indicates driverless technologies could wipe US$20 billion off insurance premiums globally by 2020,” said Ridley.

“What’s more, companies like Volvo are already assuring their customers they will accept full liability for the actions of their autonomous vehicles when they officially go to market resulting in customers not requiring car insurance in the future.

“For generalist banks, the impact of driverless cars will reverberate across insurance, real estate, loans, capital works funding, and small to medium-sized enterprises,” said Ridley.

“What’s more is this transition is happening faster than we may think. While current Tesla motor vehicles are semi-autonomous and still require a driver at the wheel, Telsa CEO Elon Musk expects the company will have fully autonomous vehicles ready for market by 2018.”

In addition, Google’s Self-Driving Car project has clocked up more than three million kilometres of real world testing; Singapore has announced two driverless vehicle trials; Uber is expecting their full fleet to be driverless by 2030; while automakers BMW, Ford, General Motors, and Toyota have indicated they expect to launch commercially viable, fully autonomous vehicles on the road by the end of the decade, AB+F said.

Full vehicle automation comes with its challenges though, particularly in regulation.

“Musk predicts Tesla’s driverless cars will be ready by 2018 but, given the lack of industry standards, regulatory approval may take a further three years. Co-existence of current car models with semi-autonomous and fully-autonomous vehicles presents another challenge,” Ridley said.

Hugh Bradlow, Telstra chief scientist, said that by 2030, all vehicles on Australian roads will be driverless as the cost of retrofitting existing cars is expected to fall below US$1,000.

In March 2016, South Australia was the first Australian jurisdiction to authorise on-road trials of driverless cars, following estimates that the industry will be worth $90 billion within 15 years, AB+F said.

Various studies indicated that cars are among the most inefficient assets people own, as these are often left unused approximately 95 per cent of their existence, particularly within urban areas.

“Driverless automation will likely increase the opportunity to access a fleet of shared on-demand driverless vehicles, provoking consumers to further question the validity of car ownership,” said Ridley. 

“This in turn will have a significant impact on conventional banking models and car loan schemes.”

Related stories:
Tesla forays into car insurance business
Uber’s first self-driving fleet to launch this month
  • Peter 2016-09-21 12:43:22 AM
    We should see billions of $$ in cyber insurance though
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  • Barry 2016-09-21 1:21:26 AM
    Swings and roundabouts, eh Peter?
    Post a reply
  • The West Australian Perspective 2016-09-21 3:13:49 AM
    The technology at present is best described as "flawed" and yet everyone want's to make out that this is going to happen tomorrow. Insurers need not panic, as you will still need to insure your asset for damage not involving a vehicle, i.e. parked in the drive way and a hail storm comes along!! Don't we all have short memories. As for Volvo stating they will pay for any incidents involving driverless cars on their technology, since when did they suddenly find unlimited capital reserves to pay for this when it occurs and it will. In addition there are presently estimated to be 16 million cars/light vehicles in Australia alone and I am not sure where we are all going to find the necessary $350B plus of funds needed to replace all of our existing vehicles. Whilst the future will happen, insurers need not get completely sucked into the conversation about a new technology to the extent that it distracts them from the job of underwriting their other insurance products, which make up more than 80% of their business. People selling driverless cars/technology have an agenda like everyone else and that's to make a sale.
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