Autonomous vehicle boom could slash $3 billion of workers' comp premium

There are also major repercussions for other lines of insurance

Autonomous vehicle boom could slash $3 billion of workers' comp premium

Motor & Fleet

By Gia Snape

Rapid advancements in self-driving technology are poised to transform America’s trucking industry. An estimated 380,000 long-haul truck drivers could be replaced by autonomous vehicles (AV) in the next five years, according to Deloitte.

This could have huge repercussions for the insurance industry, with a potential loss of around $3 billion worth of workers’ compensation premiums and significant shifts in commercial auto, product and professional liability, and cyber lines of insurance, the global consulting firm said in a recent report.

“Companies that focus on both commercial auto and workers comp insurance associated with long haul trucking are going to have to figure out how to pivot and continue to grow their portfolio as premiums from those products go down,” said Matthew Carrier (pictured), transformational projects lead at Deloitte and industry advisor for the property & casualty (P&C) space.

What’s the impact of autonomous trucking on insurance?

A Deloitte survey found around half (51%) of US and European transportation providers and manufacturers are actively adopting autonomous vehicles for fleet transportation.

The biggest benefits for self-driving trucks are alleviating supply chain challenges and plugging driver shortages.

While some workers’ comp carriers may have enough diversity in their portfolios to offset losses, Carrier said that other lines of insurance will also be transformed by the advancements in the trucking industry.

“Insurers need to be thinking about both the front end – the underwriting, the premium, and the risks that are involved – and the back end, which is the complexity of claims and how they’re going to adjudicate them,” said Carrier.

Insurers must also adapt to the new exposures posed by self-driving trucks, many of which aren’t covered by traditional commercial auto policies.

“Companies that are writing exposures in the long-haul trucking space via commercial auto, workers’ comp, or even some of the marine inland marine coverages that apply to long-haul trucking, need to consider the shift in exposure,” Carrier told Insurance Business.

While a significant proportion of losses in commercial auto come from human factors such as impaired or distracted driving and illegal maneuvers, that won’t be the case for autonomous driving. Exposures could come from the manufacturing process or even cyberattacks.

There’s also not enough data to show that autonomous trucks are less likely to be in accidents than those steered by human drivers, according to Deloitte.

“Carriers need to know what the exposure looks like and start to model that for their traditional coverages, and maybe new coverages that they need to be thinking about creating,” said Carrier.

“On the claims side, it’s about making sure you have the right expertise and legal representation to deal with the exposures you may not have seen historically.”

How brokers can embrace the challenges

For brokers, the challenge will be in finding the right coverage for trucking firms embracing autonomous driving technology. Carrier noted several ways insurers and reinsurers are dipping their feet into the market.

“We are seeing reinsurers interested in teaming up with direct writers on different kinds of opportunities and new types of risks,” he said.

“One thing for the brokers to think about, if they’re struggling to find a market for the risk is to have some conversations with the reinsurance companies, because they’re interested in testing the waters to understanding how the exposures could work.

“Some of the large reinsurers may understand the markets that traditional brokers may not have exposure to. So, I would point in them in that direction to have some conversations and figure out where the new markets are emerging.”

How soon is the driverless future?

Though self-driving vehicles have come a long way and investments in the space are ramping up, there are still many hurdles to overcome before the technology can be deployed at scale.

For one, AV technology needs to improve navigation in bad weather conditions and driving off highways, the Deloitte study found. This means that human drivers still need to handle parts of the journey, such as the more complex runs to the warehouse.

“In long-haul trucking, which is mostly interstate driving, autonomous driving is already happening in some test pockets, and I think that’ll continue to expand,” said Carrier.

Regulation will also play a key role in how quickly autonomous driving can take off in the trucking industry.

“A combination of technology and legislation adoption needs to happen, both within states and federally,” Carrier added. “So, it’s hard to predict exactly when that will happen, but I think in the next five years you’ll start to see some developments.”

Do you think autonomous trucking will change the game for commercial auto insurance? Share your thoughts with us below.

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