Autonomous technology will significantly improve traffic safety, but it will also affect the auto insurers’ profit, a new report says.
Active safety features, such as automatic braking, adaptive cruise control, and lane departure prevention, are becoming mainstream systems and will reduce the frequency of accidents in the next five-to-ten years, a benefit for auto insurers. As for longer term, self-driving cars could translate into significantly lower premiums and profits for insurers as the number of accidents declines dramatically, Moody predicts. The report noted that while self-driving cars will likely force auto insurers to rethink their business models, widespread adoption of this technology is decades away, allowing insurers plenty of time to adapt. In the near term, accident avoidance technologies will have a more immediate, positive impact on auto insurers.
“Accident avoidance technologies are becoming more common in cars which should reduce the number of accidents and boost insurer profits,” said Jasper Cooper, Moody’s Investors Service Assistant Vice President. “However, auto insurers will also face higher auto repair costs from embedded cameras and sensors which are often located in or near bumpers.”
Automakers such as Ford, Daimler or Tesla, and tech companies such as Google, have announced plans to introduce self-driving cars by 2020. “Widespread adoption of self-driving cars is still decades off, but it raises questions of what an auto insurer’s role will be in a world with far fewer accidents,” added Cooper. “Regulators, lawmakers and courts will have to determine how liabilities are shared among insurers, automobile manufacturers, and technology companies.”