Autonomous Vehicles Expected to Slash Motor Insurance Premiums by 2035
Insurance premiums could fall sharply as self-driving cars reduce crashes by up to 80 percent, with global insurers facing major restructuring over the next two decades.
Insurers are bracing for a fundamental shake-up as autonomous vehicles move closer to widespread adoption. Industry research suggests self-driving technology could reduce road accidents by as much as 80 percent by 2035, threatening the traditional motor insurance model and the billions in annual premiums it generates.
A study by Swiss Re and HERE calculated that self-driving technologies could wipe $20 billion off global insurance premiums by 2020, with further reductions expected as autonomous adoption accelerates. This trend is partially offset by rising car sales in emerging markets, particularly China and India, which are forecast to become the largest motor insurance markets by volume by 2025.
Fewer Accidents, Lower Premiums
The business case for autonomous vehicles is rooted in safety. The US National Highway Traffic Safety Administration (NHTSA) predicts that, by 2035, advanced driver assistance and connectivity will cut crashes by 80 percent. Even when collisions occur, the severity is likely to be reduced as vehicles use sensors and algorithms to limit impact speed.
With accident rates falling, the rationale for current premium levels weakens. Insurers will be forced to adapt products and pricing, with a likely shift in liability from individual drivers to manufacturers and technology providers. This could see product liability and cyber risk policies take a larger share of the market, while traditional third-party and comprehensive cover contracts shrink.
Manufacturers and Insurers Face New Responsibilities
Volvo, a vocal proponent of autonomous technology, has called for insurers to prepare for radical change. The Swedish brand argues that fewer accidents and lower claims frequency are positive developments for society, but they require a complete rethink of risk assessment and liability. The shift could also drive new partnerships between carmakers, tech firms and insurers as the sector redefines its role.
While the timeline for full autonomy remains uncertain, the direction is clear. Insurers and manufacturers are already working through the legal, technical and ethical questions raised by autonomous driving, from data sharing to black box requirements. For more on the industry’s transition, seeAutonomous Cars Set to Reshape the Global Motor Industry.
Emerging Markets and the Global Picture
Despite the global trend towards lower premiums, rapid vehicle sales growth in Asia is expected to sustain insurance volumes in the medium term. China and India are on track to lead the sector by 2025, even as mature markets in Europe and North America see premiums fall. The overall effect will be a rebalancing of the insurance industry, with product innovation and new risk models at the centre of its response.
