In surveying senior U.S. insurance executives whose companies, in aggregate, account for almost $85 billion in personal and commercial auto premium, KPMG found skepticism about the potential transformation autonomous vehicles will bring in the near-term.
According to KPMG, few carriers have taken action—not due to doubts about the possible ramifications, but rather because most believe the change will happen far into the future, if at all. In fact, 84 percent of executives don’t expect autonomous vehicles to have a significant impact on their business until 2025, while 42 percent expect a significant impact in six to 10 years.
Nearly three quarters of insurers (74 percent) feel they are unprepared for autonomous vehicles today.
KPMG analysts think these executives are mistaken.
Albright said new technologies making cars safer are impacting underwriting practices, claim frequency and severity as well as auto premiums. “To remain relevant in the future, insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy and operations,” he said.
“As the trend towards car-sharing proliferates and mobility-on-demand companies like Uber and Lyft become more popular, commercial lines likely will take a larger share of the automobile insurance pie,” said Alex Bell, a managing director in KPMG’s CIO Advisory practice. “The share of the personal auto insurance sector will likely continue to shrink as the potential liability of the software developer and manufacturer increases. At the same time, losses covered by products liability policies are likely to increase given that the sophisticated technology that underpins autonomous vehicles will also need to be insured.”
“The potential reduction in car ownership and decreased demand for personal auto insurance could lead to financial stress for less-diversified carriers, triggering consolidation in the insurance industry,” said Joe Schneider, a director at KPMG Corporate Finance LLC. “Assuming consumers demand lower premiums to reflect fewer accidents, there is the possibility of frenzied competition as firms attempt to maintain premium volume to cover operational expenses and market share. This irrational pricing behavior could result in a dangerous downward underwriting spiral for the broader industry.”
via Insurance Journal – Insurers Unprepared for Self-Driving Car Disruption: KPMG