Insurers will find new opportunities in Autonomous Vehicles – KPMG

 

Insurers will there need to develop far more agile, responsive and real-time offerings that are wrapped into the connected mobility ecosystem. The mobility ecosystem that is taking shape will bring significant disruption and therefore opportunity for the insurance industry.

 

 

According to a KPMG report Insurance companies will become integrated into other services such as AV rental on a pay-per-use basis.

 

 

In the face of the huge changes coming, insurers need to start acting and planning for it now. The migration away from personal insurance towards commercial will represent a fundamental change in how risks are managed by the insurance industry.

 

 

According to this report it is expected that the balance of personal to commercial premiums to shift from 80 percent/20 percent today to 40 percent/60 percent by 2040.

 

 

At the same time, it is expected that the traditional insurance premiums will fall by as much as 40 percent by 2040 due to higher road safety through AVs.

 

 

This alone is a fundamental challenge to the traditional business model. Nonetheless, as the commercial insurance pool grows so economies of scale will start to improve, while cover for new risks such as cyber security, product liability and infrastructure such as cloud servers, sensors, signals etc. could be worth £900 million annually.

 

 

Ultimately, it is expected that those insurers that get it right to increase profitability by over 30 percent by 2040 after experiencing a dip along the way.Taking into consideration the present day insurance landscape there is a clear picture of change that will occur in its traditional components.

 

 

Also the report indicates that the rise of AVs could lead to perhaps 30-50 percent fewer accidents, driving the 40 percent fall in premiums by 2040.

 

 

However this innovation poses such serious concerns for customers meanwhile, there are big liability questions, such as who is responsible if an AV vehicle malfunctions and crashes are still to be resolved this will be an evolving area as case history, regulation and industry experience develops.

 

 

It is possible that a central pool will be needed to cover catastrophic risks such as terrorism, cyber hacks and total outages of service and systems. The costs from such risks are likely to be too high for insurers to cover individually, meaning a reinsurance mechanism will be needed. There are precedents for this in some areas already today, such as terrorism.

 

 

Customers today expect the process to be quicker, simpler and more intuitive. This expectation will accelerate. For example, if a user’s vehicle breaks down, they are likely to expect the provider to arrange for a new one to self-drive to them straightaway rather then enter into a protracted claims process.

 

 

With the emergence of this technology vehicles will become increasingly able to self-diagnose faults and automatically place an order for replacement parts of a vehicle.