Autonomous cars could prompt 60% drop in insurance premium revenue: Kennedys report

Motor premium revenue could fall as much as 60 percent if drivers switched to autonomous cars, which are designed to cut the number of accidents.

That’s one of the findings in a report by global law firm Kennedys. The focus will shift towards product liability cover for the manufacturers and software providers, said the report.

Removing the scope for human error behind the wheel, as seen with full automation, removes the driver from the liability equation, said Kennedys. This weakens the relationship between the driver and the insurer. This means the market will have to move more towards a product liability focus. One insurer predicted that as much as 60 percent of their motor premiums could disappear in a fully automated marketplace.

Kennedys polled more than 6,000 people across six territories: UK, US, Australia, China, Singapore and Hong Kong.

The survey also covered other issues such as on-the-go-insurance. Some 49 percent of UK respondents said most people would switch to on-the-go in future. When asked the extent to which the introduction of autonomous vehicles would change their own driving habits, only 22 percent said they would be more likely to take insurance on demand.

Overall, UK drivers were uncomfortable with autonomous vehicles. Only 26 percent said they would want to own a driverless car. This compares with 66 percent in China, with Hong Kong the lowest at 19 percent. The main concern among UK drivers was safety, even though fans of driverless cars will claim that safety is one of their key advantages. Hacking and privacy were among the other concerns.

Richard West, head of liability and innovation at Kennedys, said: “The rapid development of autonomous vehicles will have a profound impact on the insurance industry. Insurers will be faced with strategic challenges in continuing to support the classic insurance model towards new risk models in which the liability moves towards product manufacturers.”

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