Auto Insurance Voices Caution As Self-Driving Cars Near
By Sentieo on February 21, 2017 3:48 pm in Technology
valuewalk.com
excerpts:
We analyzed over 9 million financial documents, covering more than 10,000 companies across the globe, for mentions of the self-driving car theme. We found that interest in self-driving cars has grown 8.5x in the past two years, but suspect that there is much more interest to come. Predictably, car and technology vendors were earliest in bracing for the technology’s impact, but the insurance industry is now beginning to take the threat seriously.
Self-driving cars are approaching quickly. Google unveiled its self-driving project just four years ago, while Tesla shipped the first car with its famous auto-pilot feature just one year ago. Though impressive progress has been made, much more is needed before self-driving cars reach scale. In the meantime, there have been setbacks. Last May, the first person was killed in a car operating on auto-pilot, while Uber ended its San Francisco self-driving project after a week amid permit conflicts with the DMV, along with several sightings of its cars running red lights. (The project continues in Arizona.) Despite the inevitable bumps along the way, self-driving cars—also known as “autonomous vehicles”—will almost certainly become a reality within the next two decades, and their impact will be felt massively across the transportation and logistics industries, among others.
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Many statements which we reviewed were dismissive, arguing that the extent and timing of adoption remains long-term and uncertain. Many statements are more bearish however, indicating anxiety ahead of the deep changes to come. Below is a sample of quotes from company transcripts and filing reports:
Swiss Re, a Swiss reinsurer, has regularly mentioned self-driving cars as a major risk since a 2013. It sees a substantial reduction in the growth of the car insurance market, and argues that diversification will be key to survival. From their 2015 annual report: “Autonomous cars […] are […] a highly disruptive technology. […]Swiss Re held various events since 2013 with] experts from car manufacturing and technology, safety and legal specialists. […] this will present many new challenges to the way we do business and how we view and manage risk, retail insurance and liability. […] 1. Autonomous cars will improve safety; 2. The sharing economy will drive autonomous car adoption; 3. They are more climate-friendly and can reduce energy reliance; 4. Consumers will begin to embrace the technology; 5. Regulation and the law will adapt, slowly; 6. Cyber risk will increase; and 7. Autonomous cars will affect liability and tort cases. Although it is uncertain how legal and regulatory issues will play out, it is clear that our role as re/insurers will change considerably. Many of these changes will also create new opportunities for businesses who quickly adapt and diversify their products and services so as to target new market segments.”Swiss Re: motor insurance market forecast (assumes 100% ADAS adoption and no inflation)
Source: SwissRe: The future of motor insurance (2015)
Tryg, a Danish insurance group, describes the disruption from self-driving cars in its 2016 annual report: “Motor insurance accounts for a significant share of the non-life insurance market, and the insurance business therefore closely monitors how technical developments affect this area. With the development of the autonomous car, the motor insurance market is expected to shrink in the future. What exactly the impact will be on the insurance business remains an open question. So far, the development of more technically advanced cars has led to a reduction in the number of people who are injured in car accidents, but at the same time it is also clear that the more advanced cars are much more expensive to repair. Contrary to developments in motor insurance, other areas are expected to grow in the future. This goes, especially, for the insurance of people, pets and technology. Based on these developments, Tryg has been actively acquiring companies in these areas and developing new child insurance, pet insurance and cyber insurance products.“
AON, the reinsurance broker, said in a report in September 2016 that Autonomous vehicles may reduce US motor premiums by -20% to over -40% by 2035-2050. However, “we as an industry need to act quickly to ensure that we have the products available to align to the new paradigm; if we fail to do so, we only invite disruption.”
SOMPO Holdings, one of the top insurers in Japan, sounded more dismissive of the threat than its European peers in a May 2015 earnings call, although it conceded that a reduction in premiums is to be expected: “A world where we see 100% of the vehicles as self-driving cars on the road will not come. [However,] there are cars already available with safety driving assistance system, which receives some discount premium and we would probably have to apply something similar to that. […] So self-driving cars plus cars driven by people and totally manual cars. So three types of cars will co-mingle on the road and this co-mingle situation will continue for 10, 20 years [will support a smooth long term decline either than immediate change.]”
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