Following the government’s announcement on the 30th July to step up trials of driverless cars on public roads, Towers Watson's Graham Fulcher commented:
“Almost inevitably, driverless cars will change the demand for motor insurance, both in volume and in nature. Nonetheless, when it comes to existing motor insurers, the famous Mark Twain quote - “The report of my death was an exaggeration” - springs to mind.”
“History has shown that people tend to overestimate the impact of technology on a fairly short time horizon of say five years. Equally, they also tend to extrapolate the current, leading to step-change effects being overlooked and the underestimation of the effects in a longer time window. So, as part of longer-term strategic thinking, remaining on the front foot might well require insurers to contemplate business models and potential new products that could enable them to ride along with changes in demand.”
“For example there will be a long transition with driver and driverless cars on the road where insurance needs may actually increase. Even when, or maybe if, everything is driverless, I think there will be a big need for insurance – except the risks, frequencies and severities will all be different. The industry will now be insuring computers/technology against malfunction/failure in a liability sense as opposed to drivers getting it wrong.
“One area most affected could be distribution. There is a potential scenario where car manufacturers might cut out insurance companies altogether, although their track record in offering insurance products in the past is not strewn with success stories.”
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