Driverless cars may cut traffic jams, but not insurance premiums

It turns out robots need insurance too. As driverless vehicles reduce car ownership in coming years, insurers may not face the Armageddon that had been predicted, new research shows. "We do not expect revenues for auto insurance companies to experience a sudden decline as a result of autonomous vehicles," Alejandro Zamorano, an analyst at Bloomberg New Energy Finance, wrote Thursday in a report. "Instead we expect a gradual shift in the type of auto insurance products as well as new revenue sources for insurance companies." That assessment contrasts with previous dire predictions for the industry. A Morgan Stanley report in 2016, entitled "Are Auto Insurers on the Road to Nowhere," estimated the business could contract by as much as 80% by 2040. But as a handful of fatal accidents involving autonomous vehicles has made clear in recent years, insurance coverage will probably evolve, not disappear. One thing that will change is who pays for the policy, according to BNEF. Rather than individual drivers, manufacturers and technologies companies will be more likely to need coverage, and that shift could be a boon for insurers that are quickest to adapt. "While the nature of the premium might change, the opportunities to the insurance industry would be greater," Fred Donner, senior managing director at FTI Consulting Inc.'s global insurance practice, said in an interview. Mr. Donner said one such opportunity is cyber insurance to protect against cars getting hacked.

Fender Benders

Even if autonomous driving makes the roads safer, accidents that do occur could cost a lot more, by damaging expensive sensors, for example. That's already happening as car manufacturers adopt new technologies, such as cameras in bumpers, that push up the average cost of repairs. The road to a truly disrupted future is long. Rather than fully autonomous cars taking over, it's more likely that drivers will use autonomous features part of the time, to park or while stuck in traffic. For now, that will create a space for insurers to cover both the individual owner and the car itself. "That transition is very hard — there are few companies that do both," Tanguy Catlin, a senior partner at McKinsey & Co., said in an interview. "The opportunity for insurance companies is to recognize this era of autonomous vehicles is coming."