The struggling U.S. auto insurance industry can anticipate $81 billion in new premiums over the next eight years from policies for driverless vehicles, according to a new report from Accenture and Stevens Institute of Technology.
The market for autonomous vehicle coverage is expected to expand quickly due to risks related to cybersecurity, software and hardware, as well as the need for additional public infrastructure coverage.
"Insurers are bracing for long-term declines in auto premiums as new and safer autonomous vehicles gain adoption," John Cusano, a senior managing director at Accenture and global head of the company’s Insurance practice, said in a statement. "However, our research suggests that auto premiums will increase before they decline on this trend, so insurers that can navigate the changing technology environment could win market share."
The research conducted by Stevens Institute of Technology concluded that cybersecurity, product (software and hardware) liability and public infrastructure insurance for autonomous vehicles could grow to $81 billion by 2025. After that, according to the report, autonomous vehicle policy premium growth will likely plateau or decline as roads become safer and policies shift from consumers to autonomous vehicle manufacturers and other service providers.
"Three new business lines — cybersecurity, product liability for sensors and software algorithms, and public infrastructure — are going to drive billions in new insurance premiums for the U.S. auto insurance industry in the coming years," said, Larry Karp, a co-author of the report and global insurance telematics lead in Accenture Mobility, in a statement. "Forward-thinking insurers are already putting these new products at the top of their agenda as they look to capitalize on the first-mover advantage."
The research found that cybersecurity insurance will be the greatest potential driver of new premiums, totaling $64 billion by 2025, followed by product liability insurance ($14 billion) and public infrastructure insurance ($3 billion).
"This research is an important step in helping insurers understand how their business models need to evolve over the next decade," Chen Liu, co-author of the report and a research assistant at Stevens Institute of Technology’s School of Systems and Enterprises, said in a statement "Autonomous-vehicle technology will drive a significant shift in risk from human error to malicious third party, software, hardware and infrastructure risk. Understanding and proactively responding to this anticipated enterprise transformation is imperative."
The following graphic is from the new report, “Insuring Autonomous Vehicles: An $81 Billion Opportunity by 2025.”