Multi-billion pound motor insurance industry in the U.K. faces radical restructuring due to autonomous cars

The multi-billion pound motor insurance industry in the United Kingdom faces a period of radical restructuring as a result of the advent of autonomously driving (AD) cars, with the number of crashes set to dramatically drop and insurance premiums set to plummet, a panel discussion organized by Volvo Cars and Thatcham Research Centre heard on Tuesday.

The number of automobile crashes could drop by 80% by 2035, Volvo said, quoting research from the U.S. National Highway Traffic Safety Administration. AD technologies could also wipe US$20 billion off insurance premiums globally by 2020 alone, Volvo said in a press release, quoting a Swiss Re and HERE whitepaper. At present, motor insurance represents 42% of all non-life gross premium of the total property and casualty insurance market.

“Volvo Cars believes that the insurance industry will have no choice but to react to these seismic challenges to its existing business model,” the release said, noting that the medium- to long-term impact on the insurance industry is likely to be significant.

“But let’s not forget the real reason for this – fewer accidents, fewer injuries, fewer fatalities,” Volvo Cars president and chief executive Hakan Samuelsson said during a seminar in London entitled A Future with Autonomous Driving Cars – Implications for the Insurance Industry. “Autonomous drive technology is the single most important advance in automotive safety to be seen in recent years.”

Peter Shaw, chief executive at Thatcham Research, added that “vehicle manufacturers are predicting that highly autonomous vehicles, capable of allowing the driver to drop ‘out of the loop’ for certain sections of their journey, will be available from around 2021. Without doubt, crash frequency will also dramatically reduce.”

This crash frequency has already dropped with the adoption of autonomous emergency braking on many new cars, Shaw continued. “Additionally, if a crash unfortunately can’t be avoided, then the impact speed will also drop as a result of the system’s performance – reducing the severity of the crash,” he said in the release.

Volvo announced in late April that it will start the U.K.’s most extensive AD trial – called Drive Me UK in 2017 – with up to 100 AD cars “being driven on real roads by real people,” as part of its global push to develop AD cars. Similar programs are expected to be launched in Sweden and China.

“The automotive industry cannot do this on its own,” Samuelsson said during the seminar. “We need the government’s help. It is essential that carmakers work with the government to put in place laws and regulations that allow us to get these cars on the road as soon as possible and start saving lives.”

Samuelsson went on to say that the advent of autonomous driving represents a revolution for automotive safety. “Volvo has a vision that no one will be killed or seriously injured in a new Volvo by 2020,” he said. “Autonomous drive technology is a key tool in helping us achieve this aim.”