Driverless cars are set to be the biggest disruptive innovation of the early 21st century.
With this in mind, senior risk manager Rahul Gumber has compiled a white paper offering his own personal opinion on the consequences of this transition.
Here are five interesting points he raises:
1) Insurers need to plan or risk extinction
In 2012, roughly £12bn in personal and commercial motor insurance premiums were written in the UK, accounting for roughly one-third of the total general insurance industry's net premium. Insurers must start to prepare themselves for the inevitable disruption that this developing technology will cause or risk becoming extinct in this market.
2) Telematics has a limited life-span
Clearly, in a world where a computer, rather than a human, controls braking, acceleration, cornering, lane switching and speed patterns, there will be little left to differentiate between drivers. Insurers should be mindful of the life span of telematics when analysing the potential long-term benefits of investing in this technology.
3) Expect legal costs and claims to rise in the short term
The technology seems likely to be ready before all the questions of regulation and liability have been sorted out. Not every legal question that might arise will be answered before driverless cars are on our roads so insurers should expect legal costs associated with claims to rise in the short term as precedents are established in the UK through judges and the courts.
4) Lloyd's stands to gain from the shift from personal to commercial
Some personal motor insurance will still be needed, such as coverage against theft or vandalism, and for weather events such as flood or hail but motor insurers' primary revenue stream could shift from personal consumers to vast commercial businesses as the industry re-directs its attention from selling personal motor insurance to product liability coverage.
The biggest beneficiaries here may be Lloyd's where the subscription model, capacity and experience of dealing with unusual, large and complex risks might suit the nature, volume and profile of potential losses.
5) The risk of cyber terrorism
There is the potential for cyber terrorism - the first attack on an entire fleet of cars or a large-scale immobilisation of vehicles could not only cause catastrophic death and destruction, but is bound to be a major set-back to a fully driverless future. With the increasing threat of cyber risk, insurers will find much more scope for writing cyber insurance.
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