Auto premiums to drop 40% in 2050: Aon

Premiums for US auto insurers may drop more than 40 percent once the use of automated vehicles has been fully adopted by 2050 and driving becomes safer, according to insurance broker Aon Plc during the launch of its annual Global Insurance Market Opportunities report.

Paul Mang, CEO of Aon Analytics, said: “Adoption of autonomous vehicles will of course be affected by many variables such as regulatory challenges, cost to the consumer, safety, vehicle ownership preferences, and the technology itself. However, we as an industry need to act quickly to ensure that we have the products available to align to the new paradigm; if we fail to do so, we only invite disruption.”

The report, Riding the Innovation Wave, reveals that if autonomous vehicle technology is adopted at even a moderate pace, US motor pure premiums could decrease by 20 percent by the year 2035 compared to their 2015 levels – and potentially by more than 40 percent by the time that autonomous vehicles reach full adoption in 2050.

With the first commercially available technology expected to hit the road in 2018, the forecast assumes an 81 percent reduction in claims frequency, and an increase in claims severity due to sensor costs and an increased cost of handling product liability claims.

Personal motor accounts for 47 percent of global insurance premium – without this ballast and implicit capital subsidy, Aon Benfield estimates that US property-casualty insurance volatility could increase by 40 percent.