Random Thoughts: Driverless Cars

Only one thought today. Two weeks ago, the econoblogsphere – which I tend to follow when time permits – gained a fabulous participant: the Bank of England launched their blog, Bank Underground.[1] Even better, their second post was on a hot insurance topic: driverless cars, which the BoE thinks will have a massive impact on the industry.

A switch to driverless cars […]  is a double edged sword for UK insurers who underwrote around £8bn in private motor insurance premiums last year. What they could save in falling claims costs and frequency, they stand to lose in shrinking premiums – one estimate being as much as 50% by 2025 and 80% by 2040 according to Thatcham Research.

When I present on “Insurance of the Future”, one of my favorite leads is the question “in (insert future year here), will cars need insurance?” We generally tend to agree that some kind of insurance is needed – it still poses a risk after all – but not in the same way as currently. The BoE echoes that: motor insurers will have to look for their revenue in other kinds of service.

There’s really not much I can add to the post – so here is the link.

[1] Which means we don’t have to wait until Mark Carney retires, unlike with Ben Bernanke