Self-driving cars could massively reduce accidents by eliminating human errors, shifting liability from drivers to manufacturers and making personal auto insurance obsolete. According to a new report from Morningstar, “Insuring Autonomy: Analyzing the Implications of Self-Driving Cars for the Auto Insurance Industry,” in the most aggressive adoption scenario, most cars on the road could be automated to a level where insurance is largely unnecessary within 20 years.
Key takeaways from the report include:
• The current market size for autonomous systems remains limited, but as the technology evolves, the market is expected to grow rapidly in upcoming years. PitchBook estimates the global market size for autonomous driving to reach around $300 billion by 2030.
• Latest versions of autonomous driving systems are already safer than humans. A study done by Waymo and Swiss Re concluded that Waymo's driverless vehicles incurred no bodily injury claims, compared with 1.11 claims per million miles for human driving benchmarks.
• Investors shouldn’t discount auto insurance stocks today, but with insurers like Allstate and Progressive trading at hefty premiums to their fair value estimates, current valuations may not be justified considering these business could become obsolete.
• There is potentially a positive scenario for auto insurers. If full autonomy proves difficult to achieve, but partially autonomous cars meaningfully improve safety, auto insurance could remain necessary for decades to come. Auto insurers could potentially draft off lower accident rates for years.
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