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Self-driving vehicles may reduce traffic for insurers

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The spread of self-driving vehicles could have significant implications for insurers and some of their commercial policyholders alike, according to a report issued last week by Moody's Investors Service Inc.

The report, “Self-Driving Cars Could Send Auto Insurers Skidding,” said there are several unique factors which could speed up — or slow down — the adoption of self-driving vehicles for commercial uses.

For example, Moody's said that once “autonomous long-haul trucks become available, trucking companies could be under economic pressure to replace their fleets with self-driving trucks due to lower operational costs of drivers' wages, cheaper insurance costs, lower wear-and-tear on the vehicles ,no required downtime due to driver fatigue, and better fuel economy algorithms.”

In addition, trucking companies could face social pressure from both safety advocates and environmentalists to use self-driving vehicles.

But companies could also face resistance from both labor unions and professional drivers. Moody's predicted that drivers will stay in the cab for the first few generations of self-driving trucks so that they can take over if need be.

“Truck drivers also serve a secondary purpose of watching over valuable cargo to protect it from theft or vandalism,” said Moody's. “As these jobs are eliminated, there could be reduced demand for workers' compensation insurance.”

Moody's also said that automobile manufacturers would have to deal with insurance ramifications of the use of self-driving vehicles.

Moody's said in the report that as the technology involved in self-driving vehicles improves, vehicle manufacturers and technology suppliers “could eventually accept liability for collision damage either voluntarily for competitive advantage or involuntarily as courts and/or regulators hold them responsible for accidents caused by their product.”

Moody's said that carmakers could self-insure for most claims and purchase reinsurance to cover “systemic software problems including cyber attacks.” Taking this approach might lead manufacturers to buy existing automobile insurers as a means of gaining their claim infrastructure and expertise, according to Moody's.

Another approach would be for manufacturers and suppliers to buy product liability insurance, using the insurers to process claims.

Moody's predicted several decades will pass before self-driving cars are widely adopted, projecting that a majority of cars could be self-driving around 2045, and “are likely to become nearly universal about 2055.” That will have a significant impact on personal lines auto insurers, Moody's said.

As the new technology takes hold, accident frequency will fall sharply over time, and will ultimately mean “significantly lower premiums and, consequently, lower profits for auto insurers,” according to the report.

“Given that personal auto is the largest (property/casualty) insurance line in many countries, including the U.S., the insurance industry impact could be significant,” said Moody's. “Regulators, lawmakers and courts will have to determine how liabilities are shared among insurers, automobile manufacturers and technology companies.”