FACI Considers Insurance Implications of Autonomous Cars
Posted September 28, 2016
Article by Jennifer Webb at www.iamagazine.com.
At a recent Federal Advisory Committee on Insurance (FACI) meeting in Washington, D.C, attendees discussed how autonomous vehicles will impact insurance markets and independent insurance agents.
KPMG experts told the committee they predict self-driving cars will become the “new normal” over the next 25 years—and that the insurance industry could already experience significant impacts within the next decade.
Currently, road traffic accidents are the leading cause of death in the U.S. for people ages 15-34. By 2040, autonomous vehicle technology is expected to reduce the frequency of car accidents by as much as 80%—a decrease that may be large enough to impact life insurance mortality tables. However, the cost of accidents could increase due to the more expensive components in autonomous vehicles.
While experts expect personal auto and workers’ compensation claims to decline, they also predict that commercial auto and product liability claims will increase. According to projections, car sharing will drive increases in commercial auto policies and claims, and product liability claims could increase anywhere from 14 to 50%.
KPMG also outlined four ways car manufacturers could play a role in selling insurance for autonomous vehicles: 1) providing driving and vehicle data to insurers to underwrite policies; 2) working with insurers to distribute insurance, akin to an insurance agent; 3) acting as an insurer but, outsourcing many administrative functions to insurers; or 4) fully entering the insurance market and competing directly with insurers. To what extent these predictions will come to fruition will depend on how the autonomous car industry develops.
Beyond autonomous cars, the meeting addressed the impact of Brexit and sustained low interest rates on the insurance industry, as well as the Terrorism Risk Insurance Program’s efficacy.
FACI provides advice to assist the Federal Insurance Office and consists of various insurance experts from private industry and academia, as well as state regulators and consumer advocates. Maryland Big “I” member Loretta Fuller currently serves on FACI. The next meeting is scheduled for November.