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Global Credit Research - 29 Mar 2016
New York, March 29, 2016 -- Accident avoidance features in vehicles, such as automatic braking,
adaptive cruise control, and lane departure prevention, are
becoming more prevalent and will lead to lower accident frequency in the
next five-to-ten years, a benefit for auto insurers.
Longer term, self-driving cars could translate into significantly
lower premiums and profits for insurers as the number of accidents declines
dramatically, said Moody's Investors Service.
A new report from Moody's noted that while self-driving cars
will likely force auto insurers to rethink their business models,
widespread adoption of this technology is decades away, allowing
insurers plenty of time to adapt. In the near term, accident
avoidance technologies will have a more immediate, positive impact
on auto insurers.
"Accident avoidance technologies are becoming more common in cars
which should reduce the number of accidents and boost insurer profits,"
said Jasper Cooper, Moody's Investors Service Assistant Vice
President. "However, auto insurers will also face higher
auto repair costs from embedded cameras and sensors which are often located
in or near bumpers."
Automakers like Ford, Nissan and Tesla, have announced plans
to introduce self-driving cars in the next few years, which
could initially be optional on luxury vehicles. "Widespread
adoption of self-driving cars is still decades off, but it
raises questions of what an auto insurer's role will be in a world
with far fewer accidents," added Cooper. "Regulators,
lawmakers and courts will have to determine how liabilities are shared
among insurers, automobile manufacturers, and technology companies."
Moody's report noted that once self-driving cars are mainstream,
accident frequency will fall sharply translating into significantly lower
premiums and, consequently, lower profits for auto insurers.
The industry impact could be dramatic over the very long term given that
personal auto is the largest P&C insurance line in many countries
including the US.
Despite the uncertainties self-driving cars cast over the auto
insurance industry, insurers have time to innovate and diversify
in order to stay competitive in a potentially narrower market.
Moody's expects significant industry changes including consolidation,
failure, and the potential rise of new entrants as self-driving
cars have a transformative impact on the global auto insurance industry.
The report, "P&C Insurance - Global: Self-Driving
Cars Could Send Auto Insurance Industry Skidding," is available
to Moody's subscribers at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1019643.
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Jasper Cooper, CFA
Asst Vice President - Analyst
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
MD-Gbl Ins and Mgd Invests
Financial Institutions Group
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Moody's: Auto Insurers Face Long Terms Challenges From Self-Driving Cars
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
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