The End of Auto Insurance: A Scenario or a Prediction?

by Donald Light, June 1, 2016
Industry Trends
Global, North America

Abstract

Four years ago a Celent report asked a question, “What happens when there are (almost) no auto accidents?” To answer that question, this earlier report described A Scenario: The End of Auto Insurance.

 

This current report takes advantage of developments during the past four years to looks at three key technologies: Telematics, Advanced Driver Assistance Systems (aka collision avoidance systems), and Driverless Cars. The report examines the incidence and the effectiveness of each technology over the next 15 years — with some surprising findings. Based on these variables Celent projects the impact on losses and premiums. 

Using these three technologies, this report creates a model of auto insurance losses from 2016 to 2030. The model makes four sets of projections for each year in the 2015 to 2030 period for incidence and effectiveness in reducing losses for:

  • Telematics only.
  • Multiple ADAS (a vehicle having more than one ADAS capability) only.
  • Both telematics and multiple ADAS.
  • Driverless technology.

“Two of the parameters in this report’s model are already in common use today: telematics and ADAS,” commented Donald Light, Director in Celent’s North America Property/Casualty Practice and author of the report. “The technology of the third parameter, for driverless cars, is still in a R&D phase. However, with nearly every manufacturer (and Google) pouring substantial sums into making such vehicles generally available within a few years, driverless cars certainly deserve a place in the model.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

 

Key Research Questions

1

introduction

2

 

Key Research Questions

2

Driver Error as a Fundamental Cause of Auto Losses

3

The Celent Auto Loss Model: Parameters and Assumptions

5

First Technology: Telematics

7

 

Incidence and Effectiveness

7

Second Technology: Advanced Driver Assistance Systems

8

 

Incidence

8

 

Effectiveness

9

Third Technology: Driverless Cars

10

 

Incidence

10

 

Effectiveness

10

Physics and Network Effects and Other Variables Outside the Model

11

 

ADAS and Kinetic Energy

11

 

Network Effects Among the Three Technologies

11

 

Vehicle to Vehicle (V2V) and Vehicle to Infrastructure (V2I)

11

 

The Shared Economy

12

 

Automated Traffic Law Enforcement

12

 

Gas Prices, Miles Driven, and Auto Losses

12

A Model-Based Projection for Losses; 2015 to 2030

13

 

A Celent Timetable

13

 

The Model’s Projections and Assumptions

13

By 2030, If Not Before, Auto Insurers with Declining Premiums Will Face Some Hard Choices

21

Conclusion

22

Leveraging Celent’s Expertise

23

 

Support for Financial Institutions

23

 

Support for Vendors

23

Related Celent Research

24

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