Insurance Companies Likely to Partner with OEMs for Autonomous Vehicles
July 26, 2017—With the rapid advancement of autonomous vehicles, traditional personal auto insurance has the potential to be severely disrupted by new competition and shifts to other types of insurance coverage, meaning they are likely to form partnerships with OEMs, according to an Auto Finance News article.
Autonomous vehicle technology could shrink the auto insurance sector by 71 percent—or $137 billion—by 2050, according to a report from KPMG. As such, the core business model for traditional auto insurance carriers may be under threat of obsolescence, and manufacturers have the potential to be a viable alternative to cover driving risk.
While this reality will be an incredible upheaval to the traditional business model for insurance companies, there are opportunities for partnerships with OEMs, Jerry Albright, an author of the KPMG report.
“You are going to see a proliferation for partnerships just because no one can afford to stick it out alone,” he said to Auto Finance News. “There’s potential for relationships and strategic partnerships between OEMs and insurers … [but] firms are still trying to understand how their partnerships should evolve.”
Automakers will assume more of the driving risk and associated liability, the article stated, and have new opportunities to provide insurance to car buyers—taking marketshare away from traditional insurers.
Additionally, by 2050, there will be a significant increase in products liability insurance to 57 percent of total auto losses in order to cover the autonomous technology in vehicles, and a considerable decrease in personal auto insurance to 22 percent of total auto losses.