Bank of England Says Autonomous Cars May Give Insurers a Rough Ride
March 17 2017 - 10:36AM
Dow Jones News
By Jason Douglas
Self-driving cars may ease congestion on the roads but they
could prove a headache for insurers.
That was the conclusion of researchers at the Bank of England,
who on Friday published a report with estimates of the likely
impact of autonomous vehicles on insurance company earnings.
Motor insurance is a big earner for British underwriters,
accounting for some GBP15.6 billion ($19.3 billion) of sales in
2015, according to the central bank. That made insuring drivers
against accidents insurance companies' single-largest business
line.
Self-driving cars, though, promise to make driving much safer,
if their proponents are to be believed. Though that means fewer
insurance payouts, it could also lead to a reduction in policy
premiums. According to BOE staffers Stefan Claus, Nicholas Silk and
Chris Wiltshire, insurers' income from motoring policies could fall
by as much as 21% by 2040, assuming autonomous vehicles are
introduced only gradually over coming decades.
The paper, published in the BOE's quarterly bulletin of
research, highlights a little-studied aspect of the coming
revolution on the road. Auto makers including Ford Motor Co. are
racing against tech giants such as Google parent Alphabet Inc. and
iPhone maker Apple Inc. to bring autonomous vehicles to the streets
within a few years.
The BOE paper contained other bad news for the insurance
industry, estimating that falling motor insurance income won't be
offset by a decline in the capital insurers must build to guard
against losses. That is because they will still face claims for
bodily injury and must also shoulder the risk of cyberattacks on
robot vehicles and the networks they run on, researchers said.
The BOE's purpose in conducting this research was to see if
self-driving cars could pose enough risk to insurers' to threaten
the stability of the financial system.
The paper did acknowledge that autonomous vehicles promise big
benefits for consumers, including improving road safety and
expanded leisure time.
Write to Jason Douglas at jason.douglas@wsj.com
(END) Dow Jones Newswires
March 17, 2017 10:21 ET (14:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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