BoE predicts motor insurance shrinkage
The Bank of England (BoE) has predicted a constriction in the UK motor insurance market by 21-41% in the next 20 years.
It says the emergence of autonomous vehicles will result in this reduction.
Its latest quarterly report said that driverless cars would account for 80% of new vehicle sales in 2040.
The BoE said, ‘Our current forecast is that the motor insurance sector will reduce in size, but that this is likely to be a gradual shift over the next two decades.’
It expects the market premium to decline by 21% from £11.7bn in 2015 to £9.2bn in 2040.
In an alternative scenario wherein AVs are assumed to be adopted faster, travel more miles and be 20% safer, the market is predicted to contract by 41% to £6.9bn over the same period.
The regulator said insurers need to transform aspects of the current insurance value chain, including claims management, underwriting and product development – areas which are expected to be impacted by driverless cars. But in order to succeed in the age of driverless cars, the BoE expects insurers to increasingly rely on partnerships with technology firms and manufacturers.
But while the BoE forecasts spell tough times for insurers, others within the industry have predicted the impact of AVs to be far swifter and far more severe on insurers.