Motor insurance could become more like catastrophe cover thanks to adaptive steering and braking technology
Safety technology being built into new cars will “permanently change the shape of exposure for motor insurers” over the next decade, according to Lloyd’s Market Association (LMA) underwriting manager David Powell.
Powell said in the LMA’s latest member newsletter that motor underwriters will have to reassess traditional underwriting and pricing in the future because safety technology will “significantly” reduce accidents.
As a result, Powell said, exposure could change forever, with motor cover changing from a high-frequency, low-value product into something more like catastrophe insurance.
Powell’s comments follow a test drive of car manufacturer Volvo’s latest adaptive steering technology.
Volvo’s new XC90, due in 2015, will have an optional system that uses radar to judge distance and cameras to read road markings. This in turn will enable a computer to adjust the car’s speed and steer it automatically.
Powell said a downside to the new developments was that cars would be laden with expensive cameras and sensors, which could increase claims costs.
But he added that any additional claims cost would be far outweighed by a steady decline in accident frequency rates.
It is predicted that advancements in safety technology, such as autonomous emergency braking (AEB), will cut claims inflation by 250,000 claims by 2018, based on current and projected fitment rates.
Powell said: “We will see a future motoring experience dominated by autonomous driving.
“AEB and adaptive cruise control is already available on many current models, and auto-steering is arriving in the next few years.
“The coming wave of safety technology in the next decade will permanently change the shape of exposure for motor insurers.”