Car insurance? Who needs it? Financial research company Morningstar says auto insurance could be obsolete in 20 years, when it's expected that most cars on the road will be automated.
When that happens, liability for safe operation would shift from the driver to the manufacturer. So if your Toyota smashes into a parked Honda, it would be Toyota that's on the hook, not you.
Morningstar paints this as a worse-case option from the standpoint of insurance companies but it would almost certainly be a boon for consumers, who would save thousands of dollars a year that's not spent on insurance policies.
Autonomous cars might also save most of the hundreds of thousands of people killed in traffic accidents each year.
This transition could be the end of the line for insurers that rely too heavily on personal auto premiums, Morningstar warned, highlighting Progressive as potentially being at risk.
The timeline matters
While it seems likely that autonomous cars will one day rule the road, no one is quite sure how fast it will happen, In its report, “Insuring Autonomy: Analyzing the Implications of Self-Driving Cars for the Auto Insurance Industry,” Morningstar finds that by 2044, in the most aggressive adoption scenario, most cars on the road could be automated to a level where liability shifts from driver to manufacturer.
Morningstar said the most important factors that will affect AV penetration rates are the timeline of technological development, pace of AV technology adoption and scrappage rate of the existing car fleet.
Using previous technologies as a guide, Morningstar calculates that Level 4 or 5 AV technology could reach an 80 percent adoption rate in as little as seven years (14 years with an aggressive scenario and 18 years with a moderate scenario).
For scrappage rates, the firm took historical data as a baseline, with the very aggressive and aggressive scenarios assuming the rate at which old cars are replaced will increase materially over time.
Using these calculations, Morningstar projects that under its very aggressive, aggressive and moderate scenarios, 60 percent of the cars on the road will be Level 4 autonomous or higher by 2044, 2053 and 2060, respectively.