Insurance in the new mobility ecosystem


Insurance in the new mobility ecosystem

Quantifying an uncertain future

As surely as the auto industry is headed for fundamental transformation, insurers should be prepping for change across the board, from customers to claims.

Modeling future auto insurance premiums

In Insuring the future of mobility: The insurance industry’s role in the evolving transportation ecosystem (Deloitte Insights), our primary focus was future premium revenue streams. We concluded that by the year 2040:

  • Safety improvements from autonomous vehicles could decrease total annual auto insurance premiums by up to 30 percent from current levels
  • Personal auto premiums could see an even more significant decrease
  • The decrease in personal auto premiums will likely be offset by growth in commercial auto and product liability premiums
  • Geographic distribution of auto insurance premiums will likely shift

In our newest paper, Quantifying an uncertain future: Insurance in the new mobility ecosystem, we discuss the methodology we used to reach the conclusions above, the results of our modeling, and the potential implications for insurers and their actuaries.

Predictions for the future of premiums—and insurers

In the exhibit above, the steady state line estimates auto insurance premiums assuming that today's mobility environment persists into the future, while the projections line accounts for our views on the future of mobility. Our modeling indicates that significant changes could already be felt by the year 2030. Compared to a steady state premium estimate of $320 billion:

  • The driver-driven sharing economy boosts total premiums by 10 percent due to more expensive commercial auto policies for those drivers.
  • Autonomous vehicles reduce premiums by up to 26 percent because of the safety benefits. Product liability insurance adds around one percent.
  • Reduced fraud, additional safety benefits, and other factors from driver-driven and autonomous vehicles reduce premiums by up to 18 percent.
  • Overall premiums of $214 billion in 2030—a nearly 33 percent decrease relative to a steady state.

By the year 2040, the gap between the steady state and our projections is even greater—there is nearly a 70 percent difference.

Change is coming

Our research and modeling work—as well as daily headlines—all point to significant changes in the auto insurance industry over the next 25 years. Whether our modeling holds true to actual future experience remains to be seen. Regardless, the automotive industry is undoubtedly undergoing changes that will help improve vehicle safety, change vehicle ownership models, and increase asset utilization, all of which impact the auto insurance industry.

Today, nearly 300 insurers write personal auto insurance. In an environment where premiums will likely decline and coverages will shift, insurers that recognize this early and take appropriate action now will be prepared to navigate the disruption ahead. They will be able to maintain or grow market share, have greater customer retention, and perhaps most importantly, have the data and expertise necessary to make informed decisions. We invite you to read Quantifying an uncertain future: Insurance in the new mobility ecosystem in its entirety and stay tuned for future perspectives from Deloitte on the everyday impacts to the world we live in as the future of mobility emerges.

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