A new report by Accenture in collaboration with the Stevens Institute of Technology examines the challenges and opportunities arising with the rapid emergence of autonomous vehicles. It estimates that the switch to autonomous vehicles could generate at least USD 81 billion in new insurance revenues in North America between 2020 and 2025.

Worldwide leader in strategy, consulting, digital, technology & operations services and solutions, Accenture, has just released a new report in collaboration with Stevens Institute of Technology entitled, ‘Insuring Autonomous Vehicles: An $81 Billion Opportunity Between Now and 2025′. Stevens Institute of Technology estimates that up to 23 million fully autonomous vehicles will be travelling US highways by 2035 – a prediction that brings with it both challenges and opportunities.

Autonomous vehicle adoption forecast

According to Accenture’s new report, this upswing in revenues will most likely come from the following areas: cyber security, product liability for sensors, software and algorithms, and insuring the security of public infrastructure. Accenture asserts that, in order to take advantage of this opportunity, insurers will need to rapidly move to adjust current business models. Insurance carriers will be in need of new capabilities in big data and analytics – two crucial areas in the industry – as well as improved actuarial models.

The report goes on to predict that after the year 2026, insurers will start to see auto insurance premiums drop due to the rollout of autonomous vehicles. It further states that by 2035, this reduction could reach as much as 12.5% of the total market, amounting to USD 25 billion. Despite the predicted dramatic changes, calculations presented by Accenture and Stevens Institute indicate that decreases will almost certainly be offset by new insurance product lines for autonomous vehicles. Accenture contends that the autonomous vehicles revolution gives rise to opportunities for insurers in three major areas: (1) cyber security, (2) product liability insurance for sensors and/or algorithms, and (3) insuring against infrastructure problems – as seen in the figure below.

Opportunity map

Accenture stresses that those insurers who take the initiative to explore opportunities presented by autonomous vehicles now will be best positioned to capture new revenues going forward. The report concludes with sound advice to help insurers get ahead of the competition and, “gain an early mover advantage.” It proposes four key initiatives that insurers should undertake to achieve competitive advantage, namely:

•  Develop needed expertise in big data & analytics

•  Begin the actuarial & modeling process

•  Explore the partner ecosystem

•  Think about new business models