In a quarter of a century, the car policy market could shrink by as much as 60 percent, says KPMG.
A recent report issued by the KPMG consulting firm has suggested that by the time the millennials who are only just entering into the auto insurance industry as professionals now become top execs in 25 years, the market will be 60 percent smaller than its current size.
The private passenger automobile industry is expected to experience a massive decrease in size.
While that doesn’t sound like good news for the auto insurance industry, the upside of this KPMG report is that the reason the market is expected to be that small in a quarter of a century is that there will be “radically safer” vehicles that will make it possible for far fewer accidents and road fatalities. This was shared by the consulting firm in its “Marketplace of Change: Automobile Insurance in the Era of Autonomous Vehicles” report.
The auto insurance need will also fall with on-demand car service expansion and the use of autonomous vehicles.
The KPMG report also predicted that there would be an 80 percent decrease in the frequency of crashes by the year 2040, primarily because there would be an increase in human-free driving and because those vehicles that are operated by people will be much safer. Though there will be a much higher cost per accident due to the expense associated with these safer and more automated vehicles, the decline in the frequency of the accidents will greatly compensate for the costs of the losses, said the report.
This will also be reflected in the premiums that are being paid by drivers for their insurance policies. The report indicated that at the moment, over 90 percent of all accidents every year are caused by driver error.
When taking into account the predicted reduction in the frequency and severity of accidents, this would mean that the personal auto insurance industry will be covering under $50 billion in costs by the year 2040, which represents a drop of 60 percent over the $125 billion in costs that are currently being covered.