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Report: Self-Driving Cars Could Create Longterm Challenges for Insurers

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March 30, 2016—Autonomous safety features in vehicles will lead to lower accident frequency over the next few years, which should benefit auto insurers in the short term. But over a longer period of time, accidents will decline, premiums will go down, and profits will be reduced, according to a report from Moody's Investors Service. 

The report said autonomous cars will force insurers to rethink business models but they will have time to adapt over decades. In the meantime, accident avoidance systems and autonomous features will benefit insurers. 

"Accident avoidance technologies are becoming more common in cars which should reduce the number of accidents and boost insurer profits," said Jasper Cooper, Moody's Investors Service assistant vice president. "However, auto insurers will also face higher auto repair costs from embedded cameras and sensors which are often located in or near bumpers."

Twenty automakers recently agreed to make automatic emergency braking standard on nearly all vehicles by 2022, while Lexus and Toyota went further to say they will make it standard by the end of 2017. Other Automakers are in a hurry to get fully autonomous vehicles on the road as well. 

"Widespread adoption of self-driving cars is still decades off, but it raises questions of what an auto insurer's role will be in a world with far fewer accidents," said Cooper. "Regulators, lawmakers and courts will have to determine how liabilities are shared among insurers, automobile manufacturers, and technology companies."

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