The rapid growth of autonomous vehicles is set to reshape the $400 billion U.S. auto insurance industry, predicted Goldman Sachs, which is forecasting steep declines in accident frequency and insurance costs over the next 15 years.
According to a June 9 note from Goldman Sachs analysts led by Mark Delaney, autonomy has “the potential to significantly reduce accident frequency longer-term and reshape the underlying claim cost distribution and legal liability for accidents.” As vehicles shift from human-driven to computer-operated, insurers will face profound changes in how policies are written and risks are assessed.
Goldman estimates insurance costs could fall more than 50%, from roughly 50 cents per mile in 2025 to approximately 23 cents per mile by 2040. However, the firm still expects modest real growth in auto insurance premiums over the next 10 to 15 years.
The U.S. autonomous vehicle market is rapidly expanding, projected to reach $7 billion by 2030. In particular, the market for autonomous virtual drivers for Class 8 trucks could approach $5 billion by that year. Companies like Tesla, Alphabet Inc.'s Waymo, and Aurora Innovation Inc. are leading the charge, with Tesla’s long-anticipated robotaxi service set to debut soon in Austin. Austin has become a hub for robotaxi development, thanks in part to Texas’ comparatively lenient regulations for autonomous vehicles, which require onboard cameras, adherence to traffic laws and insurance coverage.
While accident frequency may decline, liability questions present new legal and regulatory challenges. Traditional auto insurance assigns responsibility to the driver, but in autonomous vehicles, the driver may be a passive passenger while software controls the vehicle. This shift raises the question of who should be held responsible for accidents — the passenger, the vehicle manufacturer or the software developer.
“The underlying protection needed for autonomous vehicles could shift the insurance pool towards product liability and cyber coverage — a different underlying risk profile than what auto insurers cover today. Therefore, incumbent auto insurers may need to invest in talent and capabilities to profitability underwrite a new set of underlying risk,” the Goldman analysts wrote.
These issues, Goldman suggests, may ultimately require resolution through federal legislation or court rulings.
Goldman identified several companies positioned to benefit from the rise of autonomous vehicles, including Tesla, Alphabet, Aurora Innovation, Uber Technologies Inc., Lyft Inc. and Progressive Corp. The firm views investor concerns over AV risks as “overdone” for these companies.
Progressive and Allstate Corp. currently hold the largest exposure to the auto insurance market. Goldman analyst Rob Cox expects Progressive to continue gaining market share, citing its advantages in customer acquisition and pricing segmentation. “PGR has been vocal on vehicle technology for over a decade and has shown an ability to embrace technology, such as its early implementation of usage-based insurance nearly 30 years ago,” Cox noted.
