Self-driving cars could make personal auto insurance largely obsolete within 20 years, according to a wor
st-case scenario modeled by Morningstar. A more likely, moderate scenario forecasts the line could remain necessary for a few more decades, until 2060.
The firm’s new report, “Insuring Autonomy: Analyzing the Implications of Self-Driving Cars for the Auto Insuranc
e Industry,” finds that by 2044, in the most aggressive adoption scenario, most cars on the road could
be automated to a level where liability shifts from driver to manufacturer. Morningstar believes that wide adoption of autonomous vehicles likely means that car insurance would be replaced by product liability insuranc
e, which would ultimately be borne by the auto manufacturers when Level 4 or 5 autonomy is achieved.
This transition could be the end of the line for insurers that rely too heavily on personal auto premiums, Morningstar warned, highlighting Progressive as potentially being at risk.
The Timeline
Morningstar said the most important factors that will affect AV penetration rates are the timeline of technological d
evelopment, pace of AV technology adoption and scrappage rate of the existing car fleet. The firm then developed three scenarios for each of these factors: very aggressive
(the worst-case scenario for personal auto insurers), aggressive and moderate (the most likely scenario).
Morningstar noted that most vehicles currently in the market are at Level 2-3 automation, with driver assistance or navigation on autopilot (NOA) systems
Watch More Image Part 2 >>>
like Tesla’s FSD Supervised or XPeng’s XNGP. These systems can autonomously brake, accelerate, stop, steer, overtake, and change lanes in a complex ur
ban or highway environment, but they still require continuous input from a human driver. There are some Level 4 solutions from companies like Waymo, Cruise,
Apollo and Pony.ai, which offer robotaxis capable of driving without a human behind the wheel, but r
des are currently limited to certain geographical locations where the software is trained extensively on location-specific parameters.
The study defines the timeline for technology development as the point at which 0.25 percent of the vehicles sold have Level 4 or higher autonomous c
apability. Morningstar calculated that in a very aggressive scenario for technological development, a 0.25 percent adoption rate could be reached in early 20
26. That breakpoint would push back to mid-2027 for the aggressive scenario and 2029 in the moderate scenario.
Using previous technologies as a guide, Morningstar calculates that Level 4 or 5 AV technology coul
d reach an 80 percent adoption rate in as little as seven years (14 years with an aggressive scenario and 18 years with a moderate scenario).
For scrappage rates, the firm took historical data as a baseline, with th
e very aggressive and aggressive scenarios assuming the rate at which old cars are replaced will increase materially over time.
Using these calculations, Morningstar projects that under its very
aggressive, aggressive and moderate scenarios, 60 percent of the cars on the road will be Level 4 autonomous or higher by 2044, 2053 and 2060, respectively.