Autonomous Research has projected the UK motor insurance premium and profit profile in the period 2015-2060. Our estimates indicate that premiums will see an annual 1.5% rise leading up to 2025 with the current 20% return on capital (ROC) shrinking to a more sustainable 10%. This is reflected by the sharper fall in profits in the period 2015-2025. In our view, 2025 will be the pivotal point for motor insurers as self-driving cars take hold and premiums fall by nearly two-thirds by 2060. Unsurprisingly, profits are also expected to fall in this period; however we do not assume a slash in profitability with ROC remaining roughly constant at 10%.
Autonomous Research estimates that nearly two-thirds of new car sales will take place in emerging markets (EM) by 2025. Our forecast shows new vehicle sales in (1) Developed markets, (2) EM (China/India), and (3) EM (Other). The rise of the car-sharing economy (among other factors) in developed markets has resulted in shrinking vehicle sales from 44 million in 2005 to a projected 39 million in 2025. Meanwhile, lower purchase prices and falling operating costs are pushing vehicle sales in emerging markets, from a combined 22 million in 2005 to a projected 68 million in 2025. This growth will be particularly visible in China and India where the rise in sales is estimated from 7 million in 2005 to 41 million in 2025.
Autonomous Research has analysed the trend in driving fatalities and injury crashes in developed markets over a 25 year period. Our research suggests that fatalities decreased -19% in 1990-2000 and a further -38% in 2000-2012. This can be attributed to increased government action and technological advances in the developed world aimed at preventing deaths in car accidents. On the other hand, injury crashes increased by 5% in 1990-2000 and sharply decreased in 2000-2012 at a rate of -24%. The fall in crashes is associated with a shift in technological advances, starting in 2000, targeted at limiting the number of crashes as opposed to fatalities. This was accompanied by a modest increase of 8% in miles driven during this period due to a fall in average mileage per car. As a result, roads continue to become safer (on average) in the developed world.