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Maryam Yarahmadi's Abstract

Based on a 2017 U.S Department of transportation report human behavior is the leading cause of 90 percent of life-threatening road accidents. Driverless car technologies (DLCT) that will consistently, tirelessly and objectively apply best practice algorithms have the potential to eliminate all these accidents. By analyzing the impact of analogous waves of technological improvement on aviation accident rates since 1950 we argue that the effect of DLCT could be even greater:  up to a 99 percent reduction in an ideal world. Many studies of the effect of DLCT on insurance take a more sanguine view of their potential impact. They talk of risk moving to other lines or being retained by OEMs rather than being eliminated completely. We analyze the effect on the global P&C industry of eliminating nearly all auto-related premium. Auto is currently by far the largest line globally. We show that the impact on insurer's net income volatility could increase capital requirements and drive a significant increase in risk premiums for other lines of business, especially volatile catastrophe exposed property lines.