Understanding Risks and Opportunities of Autonomous Vehicle Technology Adoption Through Systems Dynamic Scenario Modeling—The American Insurance Industry

Under a new wave of artificial intelligence, the transportation industry is facing a revolution similar to machines replacing animals one century ago. In this time, humans could, for the first time, be fully out of the control loop of personal transportation. However, revolution comes with disruption and uncertainty. This paper focuses on mapping various causal relationships during this significant transition phase and understanding the impacts of different influencing loops. A systems dynamic model is constructed including two different transportation methods (personal owned vehicle and car services) and three autonomy levels (non, semi, and fully). The US auto insurance industry was chosen as a major industry that will be impacted by autonomous vehicles’ impacts and consequences. Consumer choices, product familiarity, and acceptance are modeled to represent purchasing behavior. Vehicle crash rate and loss ratio are considered to calculate the insurance industry's premium collections. Different scenarios are quantified and discussed. Several important causal loops are identified that will help achieve the faster growth of the technology. Several potentially new insurance products are evaluated.