The transition to semi and fully automated cars will completely transform the motor insurance industry, with liability shifting from the driver to the manufacturer and the traditional risk pool dwindling according to ratings agency Fitch.

“As the transition progresses, we expect to see risk coverage shifting from personal motor insurance policies to commercial product liability,” Fitch says in a special report.

It says insurers who do not adapt and take advantage of the radical new landscape will flounder.

However Fitch does expect that over the next decade there will be a marked reduction in claims costs due to the increased use of advanced driver assistance systems.

The traditional motor insurance risk pool will shrink significantly as a result, forcing insurers to diversify and look for other sources of profit.

But the transition will also create new opportunities, as the access to vehicle-recorded data will allow insurers to price risk more accurately.

“Recorded data could provide underwriters and actuaries with greater ability to understand and price risks, while data-sharing between the manufacturer and the insurer will be vital for determining who is liable for the cost of compensation,” Fitch says.

The report says data-sharing between manufacturers and insurers will be vital in developing new insurance products.

Early movers in telematics technology could be at a distinct advantage because they already have the processes for handling the large datasets needed.

In January the UK Government announced it will extend compulsory vehicle insurance cover to driverless cars.

The change, which affects both conventional and automated cars, will see insurers liable to pay compensation to third-party victims as well as to the insured driver if a crash is caused by technology failure.