Aviva (LSE: AV.) shares have slipped back in recent months, falling from around 700p to closer to 620p. That may suggest confidence is starting to wobble. But one risk hanging over the stock deserves closer attention.
Self-driving cars are often seen as a long-term threat to insurers. Fewer accidents could mean lower demand for motor cover. But recent industry commentary suggests the timeline — and impact — may be less clear-cut than many assume.
That raises an important question. Is the market focusing too much on a distant risk, and not enough on the earnings power available today?
A long road to autonomy
Concerns around self-driving cars are not new. But recent commentary suggests the reality may be less immediate than headlines imply.
At its FY25 results in March, management pushed back on the idea of rapid disruption. Industry estimates point to widespread adoption not arriving until the 2040s. Even then, replacing the global car fleet would take decades and require trillions in investment.
More importantly, the transition is unlikely to be smooth. Autonomous and human-driven vehicles are expected to coexist for years, especially in complex driving conditions.
For insurers, that matters. Rather than a sudden drop in demand, the shift is likely to be gradual — giving established players time to adapt.
Built to adapt, not be disrupted
If the transition to autonomous driving is gradual, the next question is who is best placed to navigate it.
Here, scale and data could prove decisive. The group has already built a significant advantage through its telematics offering, with billions of miles of driving data collected over time. In a world where risk becomes more complex rather than disappearing, that kind of insight becomes increasingly valuable.
There is also a track record of adapting to change. The shift towards electric vehicles, more sophisticated pricing models, and evolving customer behaviour has already reshaped the motor insurance market in recent years. Each time, established players have adjusted rather than been displaced.
Crucially, even in a more automated future, insurance demand is unlikely to vanish. Instead, it may evolve. A mix of personal and commercial cover, alongside new types of risk, could emerge — favouring insurers with the scale, data, and underwriting expertise to respond.
Risks
Of course, the longer-term risk should not be ignored. If autonomous technology does eventually scale, it could fundamentally reshape the insurance market.
Fewer accidents would mean fewer claims, but also a smaller pool of premiums. Some estimates suggest accident frequency could fall sharply over time, which would put pressure on overall industry revenues.
There is also a potential shift in where risk sits. As vehicles become more autonomous, liability may move away from the driver and towards manufacturers and software providers, changing the structure of the market.
The biggest challenge, however, is uncertainty. Adoption is expected to be gradual and uneven, shaped by regulation, cost, and consumer behaviour. That makes it difficult for investors to judge exactly when and how any disruption will feed through into earnings.
Despite that, I see the current concern as more of a long-term evolution than an immediate threat. With a forward dividend yield of around 6.6% and strong cash generation today, I still see the shares as one for long-term income-focused investors to consider.
