AI disruption fear might strike auto insurers. Two stocks are in the crosshairs
Artificial intelligence could shake up car insurance stocks as autonomous vehicles become more ubiquitous. That’s bad news for Progressive and Allstate , according to BMO Capital Markets. In a Thursday note, analyst Michael Zaremski said that the total addressable market for personal auto insurance could peak at about $560 billion around the year 2040. From there, it should decline by about 4% annually over the following decade. The catalyst behind that development is the rise of self-driving cars, which should reduce accidents by between 75% and 90%, Zaremski said. Currently, advanced driver-assistance systems can lower collision rates by as much as 40%, he said. Though the addressable market shrinkage is years away, the analyst said stocks with exposure will likely take hits before then. “We’re cognizant that lower estimated terminal growth rates can drive material declines in stock valuations/multiples,” he wrote to clients. It’s “something we estimate has become more embedded in auto insurer valuations over the past year.” Auto coverage accounts for more than 90% of insurance premiums for Progressive, Zaremski found. That’s the most among the insurance companies tracked by the firm. Progressive has tumbled more than 11% so far this year, signaling investors could already be wary about this theme. Wall Street expects a rebound ahead. While most analysts have a hold rating, the typical price target suggests more than 18% in upside, per LSEG. Meanwhile, two-thirds of Allstate’s insurance premiums are tied to auto coverage, BMO found. Shares of the insurance company are off more than 2% in 2026. PGR ALL 1Y mountain Progressive vs. Allstate, 1-year The majority of analysts have a buy rating on Allstate, per LSEG. The average price target implies shares can jump more than 19% over the next 12 months. On the other hand, Zaremski found Fidelis , Hamilton , Kinsale and RenaissanceRe have no exposure to personal autos.
<
