Why a driverless car future is going to make a huge dent in auto insurance revenues.
Self-driving cars may sound like a really cool future technology, but in reality, autonomous cars are already here and their growing numbers will eventually seriously impact auto insurance revenues by up to 60 percent, car experts say. So how are insurance companies, automakers and government entities preparing for this major industry disruption?
The auto insurance industry collects almost $200 billion a year in premiums. Thanks to incredible leaps in technology, automakers have been making cars increasingly safer and less accident-prone. In addition, the advents of car sharing and other transportation services have also grown dramatically.
For the first time ever, car ownership is shrinking. With the rise of driverless cars, insurance companies are starting to look at a very different future.
Just as questions about autonomous cars and insurance were beginning to heat up, Sweden’s Volvo stopped even naysayers in their tracks when it made a brash announcement: Volvo will accept full liability for any accidents in its driverless cars. Surprisingly, Volvo also gave a 2020 deadline for gifting its drivers with zero fatalities or serious injuries while driving its self-driving cars.
“There is an intense discussion about liabilities for self-driving vehicles both among government, manufacturers and the insurance industry,” explains Volvo Cars communications manager Gun Bengtsson.
Volvo, Bengtsson says, “believes that the manufacturers should assume liability to compensate for the economic losses for incidents when the vehicle is in autonomous drive mode and it is determined the defect in the autonomous drive function caused the incident.”
Why? Volvo views “driving” an autonomous car as akin to having “handed over control to the vehicle manufacturer.”
Still, he believes the insurance companies will end up being middlemen of sorts. “The request for economic compensation may be firstly addressed to an insurance company who may rebut this to the manufacturer,” says Bengtsson.
He also sees a future in which the number of insurance claims will go down particularly in relation to minor fender benders as advanced technologies such as parking assist, adaptive cruise control and an array of sensors and screens come into wider use. Already, they are decreasing minor accidents.
“This means that cost of insuring a vehicle will go down” and even the need to insure a vehicle at all may go by the wayside. Bengtsson says this is when “manufacturers may then decide to include the insurance in the offer when buying a new vehicle.”
Think this is a problem that will need to be resolved far into the future? Already, five states allow autonomous vehicle testing on city streets and lonesome highways. And on Valentine’s Day no less, Google’s self-driving car (a Lexus SUV outfitted with radar, sensors and software) not-so-lovingly hit a public bus in Mountain View, Calif.
Google admits this was the first time one of its autonomous vehicles has created an accident even after logging 400,000 miles on city streets mostly in Silicon Valley. While nobody was injured, Google’s Lexus vehicle had to be towed from the scene because of heavy damage to the bumper, radar and sensors. Video footage of the accident shows the Google car was at fault.
So who’s to blame? Google took this one on the chin, of course, but the future for consumers and their newfangled partially- and fully-autonomous vehicles is not so clear. Fortunately, the insurance industry, car companies and government entities are beginning to work together to stay in step with these fast-moving, society-altering technologies.