Changes and Challenges: Is the Insurance Industry Ready for Driverless Vehicles?
The words, “driverless cars,” are on the lips of most people these days, and for good reasons. The impact they will have on the safety of drivers, as well as businesses and the government will be substantial. And, for the most part, the changes are relatively unknown, except for the basic generalities, like there will be far fewer accidents on our roadways.
There is no doubt that the one segment of business that will be hit the hardest is the auto insurance industry, but there is some disagreement out there. While some experts say it will hurt the industry, others say it will simply change the industry. Although we can all agree that there will be some impact on the insurance industry, exactly how much of an impact is still in question.
Five Ways Driverless Cars Could Impact the Auto Insurance Sector:
Driverless cars could impact these five areas:
- The legal-insurance relationship. Auto insurance accident lawsuits are a multi-billion-dollar business. The road accident risk is why states make car insurance coverage mandatory for drivers, and for a reason, because if it was not mandatory, many drivers would not bother with it.
This is especially true for those who have older used vehicles, and if you are one of them, you should compare auto insurance quotes rather than try to go without coverage. Reducing or ending human driving errors and accidents would upend the auto insurance industry in many ways.
The liability focus. Instead of suing drivers for accidents, lawyers will have to go after the automobile manufacturers for malfunction accidents. This means the manufacturers will need to carry insurance coverage that is also more comprehensive to cover liability lawsuits. This will create a shift in the auto insurance industry as it becomes more corporation-oriented, instead of people-oriented.
- The need to downsize. Car insurance companies will need to alter insurance policies and premiums due to driverless cars. Accidents will decline; however, serious accidents due to technological malfunctioning will rise. This means although minor accidents will virtually disappear, but fatal accidents will continue, although not as often.
- Car theft claims will go down: Driverless cars will have stronger security systems, leading to less of a need for auto theft coverage. It will be easy to password protect the navigation systems in autonomous vehicles. Just like fewer, yet more serious accidents, there will be an upsurge in carjacking, a much more serious scenario when driver and passenger kidnapping is also an element.
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This is because it will be far easier to steal an occupied car that has been accessed by the driver than an unoccupied car that is still under security lockdown. The good news is, the GPS systems in these cars will make it easier for the authorities to track down and recover stolen vehicles on roadways, leading to fewer highway and city road chases. This means less accidents and better stolen car recovery rates.
- The driving age may change. Thanks to driverless technology, young people may be able to get their driver’s licenses sooner. On the same note, older drivers may be able to drive longer and safer. This will expand the driver pool for insurance companies, helping them make up the lost revenue from lower accident and car theft rates.
Is the Auto Insurance Industry Worried?
So, what does the auto insurance industry think about all this? Although they may be in for some massive changes, they don’t seem to be all that concerned. The fact is, approximately $200 billion in commercial and personal insurance premiums in the United States annually is primarily due to the prevalence of damage and injury caused by driving accidents.
Although there will still be a need for car insurance coverage, most experts estimate that need will go down as much as 75 percent. These means that the profits insurers get from the float on their premium incomes will drop dramatically, putting many companies out of business.
Should insurers be sweating at this point? Most say no, because they figure it will be years, even decades before they will feel the full impact. They base this theory on the assumption that it will take years or decades to do the following:
- Perfect autonomous driving technology.
- Change roadways and infrastructures to accommodate driverless cars.
- Create or iron out existing regulations and laws.
- Gain the confidence of the American consumer.
If car insurers aren’t concerned now, they should be, because the race towards driverless cars is heating up, and in a big way. Google’s driverless car initiative has launched a technology race in the car industry. Auto executives and board members are focused on the future as they rush to add intelligent driver assist features, like accident avoidance technology and crash monitoring and reporting. In actuality, autonomous driving has been in the works for decades, thanks to cruise control, which has been in vehicles for years, being offered to car consumers since the 60’s.
Volvo, a company famous for driver safety, estimates that it will be able to eliminate auto accidents completely for every driver using one of their cars by the year 2020. If this small auto manufacturer can have such a lofty goal, why can’t the big guns like Ford and General Motors do the same?
The bottom line is, car insurers will fare much better if they embrace the promise of driverless cars and start thinking about ways to adapt now, rather than waiting for the future to hit them in the wallet. Instead of focusing on the negative impact, they will benefit greatly by concentrating on the opportunities they bring. Driverless cars promise to save millions of lives and billions of dollars, and they are on a juggernaut course into the present.
Guest Author :
Joe Moore has extensive experience in the insurance industry. He enjoys writing about his experiences with cars and drivers on the web. His articles are available on many auto and tech sites. Follow Joe on Twitter.
[…] Changes and Challenges: Is the Insurance Industry Ready for Driverless Vehicles? – Although we can all agree that there will be some impact on the insurance industry, exactly how much of an impact is still in question. Five Ways Driverless Cars Could Impact the Auto Insurance Sector: Driverless cars … […]
[…] Changes and Challenges: Is the Insurance Industry Ready for Driverless Vehicles? The legal-insurance relationship. Auto insurance accident lawsuits are a multi-billion-dollar business. The road accident risk is why states make car insurance coverage mandatory for drivers, and for a reason, because if it was not mandatory, many … Read more on The Global Dispatch […]