The introduction of driverless cars in the U.S. is no longer an idea that’s years in the future. In fact, General Motors has plans to release its own driverless vehicle, which has no steering wheel or pedals, for commercial ride services in 2019, along with other automakers.
As anticipated, the emergence of self-driving cars isn’t exactly striking up a love connection with auto insurers. Here, we take a closer look at three key issues concerning self-driving cars and the possible impact on the auto insurance industry.
Who Pays for Accident-Related Costs
Without an actual human being sitting behind the wheel, one of the biggest concerns regarding driverless cars will be when an accident occurs. Currently, when two cars are involved in a collision, it’s the at-fault driver who is held responsible for accident-related costs, because insurance coverage typically follows the driver. So, the question de jour would be — who is responsible for expenses in an accident in which the driver is a computer? Some speculate that insurance responsibilities will begin to shift from the insured to the vehicle’s manufacturer and tech company; however, the jury is still out on this issue.
Earlier this year, this subject was front and center when a pedestrian was killed by a driverless Uber vehicle. In that instance, Uber covered all expenses associated with the accident. For now, most reports indicate no changes will be made to how auto insurance is structured, and coverage will continue to be held by the owner of the vehicle regardless of who (if anyone) is driving.
The Possibility of Higher Premiums
Insurance premiums reflect risk. Therefore, fewer accidents typically result in lower rates. If driverless cars hit the road and cause an onslaught of accidents, consumers might possibly see an uptick in rates. On the flip side, if driverless cars can help reduce risks, it stands to reason that rates may not be significantly affected.
According to the National Highway Traffic Safety Administration, 95% of serious auto accidents are caused by human error as opposed to mechanical and road condition issues. The proposed argument is that new driver assistance technology that is being built into driverless cars may actually create safer roadways, with features such as autonomous emergency braking and lane-centering steering — to name just two. In fact, a recent report by Allied Market Research projects that driverless cars are predicted to reduce insurance costs by 30%. Clearly, the subject of rates continues to be a wait-and-see issue.
Drop in Coverage Needs
Albeit a stretch, the increase of driverless cars may result in more consumers reducing or even dropping their auto insurance policies. This concern is built on the premise that auto manufacturers and the tech companies producing driverless cars will begin to self-insure their own products. As more consumers purchase these cars, the need for coverage may be eliminated or replaced by a type of micro-risk policy.
For insurance companies, this potential impact may feel like a gut punch. However, the situation may not be as dire as predicted. In a recent article in Insurance Claims Journal, Alejandro Zamorano, an analyst at Bloomberg New Energy Finance, reported that they don’t expect revenues for auto insurance companies to experience a decline as a result of driverless cars, but instead, they foresee a shift in the type of auto insurance products, along with the very real possibility of additional revenue sources for insurers. Today, insurance companies are wise to be cognizant of the impact of driverless cars and will most likely adjust algorithms as they begin to adapt to this new evolution of technology.
The integration of new technology can feel overwhelming. At One Inc, we’re helping insurance companies grow and retain business with easily adaptable solutions for processing premiums and claims payments that seamlessly integrate with existing core systems. For more information, contact us today.
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