By Clint Rhoton
While it may seem like a scene out of a science-fiction novel, self-driving cars are now a reality. Even more incredible is that the technology behind autonomous vehicles is improving on a daily basis due to machine learning, rapidly advancing sensors and driver input. Experts predict that self-driving vehicles will be the norm by 2040 and some, like Elon Musk, predict that eventually human-operated cars will be banned entirely.
However, one thing is certain: major changes are coming to the automobile industry. And, these changes will have a major impact on the insurance industry. Autonomous vehicles raise complex questions for insurers; navigating this bold new world of technology-driven modes of transportation will be an evolutionary process.
In their white paper on automobile insurance in the era of autonomous vehicles, KPMG made the following predictions as a result of society’s shift to driverless cars.
In the same report, KPMG states that there are still significant challenges faced by the auto industry that must be solved before there is widespread acceptance of autonomous vehicles. These include:
In addition to the above listed barriers, geography and community types will also play a major role in the acceptance and adoption of driverless vehicles.
When it comes to geography, autonomous cars are expected to be accepted in urban and suburban areas, because ride-sharing, car-sharing and corporate ownership of an autonomous fleet offer significant benefits in these types of settings. Things are different in a rural setting. Currently, 60 million people (more than 20 percent of the US population) reside in a rural setting. Rural roads are often underdeveloped and unpredictable, making it much more difficult for an autonomous vehicle to navigate.
Regardless of the environment or timeline for acceptance, major changes are coming to the automobile industry, and the insurance industry will doubtfully see significant changes as well. Here are some ways experts are predicting the insurance industry will be impacted:
When an accident occurs without the involvement of a human driver, most experts expect that automakers will assume the responsibility. While this may sound far-fetched, a precedent has already been set by Google, Volvo and Mercedes-Benz. These companies have already taken the responsibility in cases where a self-driving vehicle was involved in a crash. Tesla is extending an insurance program to purchasers of Tesla vehicles as part of the initial price. While there are still details that need to be such as requirements for sensors to be installed that will be able to prove whether a human or machine was at fault.
Most experts in the field predict a decline in accidents once self-driving cars become more common and, therefore, lower rates. However, the costs of repair for autonomous vehicles will likely be higher. In the short term, rates are expected to follow a similar track to current rates, though over the long term, many expect rates to drop, and the drop could be significant. Currently more than 37,000 people are killed every year in car accidents in the United States, many caused by driving under the influence and distracted driving. Neither of these issues would occur with autonomous vehicles.
While most experts agree that there will be a need for automobile insurance in the future, exactly what that looks like has still not been decided. Some manufacturers may bundle several services, including insurance coverage, into the initial cost of buying a vehicle. Insurance carriers may offer special riders and innovative approaches to cover unforeseen accident circumstances.
Although it may be disappointing to consumers that are hoping automobile insurance will not be needed in the future, as long as there is exposure to loss, and the cost of mitigating that risk is reasonable, automobile insurance will still be required and in demand.
Regardless of the vehicle type, auto, truck, commercial truck or fleet, when it comes to insurance, contact the experts at Lanier Upshaw to learn about our innovative risk protection policies.