Automotive technology is consistently advancing and self-driving vehicles, which are set to be released in the next few years, are an innovation that are about to transform both the automotive and insurance industries.
Several of today’s news cars are already equipped with features such as blind-spot monitoring, forward-collision warnings and lane-departure warnings. These features will of course be included in the coming generation of fully automated vehicles. The Insurance Institute for Highway Safety (IIHS) and the High Loss Data Institute (HLDI) have data showing a reduction in collision claims and property damage liability for cars with forward-collision warning systems.
According to the IIHS, it is estimated that there will be 3.5 million self-driving cars on the road by 2025. This technology causes several implications for the auto insurance industry. First of all, the number of accidents will be greatly reduced when self-driving cars become the norm, as more than 90% of accidents are caused by driver error. As Allstate Chairman Thomas Wilson has stated, this will have “the most detrimental impact on auto insurance”. However, this also means that auto insurance premiums will drop significantly, as the likelihood of an accident and the number of accidents will both decrease.
The biggest change that will happen to the auto insurance industry is the change in liability coverage. When humans no longer have any control of the vehicle, the liability is likely to be switched to the car manufacturer who will then have to prove they were not responsible for what happened in the accident.
Many vehicles, however, are only partially automated. An example would be the Tesla Model S car that was involved in a fatal crash while in its Autopilot mode. This is where liability gets confusing and both manufactures and the driver will need to prove that were not at fault. Germany has been planning new legislation that requires manufactures to install a “black box” that helps determine who was at fault in the accident. These black boxes will record data relative to when drivers turn on any autonomous features, take control of the vehicle, speed and acceleration, etc.
As you can tell, self-driving vehicles will likely make the roads safer and result in you paying less on your premiums, but the auto insurance industry is likely going to have to find new ways to make money.