The Impact of Self-driving Cars on Insurance Companies
Dan Levenson March 16, 2020
A String of Accidents
December 29th brought the latest in a string of fatal accidents involving self-driving vehicles like the Tesla model S. Two residents of a Los Angeles suburb died when a Tesla exiting the freeway at an elevated speed failed to stop at an intersection, plowing into their vehicle. A few days prior to that in Connecticut, another Tesla hit a police car while its self-driving function was engaged. Fortunately, no one died in that instance. Only the vehicles sustained damage.
Stories like these are becoming all too common. Although thousands of self-driving vehicles have successfully driven millions of miles without any issue, the increased amount of cars with autopilot features is set to have a major impact on American transportation. With everyone focused on the safety and ethics of self-driving vehicles, the question of insurance often falls by the wayside, yet this new class of car stands to have a profound effect on the entire insurance industry.
How Self-driving Vehicles Will Affect Insurance Policies
This string of recent accidents might seem like a deal-breaker to some. One could expect premiums to skyrocket due to the increased danger of what some see as driverless cars, but the truth is that this change in technology is more impactful to insurance providers than individual consumers. It will bring about a significant change in the way insurance companies have do business. For them to stay competitive, they will have to embrace that change or lose out.
The first thing to note is the potential decrease in premiums across the board. With the rise of the self-driving car, American consumers stand to save money. Although it might seem like autopilot makes the road a more dangerous place based on the stories above, companies like Tesla and Uber have tested these technologies over millions of miles of highway, and have made their extensive test records available to insurance actuaries. For the most part, autopilot features make the road a safer place, and the car manufacturers have the data to prove it.
Autopilot is demonstrably a safety feature. So what does this mean for the average driver? Lower overall premiums as the amount of accidents should potentially go down. Autopilot means the removal of human error. With precision instruments taking the place of human judgment, roads may ideally become safer.
Shift in liability
Autopilot won’t just affect insurance premiums. It will also trigger a major shift in accident liability.
Currently, insurance companies spread liability across involved parties when an accident happens. It is the job of claims adjusters to determine who is at fault. Many of the horrific accidents featured so prominently on the evening news, however, have been the result of mechanical failure on the part of the vehicle, such as a sensor or network failure.
To keep in lock step with changing state regulations regarding self-driving vehicles, insurance companies will have to start assigning more liability to the auto manufacturers themselves, splitting fault multiple ways in the case of a crash.
The cost of claims may stabilize
A lot is still up in the air, however. Premiums may decrease because insurance companies will potentially have fewer claims to settle, meaning less money to pay out.
It could go the other way though. While the overall number of claims might decrease, the cost of those claims might be considerably higher. Self-driving vehicles require an array of high-tech parts to operate. Because insurance companies might have to pay more for repairs, the actual cost of paid claims might not change as much as some may think. It might even increase, creating a new type of discord between the cost of premiums and the expenditure of claims.
Rise in new insurance categories
In order to offset potential changes to their customers’ evolving needs, insurance companies will look to develop new areas of coverage. Self-driving vehicles require complex computers and internet connectivity in order to operate. Wise insurance companies will increase ancillary coverage, such as cyber security, to help protect their customers from hazards that they might not have previously anticipated.
Other areas of coverage might include an increased focus on environmental damage such as wind, snow, rain, and hail, as well as adjusted premiums that are dependent on a driver’s geographic location.
The Changing Landscape
Technology moves at a rapid pace, but automated vehicles are still a relatively new market. How self-driving vehicles will actually impact the insurance industry remains to be seen. No matter the effect that modernization has on the market, Insure Your Company can help you and your business select the coverage that will keep your assets safe in our ever-evolving world. Please contact us to obtain a new quote for your business today.