We may not be quite at the point of ditching human drivers altogether and putting our safety and wellbeing in the hands of automated car manufacturers, but that will become a reality sooner than you may think.
Experts predict that self-driving vehicles will be the norm on the roads by the 2040s, and industry leaders such as Tesla’s Elon Musk think than human driven cars could be banned completely. So, within the next 20 years some major changes are coming to the motor industry – and the car insurance world will subsequently see its own major changes.
Self-driving cars raise some very complicated questions for car insurance companies, and addressing and answering those questions will take a long time. Unsurprisingly, that discussion has already begun and experts have began to question just how self-driving cars and Artificial Intelligence will affect the car insurance industry…
Who is liable for an accident with self-driving cars?
Perhaps the biggest question around driverless cars is: who will be at fault if a self-driving car crashes? Although this is often a bone of contention between two drivers who crash, it is currently quite straightforward in many situations. If a driver hits you in the rear, or changes lane etc. then they are at fault. But who is at fault if you are involved in a crash with a self-driving car?
The general consensus right now is that the car manufacturer will assume liability in the even of a self-driving car collision, and the precedent has already been set.
Volvo, Mercedes-Benz and Google already accept liability in real-life cases where their self-driving system is at fault for a crash. Tesla has taken this a step further by extending an insurance program to those who buy a Tesla vehicle with automated features (self-parking, lane discipline technology etc…) which shows how confident they are in their technology. They are also confident in the statistics, which show that human error is the cause for as much as 94% of all car accidents.
It may sound like this issue is all straightforward, but don’t expect it to stay that way. As more and more self-driving and automated cars take to the roads, with different hardware and software running them, it could all get a lot more complicated. One solution could be that independent tracking sensors are fitted to self-driving cars to provide an impartial breakdown of exactly what went wrong in the lead-up to a crash and to determine if a human or the AI driver was at fault.
If there is less accidents will car insurance premiums cost less?
As the data suggests that the overwhelming majority of car accidents are due to human error, the less humans are in control of cars the less accidents should happen. As self-driving cars begin to dominate the roads then we can expect to see less accidents happen over time. There may be an ‘adjustment period’ as driverless cars mix with drivers on the road, but eventually experts are predicting a sharp fall in the number of accidents.
This will result in car insurance premiums becoming cheaper, as the risk of an accident will be a lot less. There will still be the risk of theft or damage to a self-driving car, so the need for car insurance will still be there – but it won’t cost as much as it does today.
We shouldn’t need to wait for fully self-driving cars to hit the roads to see cheaper car insurance either, as cars fitted with Advanced Driver Assistance Systems (ADAS) are now increasingly becoming the norm – which have the potential to significantly reduce the number of accidents.
As more new cars models with ADAS features become more prevalent on the roads, there should be a noticeable reduction in car accidents. Within the next five years we could see 40% of all the cars on the road have ADAS features like collision prevention and lane change alerts.
Car insurance companies have already started to offer discounts to cars with these features, which will only continue in the future as more ADAS-enabled cars are sold.
How much will the car insurance industry struggle with less cover required by drivers?
With the costs of car insurance likely to go down, it is possible that drivers will soon realise that have accident cover for their car is no longer needed. With little or no accidents on the road, and car manufacturers seemingly willing to assume liability for most of them anyway, what is the benefit of having that level of cover for a self-driving car?
This could lead to a situation where all owners of self-driving cars simply opt for the cheapest legal minimum car insurance – the equivalent of Third Party Only cover today – which could have a huge impact on the finances of car insurance companies. It doesn’t mean they will die out completely though, as there is still a lot of time for them to ‘pivot’ and provide products that better relate to self-driving cars. Also, in the meantime the development of AI technology can be leverage by insurance companies to improve their data-collection efforts to drive profits.
Whatever happens between now and the 2040s, it should be an interesting ride for drivers.
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