It’s estimated that there will be 23 million autonomous vehicles driving around in the US by 2035. The overall aim is to make the roads safer, which will inevitably affect insurance companies, from what they base their prices on to who will be paying for them and what needs insuring. The testing of driverless cars is quickly advancing, with laws changing in some states to allow driverless cars to ditch their safeguards to further test vehicles in preparation for launching to the public.
The Future Is Now
Self-driving cars have been around for a while, but only on television and in movies. However, in 2017 Arizona saw a fleet of driverless cars hit the roads without backup safety drivers for the first time. Waymo, the company behind the cars, say they removed the safety drivers to do further testing, after 3.5 million miles of test driving with the safeguard in place. The goal is to remove the steering wheel, gas pedal and brakes, solely relying on the engine to drive the car and a host of cameras, lasers, sensors and radars to guide it.
The Shift From Private Insurance
94% of road accidents are due to human error. Driverless cars should reduce the amount and how serious accidents will be, making insurance cheaper. But who will be insuring the cars? Without a steering wheel there’s little fault on the driver if an accident were to occur, although the overall goal is to reduce the chance. It’s thought that ownership will not be with individuals, but with the manufacturers of the cars. This means that people won’t own their own car, but rather they’ll use fleets of driverless cars as and when they need to, similar to a taxi service that works 24/7. The car insurance industry depends on insuring private cars, which means it will inevitably have to shift with the technology.
How Insurance Companies Will Need To Change
As bad as it sounds, auto insurance companies depend on accidents to be able to charge for insurance. If you have an accident, it’s very likely your price will increase. So, if there’s less accidents and less private cars, the industry may be destined for collapse. But there will be ways in which driverless cars will need to be insured beyond the potential for accidents. Driverless cars will have a whole host of information on board, such as where they are, where they’ve been and where they’re going. This information can be misused and generate up to $12 billion in annual premiums. There’s also a major risk of technology failure, such as the sensors, potential of software viruses, algorithm defects and memory overload, offering a $2.5 billion insurance opportunity a year.
The shift in how auto insurance companies will need to work will be very gradual. It’s likely that traditional cars will drive alongside semi-autonomous cars and that cars will gradually become more and more autonomous overtime, giving insurance companies time to adjust with technology.