Automobiles are brilliant inventions of the modern age. There’s no doubt about it. But, in the wrong hands, they can turn out to be the worst. According to a report by Driver Knowledge, an average of 6 million car accidents take place every year in the US, and about 2 million drivers suffer from permanent injuries. Further, more than 90 people die every day in traffic accidents. Looking at these stats, it doesn’t sound much of a brilliant invention, right? Well, autonomous vehicles could change all that.
Smart cars could be the biggest thing in the future. There will be no drunk, inattentive, drowsy or talking-over-the-phone drivers causing accidents. People will feel safer and more secure while traveling in autonomous vehicles. They will also change the costs of auto insurance. It’s quite natural to wonder if the insurance costs will go down, as the roads will become safer. Let’s discuss the matter in detail.
The costs of advanced technologies
As the connected cars have complex technologies fitted inside them, they will be more expensive. That means, there are fewer chances that the insurance premiums will go down drastically. However, they may lower a bit, considering the increased safety on the roads, but you’ll only notice the change in costs after a while. The extra technology will focus more on safety equipment, which, no doubt, is expensive. The premium costs will reduce only after the unit costs go down, which will not happen immediately.
The safety factor is still in its infancy
The safety technologies employed by connected cars are still evolving. Although there will be no drunk drivers to cause widespread accidents, much work has to be done to make the technologies safer and effective at the same time. However, the technologies will surely get better, leading to safer vehicles and lower premiums on auto insurance covers.
The availability of data
With autonomous vehicles, the insurers will face little or no difficulty in accessing authentic data, which will reduce fraudulent practices to a great extent. At present, a fraudulent car owner may squeeze money out of the insurer by modifying the data, but this will no longer be the case with connected cars. As a result, auto insurance costs could go lower.
A shift in liability
As the manufacturers’ autopilot will be driving the vehicle, there will be a shift in liability from the driver to the manufacturer. However, the manufacturers are not ready to take the insurance risk at present, such questions will have to be addressed and protocols will have to evolve. It’s hard to say what the impact on premiums will be until ownership of liability is settled.
Driver’s claims history will lose its relevance
Important details like the driver’s age, profile, and claims history will become irrelevant in the new age of connected cars, owing to the shift in liability. The vehicles’ software levels, recent upgrades, and other technical information will take its place. Telematics-based auto insurance could well be the new age thing.
As personal or commercial auto insurance will evolve from the shape it is in now, insurers will have to shift their focus from the drivers to the vehicles at large. Here’s what could happen:
- Software liability – Auto insurance will focus on the software condition of the vehicles, their upgrades and related information in the case of an incident. The manufacturers then will have to insure themselves against technological mishaps like bugs, memory overflow, algorithmic defects, and more. They will also have to get the software chips and auto sensors insured to improve their risk management abilities.
- Cybersecurity – As with most autonomous systems, the chances of hacking, cyber threat and ransomware will increase. Insuring against them could be the best way to ensure seamless performance.
- Infrastructure – The new technology-fitted connected vehicles will have an advanced and expensive infrastructure to maintain. Cloud servers, signals and other safeguard features will involve more expenses, and the product liability insurance will be able to cover the same.
How to plan for a driver-less future
Insurers should focus more on big data and try to increase their effectiveness in the market of autonomous vehicles. Learning more about the technologies and the communications systems that support these vehicles can help them find ways to craft the right solutions for the manufacturers. The good news is there will be data aplenty to base these decisions on. The better news is that Big Data and Analytics technology already exists to clean, process, and mine that data. Insurers will update actuarial techniques and models to stay at par with the developments in the connected cars. Last but not the least, the insurers may find it necessary to start taking more active part in the manufacture of the vehicles, interacting with the manufacturers and the government bodies handling the developments.
Personal automobile policies could be (at least partially) replaced by large, commercial policies after considering product development and distribution on a massive scale. Small insurance carriers may also think about merging with large carriers, handling bigger risks in the AV market.
Wrapping it up
The need for auto insurance will not become optional in the driverless environment. However, there will, almost certainly, be a drastic change in policies and a shift in liabilities from the driver to the vehicle at large. The manufacturers, who will take advantage of the situation, will excel in product development and create a chain of exceptionally-performing connected cars for their customers.