How Will Car Automation Affect Auto Insurance

Self Driving Cars  

In 2016, a proposal was made in the Florida State Senate that would set new insurance requirements for companies providing app-based transportation. Such conditions are put in place to compensate auto-accident victims. While the matter has a rather straightforward solution, automated cars create a tougher problem for legislators and insurance companies alike.

Autonomous vehicles are assumed to be safer, and they lower the chances of car accidents. Estimates by Telsa indicate that the autopilot feature reduces accident rates by 50%. Car manufacturers suggest that autonomous driving alongside other safety measures can eliminate road accidents. This development has come out as a threat to the survival of the insurance industry.

Will self-drive cars kill the insurance industry?

Autonomous cars are not a threat to insurance companies. The US motor vehicle insurance industry is significant; it generates annual revenue of $228 billion, alongside creating 225,000 job opportunities. As the developers inflate the benefits of their new products, the insurance companies will have to cut through the hype. They will assist in the development of sound risk-management practices for unmanned vehicles.

Insurers usually offer important reality-check to new development plans. Whether popular or not, plans that do not make sense to insurers might fail to be launched. For instance, Kansas passed a law in 2013 that allowed school employees to bring along concealed weapons. Insurers thought the risk was too high, and so they neglected the plan by rejecting the renewal of the school's' insurance policies.

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The changing face of liability may present more coverage opportunities. This means that insurers might participate in identifying new risks likely to emerge with the automated cars. For instance, if an accident occurs as a result of software defects and not human error, the automotive company will likely be liable for the injuries. For the automakers to avoid lawsuits, the insurance companies will come up with new products to cover these possibilities.

Instead of waiting for accidents to occur, insurance companies will have to carry out self-driven vehicle research. They will focus on adapting to the safer automated vehicles so as to determine new risks. The research will also enable insurers evaluate the effectiveness of self-driving cars. Due to the lower risks in automated cars, insurers will have to create cheap auto insurance quotes and new covers for risks that may come out after the research.

The risks in use of unmanned cars are relatively unknown. From a safety perspective, the cars seem to be less prone to accidents. But practically, the real world testing has not been carried out enough times. In the meantime, the progress is fast accelerating, and the only uncertainty that the insurance companies have is the pace at which the development is expected to come.

Is self-insurance a good idea?

Due to the unknown risks, insurers are not sure what action to take. However, some developers are taking up the responsibility by self-insuring their products. These developers include Google, Volvo, and Mercedes.

There are some consequences of this move that should be considered. Self-insurance could remove a significant firewall between risk and innovation. The move might also impede the car users' freedom of travel. Self-driving car manufacturers might set the vehicles to avoid dangerous areas, resulting in self-censorship form of a thing. This would result in prejudice of business along the said routes, as well as avoiding time-saving shortcuts.

Other disruptions

Autonomous driving will greatly disrupt other sectors like truck driving, which is the most popular occupation in 50% of states in the US. The use of autonomous vehicles is a threat to truck drivers' source of income. Disruptions are sometimes necessary. However, we can not ignore the price that they bring along.

Inventive proposals need to be considered to facilitate insurers' better understanding of capabilities and risks. These might include the creation of new government agencies that focus on technical expertise. Transparency in algorithms is also important in promoting trust and predictability in products with unknown risks.

It is not too early to plan for implications and disruptions. The future of self-driving cars is promising. Therefore, these great developments should not run out of the road.

By  Lindsey Patterson	Embed
Author Bio - Lindsey is a freelance writer specializing in business and consumer technology.