Dec 04 2016 | Insurance
Driver-less cars – Impact on the insurers!!

By: Amit Jain | Delivery, Insurance

Primarily, there are three things to automatic cars i.e. technology, regulations and insurance.  Just trying to throw some light on the 'insurance' part in this article.  To briefly give you the background, almost all the major automakers are testing self-driving cars. 

Google has plans to roll out its fully automated car by 2018 and so does Tesla Motors.  Recently, the US Secretary of Transportation expressed his optimism about the driver less cars at Frankfurt Auto Show by saying, “Expect to see them in use everywhere in the world within 10 years".  IIHS, the Insurance Institute for Highway Safety has invested $30 million to upgrade its facility to test crash avoidance systems.  "We need robots to test the robots", says David Zuby, IIHS' Chief Research Officer. 

The autonomous vehicles with precise crash avoidance technology will result in substantial reduction in accidents, leading to much less coverage needed by the car owners.  Eventually, there will be substantial reduction in premium income for the insurers.  In USA, the premiums from Auto Insurance were USD 195 billion last year.  According to an estimate, it could come down to $78 billion by the year 2030 due to driver-less cars. 

Further, the Insurance Regulation will evolve according to the unfolding needs.  Currently, insurance is state-regulated with two kinds of liability systems across 51 states i.e. No-fault liability and Tort.  Insurers' compliance with the regulations would change depending on whether federal government starts playing greater role or states start moving to more uniform requirements. 

The traditional underwriting factors might continue but the make, model and the style of car may assume a greater importance.  The implications of car's garage location and where it is being driven might be different if there are dedicated areas set aside for automated driving.  Initially, or during the transition to wholly automated driving, insurers may have to rely on telematics to monitor driving activity of the cars.

Automobile ownership is likely to see a gradual declining trend.  People would use shared rides in automated cars owned by a company, municipality or other group.  A study by University of Texas at Austin found that each shared autonomous vehicle can replace 11 conventional vehicles.

To conclude the above, the changes offered by the driverless cars are phenomenal for the insurance industry and they need to be ready for it. I'll share more in this space as more information unfolds about Insurers' actions in response to the challenge thrown by driver-less cars.