Although cars are a wonderful invention, there are also dangerous not only when there’s human error but also when in the wrong hands. Since the invention of the first engine car over a century ago, major advances have been recorded, especially with regard to safety technology. Modern cars are now fitted with technology for drowsiness detection, emergency braking, blind spot monitoring etc.
Driverless cars are now a reality and their popularity will only grow going into the future. Although drivers are going to be around for some time, they’ll definitely give way for the technology sooner rather than later. Self-driving cars will change driving habits and patterns, with some people predicting even a change in car ownership. The automobile insurance industry will also be affected by this disruptive technology in various ways as explained below.
1. Fewer accidents will mean a drop in insurance premiums
Currently, human error contributes as much as 94 percent of all road accidents in the US. Driverless cars just like most of the other machines are more accurate and efficient than humans. Drowsiness, distraction, driving under the influence of alcohol, and other human behaviors linked to road accidents will become history as autonomous cars become more common in the future.
Driving history is an important determinant of auto insurance rate. The more a person is involved in road accidents over a given period, their higher the rates. However, with driverless cars, such data will not be important. The increased safety associated with these vehicles will force insurance companies to lower their premiums.
2. Reduced car ownership to affect the demand for individual auto insurance negatively
Autonomous vehicles are expected to change car ownership. Fleet ownership will flourish at the expense of private ownership. Vehicles will now make various trips on a 24-hour basis and enhance the popularity and growth of ride-sharing services. Fleet-ownership is already being tested with Uber entering into a driverless car partnership with Volvo, GM with Lyft, while more companies are exploring similar avenues.
Insurance on privately owned vehicles is mainly what auto insurance is all about. With fewer individuals owning vehicles in the future, the growth and profitability of auto insurance will be affected. The overall premiums will reduce with fewer individual owners.
3. Change in liability in the event of an accident
Autonomous vehicles will not completely eliminate road accidents. However, in the absence of a human driver, there’ll definitely be a change on who’s liable for the losses. Currently, however, it appears the manufacturers have already accepted the responsibility. Mercedes-Benz, Volvo, and Google have publicly accepted to take responsibility when their self-driving system causes the accident.
However, the process may not go as smoothly as it sounds. In an accident involving autonomous vehicles and real drivers, it will be a little difficult to determine who’s at fault even as automakers appear willing to take responsibility. It may be necessary to install extensive tracking systems in driverless cars to settle such cases.
As AI -enabled vehicles become common, it still early to say with precision how this will affect the insurance industry. However, insurance companies have the role of reevaluating how the technology may affect their business and respond accordingly. They should also be vigorous and take any opportunity brought by the technology.