A Driving Force Against High Insurance Premiums
Technology is paving the way for innovation in the automotive world, as safer, more efficient, and durable vehicles become increasingly available. For example, the melding of technology and automotive ingenuity has born autonomous or self-driving vehicles. Companies such as Facebook, Google, and many if not all of the automotive titans are trying their hand at engineering the driverless cars of the future. These vehicles –set to hit the streets within five to 15 years (Menon, 2016)— may not only change the way think about our commutes, but are likely to be driving force in reducing insurance rates.
The added safety, efficiency, and convenience these automated vehicles will provide is unprecedented. Self-driving cars will be able to transport you from point A to B automatically, perform errands, transport elderly citizens, and likely allow autonomous Google, Uber and Lyft cars to transport people more safely and efficiently. It is expected that young male drivers under 25 years of age, who currently pay the highest car insurance premiums, stand to benefit in terms of reduced insurance premiums due to the improved safety that autonomous vehicles can provide.
However, many still worry about the undesired aspects of self-driving vehicles such as longer commutes, the potential risk of remote hacking of a cars’ computer systems, among other things, which are causing trepidation from the public, government agencies, and industry regulators.
Regardless of the apprehension, industry experts assert that approximately 90% of road accidents occur because of human error and autonomous vehicles “will save lives and [actually] reduce congestion” (Kollewe, 2016). Reinsurance and technology companies are rightly predicting colossal drops in automotive insurance premiums as autonomous vehicles are set to significantly improve road safety and decrease demand for insurance.
Technology in current vehicles include autonomous emergency braking (AEB), collision warning, and lane assist systems which help cars stay in their own lane when sensing vehicular swerving. A study conducted by the Euro NCAP and Australasian NCAP car safety bodies, found that AEB systems reduced rear-end accidents by 38 percent (Menon, 2016). As such, these newer, more integrated systems, and driver-less vehicles are predicted to lower insurance premiums in the 14 largest car markets by $20 billion by 2020 alone (Menon, 2016) and driverless vehicles are predicted to reduce overall car accidents by 80 percent by 2035 (Davies, 2016).
In addition to drivers adapting to being passengers, the changes resulting from the removal of a human vehicle operator will require insurers to switch from a fault-based (tort liability) system, which pays according to blame, to a product liability system (pays according to degree of mechanical error).
However, currently, a major misconception many drivers have is the distorted sense of security in a growing world of tempting automatic safety features. Unless your car is fully autonomous, independent from human input, and capable of responding quickly in an emergency, drivers still need to be vigilant and be ready to take control in a split second, similar to a pilot taking over when autopilot is no longer functioning.
Similar to natural disasters, which continually force change upon the insurance industry (See: Insurance & Natural Disasters), self-driving cars will disrupt the current insurance status quo causing insurance and reinsurance companies to adapt. And, considering insurance has been around since the 16th century and that the industry has endured countless changes with emergent machinery/technology such as ships, aircraft, drones, and Uber, insurance companies will certainly be able to handle the changes self-driving cars require (Kollewe, 2016).
In the meantime, consumers are preparing themselves for the new wave of high tech efficiency in the automotive world, with a Volvo chief predicting many expensive car owners will rush to buy self-driving cars (Kollewe, 2016). However, until autonomous vehicles are in mass production, actually fully autonomous, reliable in autopilot, and capable of keeping you and all that you care about safe 100 percent of the time, remain vigilant, with your hands on the wheel at all times, everyone buckled up, and your eyes focused on the reality of today’s threats and perils on the road.