Automakers have historically devised ingenious ways to make driving safer and more enjoyable. Now, with the advent of the autonomous vehicle (AV) approaching, we soon may not need to drive at all. According to a new Esurance report, driverless cars have the potential to become an affordable way to get from point A to point B, and they may even be safer than traditional vehicles.
That’s not to say that autonomous vehicles are perfect. They present valid concerns to motoring enthusiasts, bicyclists and pedestrians alike. In March of 2018, a driverless car was responsible for a fatal accident in Arizona, so it’s no surprise that many are hesitant to share the road with autonomous vehicles. That said, they still present an opportunity to reduce human-error accidents dramatically.
But from software failure to cyber hacking, the risks of driving are likely to change, and the auto insurance industry will be empowered to create new, more tech-focused coverages in the coming years.
Can Human-Driven and Machine-Operated Vehicles Co-Exist?
Changing from a human-driven to an autonomous vehicle model isn’t going to happen at light speed. Delivery services and large corporate fleets will likely be the first to adopt autonomous vehicles, which means that human commuters will be sharing the highways with these AI-driven vehicles for a while.
This could take some getting used to. After all, you can’t just wave an autonomous car through an intersection, or gesture to one in a parking lot. Similarly, human drivers can’t predict the maneuvers of autonomous cars.
The good news is that overall, accident rates are expected to decrease as autonomous vehicles become more common.
Future Insurance Challenges
There are two primary factors the industry will need to consider. First, fleets of driverless vehicles owned by companies like automakers and ride-sharing services may become more common. Second, the number of car accidents could drop considerably, leading to lower premiums.
While the shift to safer roads is welcome, it’ll create the need for insurers to rethink pricing and rating strategies. With widespread adoption of driverless cars, personal auto insurance premiums could drop by as much as 40 percent by 2050.
A New Way of Insuring Cars
Despite these changes, driverless cars will create opportunities for auto insurers to expand their offerings in the autonomous era.
Commercial Auto Insurance. If companies do put fleets of driverless cars on the road, there will likely be a greater demand for commercial auto insurance. Driverless cars may create greater cumulative liability for companies managing several vehicles, particularly because they could be operating 24/7, rather than sitting idle like many consumer-owned vehicles. This increased need for commercial insurance could change the market dynamics as more companies get their fleets on the road.
Cybersecurity. Vehicles equipped with internet access, including autonomous cars, are vulnerable to malicious cyberattacks. Criminals look for flaws or exploits in cybersecurity systems and can potentially put passengers in danger. In experiments, researchers have been able to control brakes, shut off safety features and disable air bags. In a chilling demonstration that went viral in 2015, security experts remotely took control of a Jeep Cherokee on a highway. As the tech has become more sophisticated, the potential for security attacks has increased. Therefore, insurance to protect against damages and liability caused by hacking may become vital for driverless car owners.
Product and Software Liability. There will be a shift in how liability is viewed — moving from driver error to problems with the car itself. After all, if a driverless car crashes, who’s at fault? If there’s a software failure or the automated driving system doesn’t respond correctly to an unexpected event, legal and insurance experts predict that liability could fall on the equipment manufacturers. Whoever made the product that caused the car to malfunction will be seen as the source of fault.
Therefore, auto insurers will be needed to protect manufacturers from liability for a wide range of technical problems. These may include problems with sensors, computer chips and software.
Of course, it will likely take a while before AVs become the norm. You may not be hailing a driverless car to take you to work very soon. But in the years before that happens, human drivers may find themselves sharing the road with their autonomous counterparts.
In other words, auto insurance in the coming years may look much different than it does today. Now’s the time for insurers to begin shaping what auto insurance will look like in the age of driverless cars.
Stephanie Braun is a director of Auto Product Management at Esurance, where she is responsible for designing the company’s auto product lines and managing telematics programs like DriveSense Mobile. Stephanie has 11 years of experience in the industry, focused primarily on product design and launch, pricing, and product innovation.