Driverless cars are already on the road being tested, starting in January 2015. Google’s driverless car is already getting a lot of press. Other auto and truck manufacturers are less vocal about their advancements, but they’re happening quickly. United States manufacturer, Peterbilt, demonstrated its autonomous tractor a few days ago while German truck maker, Daimler, introduced its version in July. Everyone is now asking the question, “How will driverless technology impact my auto insurance premiums?”
Technological growth seems to increase exponentially over time. The major stumbling block going forward seems to be political and the steamroller that has been shown by Uber and Lyft would seem to indicate it is futile for laws to stand in front of innovation.
Google claims it can reduce accidents by 90%. Volvo has a goal of eliminating injuries and fatalities entirely by 2020. Volvo has deployed or is developing pedestrian detection that works at night, animal detection, road border and obstacle detection, auto to auto communication, parking aids, and advanced cruise control that includes steering.
The United States has 5.5 million motor accidents a year. Even a small percentage decrease would result in a vast change in insured loss and subsequently a reduction in premium.
Think of some of the reasons why accidents occur which can be eliminated with an autonomous vehicle.
- Alcohol and Drugs
- Emotional Driving
- Improper Yield of Right-of-Way
- Failure to Stay in Proper Lane
- Distracted Driving
- Over-correction and Others Resulting from Inexperience
Further, other losses might be less severe and occur less frequently with a driverless car.
Think of a world where you can drive to the nearest freeway, and then form a link of other vehicles to merge with freeway traffic. Your linked cars will be controlled by a public transportation “lead car” which is primarily driverless but can be over-ridden by a driver who is a paid professional. These “car-trains” will take up a fraction of the space now being used, which will greatly relieve expense for infrastructure and land usage.
You car will still have accidents to and from the freeway and such perils as windstorm, hail, fire, theft, and flood.
People with infrequent use for a car will probably have a driverless car come to their home, greatly reducing the need for individual auto ownership.
On the other hand, commercial trucks will run many more hours a day without the need to shut down for drivers whose driving hours are restricted. This will certainly increase exposure.
To get a feel for the impact think of the increase in private passenger auto insurance rates for those with a DWI conviction. One out of seven drivers in my home state have had a DWI; one out of seventeen have had two or more. A DWI could double, triple, or quadruple a person’s premium for three to five years. A driverless car would virtually eliminate that problem.
If the insurance industry were an automobile it would have humongous rearview mirrors and almost no windshield. The insurance industry is empirical, meaning it uses historical data to predict the future. Because of its nature it will take some time for the industry to adjust to the driverless car. However, the primary rule in our new world is “Learn fast!” Those insurers who are on top of the true nature of autonomous cars and trucks might adjust and win big.
Obviously a mixture of driverless cars and “drivered” cars on the highway at the same time will produce some chaos. How this all plays out will be interesting and unpredictable.
New problems in settling litigation will present themselves. Who will be held responsible for those odd accidents: the manufacturer of the computer, the auto seller, the mechanic, or the car owner?
Helping to alleviate some of the concerns are the automakers themselves. Companies such as Volvo, Google, and Mercedes Benz have pledged to be held liable if the autonomous technologies in their cars cause any accidents.
What ethical decisions will dictate the priorities for avoiding loss? I assume Property damage will be valued less than bodily injury, but what permutations of that primary rule will occur?
Google met with insurance companies back in 2012 to discuss the potential costs of insuring a driverless car. The safety and liability were two of the biggest issues discussed. My best guess is that auto insurance rates for the first mass-produced driverless cars will be about 25 – 35% less than for “drivered” cars and will continue to drop as actual experience proves technology to be effective. We could easily see a drop of 75% over a fifteen-year period if technology and will are evenly matched.
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