Posted on March 9, 2017
Is The Insurance Industry Ready for Autonomous Cars?
Have you ever wondered what would happen on the 400 series highways in Toronto and Mississauga if autonomous cars were the norm? Does the idea of an expressway filled with self-driving cars still make you nervous? What if we told you that crashes would actually be reduced by the increased presence of self-driving cars on the road? In the US alone, high adoption rates of autonomous cars would mean 90% fewer accidents. There’s mounting proof that cars with autonomous tech are becoming safer than those 100% controlled by human drivers. Your self-driving car isn’t trying to text and drive at the same time, or put on its make-up, or deal with children quarreling in the back seat. It’s fully focused on the task at hand: driving.
And think about this: if your car’s performance safety is more elevated by this form of technology with each passing year, should you really be paying top dollar for automobile insurance? Automaker Tesla doesn’t think so. The fatal 2016 Tesla Model S crash aside, overall crash rates for their cars with the Autopilot function installed in them have dropped by an astounding 40%. The risk premiums we pay to our auto insurers ought to go down if the risk of collision also declines, say many industry observers. That’s going to hit the auto insurance business hard in about 25 years, shrinking it by 40%. At present, 80% of auto insurance claim costs relate to collisions. Reduce the number of accidents and the logical outcome ought to be that risk premiums drop. It'll become tough for insurers to justify high rates to car owners with enhanced safety on their side.
The question of who is liable—driver or manufacturer—should an accident involving a self-driven car arise is an interesting one. Volvo has stated that it would be fully liable for any crash involving one of its self-driving vehicles. Tesla fought and won the court case that tried to rest full blame on the Autopilot function that “failed” when one of its vehicles crashed into a truck, not braking in time. Because there are levels of autonomy, and because current cars haven’t yet reached Level 4 or 5, wherein no human intervention is required to operate the vehicle, the liability question hasn’t been fully tested. Lawsuits will likely determine the shape and direction of the auto insurance premiums with regard to self-driven cars as this much-anticipated form of tech intensifies. We think plenty of car owners in Toronto and Mississauga alone will be willing to become “backseat” drivers if it means lowered insurance rates.