How Will Autonomous Cars Impact the Insurance Sector?
【Summary】The introduction of driverless cars is expected to reduce collisions by up to 90 percent. And considering that most people living in urban locations leave their cars parked 95 percent of the time (according to Paul Barter, transportation adviser); insurance providers may need to revamp traditional models of insurance to stay relevant.
During a driverless car conference, Warren Buffet uncovered a direct relationship between car accidents and insurance. The business magnate explained during an interview with CNBC, "if there are no accidents, there is no need for insurance." This bold statement is very applicable to self-driving vehicles, since one of the main objectives of automakers developing driverless technology is to reduce collision rates on public roads.
For the insurance industry, this is a call for change. At the moment, insurance companies have not offered a clear plan for autonomous vehicle owners. The only insurer that is going out of its way to provide coverage for modern cars is Adrian Flux, a UK-based insurance company that specializes in coverage for cars, homes and bikes. Coined as the world's first "publicly-available" self-driving car insurance policy, it launched the service earlier this year.
Less Accidents, Less Coverage?
Insurance is, and will continue to be, essential in the transportation sector. But the demand and extent of coverage is predicted to decrease prolifically. More than 50 percent of new vehicles on the market in 2015 came with autonomous safety features, such as auto-breaking systems. Moreover, the introduction of driverless cars is expected to reduce collisions by up to 90 percent. And considering that most people living in urban locations leave their cars parked 95 percent of the time (according to Paul Barter, transportation adviser); insurance providers may need to revamp traditional models of insurance to stay relevant.
"It will be a long, long time before every car on the road is a driverless car; there will be a lengthy period of transition with vehicles of varying autonomy sharing the roads, so there will be a need for accident insurance for some time yet," said Gerry Bucke, General Manager at Adrian Flux, during an interview with Insurance Business.
Based on Bucke's views on the transition from human-driven cars to fully autonomous vehicles, insurance companies have roughly 20 years before the impact of driverless cars becomes widespread. When the majority of vehicles on the road are equipped with SAE Level 5 features, cost for insurance will likely hit all-time lows for drivers.
Shared Mobility Coverage
For now, insurers must focus on developing coverage for an ecosystem that thrives on car-sharing and ridesharing services. The shared mobility industry is growing at an exponential rate, with pioneers like Uber, BMW and Ford, constantly pushing to expand to every corner of the globe. These services are very convenient for busy commuters – it saves them time and money, by avoiding the need to own a private vehicle. In the worst case scenario for insurance companies, shared mobility services may become so reliable that people may never need to own a car until they start a family. When this happens, car manufacturers will likely revert to offering shared mobility services through their own fleet of vehicles.
"Shared mobility will have a more immediate impact on the insurance industry. Cars will wear down faster with more frequent use, and there may be more accidents with multiple drivers," said Seth Birnbaum from TechCrunch.
Michael Cheng is a legal editor and technical writer with publications for Blackberry ISHN Magazine Houzz and Payment Week. He specializes in technology business and digesting hard data. Outside of work Michael likes to train for marathons spend time with his daughter and explore new places.
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