Autonomous vehicles, a concept we’ve always associated with sci-fi movies is now integrating into our reality. This new decade will bring a rise in the popularity and availability of ‘self-driving’ vehicles, but what does that mean for the insurance industry?
Based on research conducted by Tesla, Thesimpledollar.com stated that the safety features of self-driving cars can reduce the risk of accidents and traffic violations. However, that doesn’t guarantee cheaper car insurance premiums for drivers.
A study by insurance firm Accenture and the Stevens Institute of Technology predicted the insurance industry will see traditional premiums drop by $25 billion by 2035, and by $41 billion in 2050. That’s roughly a 20% loss over the next 30 years.
Global Head of Accenture’s insurance practice, John Cusano, commented that agents are bracing for long-term declines in auto premiums with the adoption of newer and safer autonomous vehicles. “However, our research suggests that auto premiums will increase before they decline on this trend, so insurers that can navigate the changing technology environment could win market share.”
So, will it affect auto premiums or not?
The real question you’re asking is are they safe enough to warrant lowering premiums? The short answer to this question is: it’s complicated. Self-driving vehicles are statistically safer drivers than we are, but there are other factors that make the relationship between self-driving cars and insurance costs ambiguous. Cusano’s prediction, for example, assumes that drivers are in a rush to acquire self-driving vehicles. In actuality, a recent survey by InsuranceQuotes’ found that only 32% of people currently trust self-driving technology. That reluctance is why the Stevens Institute of Technology estimated that by 2035, less than 10% of the total cars on the road would be autonomous vehicles. Travelers Insurance released a white paper at the 2018 Automated Vehicles Symposium explaining how auto insurance shouldn’t look much different when self-driving cars become more popular because people are hesitant to use them.
Here’s a hot take for you: humans are not safe drivers, and to really drive my point across, the National Safety Council released data analysis stating, “For the first time since the Great Recession, the U.S. has experienced three straight years of at least 40,000 roadway deaths.” For reference, this is only a 1% decrease from the years prior. The reason we as a society are so hesitant to legitimize their use is due to fear; we are afraid of not being in control. I would argue that this fear, though not unfounded, makes a mountain out of a molehill. Statistically, using a self-driving car is safer than riding with your uncle.
Self-driving vehicles will prevent more accidents in the coming future, making the roads a safer place for drivers. Because of this, autonomous vehicles have the power to regulate traffic and reduce road congestion so people can get to their destinations faster.
How do I not lose money?
If you are looking to cover yourself financially, you should emphasize losses that aren’t caused by collisions like weather damages or theft, meaning raising rates for these types of claims could help cushion your agency. Another idea is creating new types of insurance specific to autonomous vehicles, such as cybersecurity insurance, product liability insurance and “public infrastructure insurance, which could come with steep premiums” according to Thesimpledollar.com.
At a certain point, drivers will realize there’s no need to carry personal accident insurance. Some industry insiders even predict that states may drop mandatory coverage regulations as roads get safer. Even though there are benefits to always carrying full coverage, people may head towards investing only in the minimum legal coverage required.
Before you freak out, this doesn’t mean the insurance industry is heading towards impending doom. The above predictions don’t consider how the industry could pivot, and other forms of advancing technology could be useful to fine-tune data collection. This new information could ideally help agencies better price premiums as well as provide more useful services to customers.
Insurers have ample time to research and make appropriate changes. The ball is in your court to make the most of the new decade and shift your business models to accommodate the coming technological changes.