Autonomous cars and auto insurance: What’s going to happen?

Autonomous cars could have huge effects on car insurance.

Everyone knows that one of the newest innovations with the brightest of futures is the self-driving car. Many car manufacturers have already delved into the arena of self-parking cars and cars with automatic braking systems. However, what happens when this same technology can actually take you from place to place? And how does it affect the world of car insurance? How does a company insure a car that doesn’t have a driver? How will insurance companies assess the risks of a self-driving car? We’ll look at some of the risks that autonomous vehicles present and some of the effects they could have.

How could autonomous cars affect auto insurance?

Lower car insurance rates.

Insurance premiums could drop because of autonomous cars since they eliminate human error. The National Highway Traffic Safety Administration (NHTSA) reports that 94 percent of accidents are caused by the error of the driver. So, by removing a significant part of the risk, insurers could charge lower rates because the carrier (theoretically) won’t have to pay various, expensive claims for accidents.

Additionally, since autonomous vehicles decrease the number of accidents and traffic on the roads, it’s predicted that more people will opt out of owning a private vehicle and opt for autonomous ride-sharing services (especially in cities) for the sake of convenience.

Think about it: if you’re not driving a car, and your neighbor isn’t driving a car, and you’re both going to the same place, the odds that both of you would pay thousands of dollars for something you’re simply riding in is probably slim. This means that there are (presumably) fewer cars on the road, which of course, means less risk as well.

Passing the buck: Shifts in liability.

Even though autonomous cars take human error out of the equation, there are still opportunities for the vehicle to wreck. The unfortunate fact of the matter is that brakes fail, technology shorts, and systems fall short. But if no person is driving the vehicle, who’s to blame for the accident? More importantly, who helps pay for the car and the injury to the other car’s passengers?

Autonomous cars could lower the frequency of accidents on the roads.

With the rise of programs like Uber and Lyft and the lessened likelihood of a person actually owning the car, the answer would the car manufacturer or the business that owns the car. But since the entity “at fault” for the accident is a company, the insurance coverage would look a little different. According to Insurance Journal, instead of the liability, collision, and comprehensive insurance that normal drivers would insure their cars with, self-driving vehicles would need:

Product Liability Insurance

The fact stands that technology is not yet foolproof. So, what happens when the hardware you’re depending on for travel short circuits or shuts down unexpectedly or its memory gets overwhelmed?

They’re all things that will have to be handled by product liability for the car itself instead of liability for an individual driver. It can help cover the costs that may arise from bodily injury, negligence, and property damaged due to a product the vehicle product, not a specific operator.

Cyber Liability Insurance

Unfortunately, one of the darker sides to autonomous vehicles is that outside parties can still find their way into the software, redirecting the car for nefarious purposes or causing a crash. That’s right – we’re talking about hackers. Though many car manufacturers take great care in creating protection for autonomous car software, they’ll still need cyber liability to help cover damages if a vehicle has fallen victim to a hacker.

Of course, businesses would still benefit from BOPs, commercial liability, and other types of insurance that can protect them as an entity. Still, these are the two main types of coverage that insurance companies could see a spike in if and when self-driving cars are more common.

More Accurate Claims.

When accidents happen in an instant, the amount and severity of a claim really depend on witnesses and the drivers involved. Even authority figures that report to the scene can only deduce what happened from the layout presented to them. So, some claims can be escalated or fault can be wrongly assigned. With autonomous cars, there are tons of cameras and sensors that can give information to responders and insurance companies to properly assign fault and determine if a driver was at fault or which vehicle malfunctioned.

This results in less faulty claims and can streamline the claims system of insurance companies so that they can quickly issue payouts if an accident does still happen.

Opportunities in Government.

Autonomous vehicles won’t just expand an insurer’s opportunity to get in on the ride-sharing space. They may also have the opportunity to work with the government on infrastructure. In order to drive safely, autonomous technology must be able to sense and recognize buildings, other cars, road systems, traffic lights, and a number of other factors that long-time drivers take into account in a matter of seconds.

So, the autonomous cars won’t be the only ones that will need sensors. Certain buildings, crosswalks, and other types of infrastructure will need ways to communicate with the car. These sensors, along with the communication devices on other cars will need to be insured for software bugs, errors in communication, and wear of the system over time.

Preparing for Autonomous Cars

Overall, self-driving cars don’t seem to be that big of a threat to the insurance industry as a whole. If anything, the rise of these autonomous vehicles may help carriers. Less human error means significantly lessened risks and fewer payouts from claims. Insuring businesses and corporations instead of individuals means more revenue than personal auto insurance plans currently generate. Plus, according to the Harvard Business Review, the new lines of insurance that would grow from this need could generate more than $81 billion by 2026.

However, there are some adjustments that have to be made to truly profit from this shift. Actuaries (the people who determine exactly how much risk it would be to cover an entity) will have to adjust their models for assessing the risk of the software behind self-driving cars. Carriers will need to collaborate more heavily with governments, safety organizations, communication businesses, and software companies to effectively manage the risks of self-driving vehicles.

Carriers should also start to consider new business models to deal with the increase in business insurance to cover these cars. Plus, insurance companies that focus more on personal lines will need to consider more flexible business models for the potential drop in necessary personal auto insurance.

If insurers consider the benefits of adapting to the business of autonomous cars instead of fighting against it, there could be mutual benefits for everyone involved – including current drivers and future passengers.

Insurers will have to adapt to the changes autonomous cars could bring.

But in the meantime, if you’re looking for Atlanta car insurance we can help. Our team can help you find great coverage at a great rate – we’d like to help you save money on car insurance. You can get in touch with us by filling out our online quote form or giving us a call today.