Ever since the discussions about autonomous cars) have come into the light, one question which has become quintessential is that – Will it be the death of the automotive insurance industry?
It is being believed that driverless cars will reduce the risk of mishaps which leaves the future of the motor insurance industry in jeopardy. Although the autonomous cars are still not seen in huge numbers on the streets, but that time is not very far. Some of the advancements in the cars which hint towards the adoption of such futuristic conveyance are cruise control, park assist, collision avoidance systems, warning when a car is drifting out of its lanes, etc.
The above mentioned advancements have surely left the motor insurance industry thinking and at a momentary pause. Let us dive deep into the situations across the world.
Swedish motor giant, Volvo, has recently made an announcement that the company will accept complete liability whenever one if its manufactured cars becomes autonomous and gets involved in a mishap. This statement is the first ever proclamation by a carmaker.
However, one should be clear that the company will bear the charges in an accident in which the autonomous car is mangled. The chances of such mishaps are very less since the driverless cars are capable of monitoring 360-degree view avoiding collisions caused by other vehicles and reacting more quickly than a human can.
Volvo’s President and Chief Executive, Ha?kan Samuelsson, has also urged the federal lawmakers to create guidelines for the ‘testing and certification of autonomous vehicles.
Direct Line, the Great Britain’s largest motor insurer has described driverless cars as a risk that can have a huge impact on the size of the motor insurance market and the insurers’ role.
People have been presuming that the paradigm shift of the vehicles to autonomous mode would be pressurized and brought by the insurance companies keen to limit liability and costs. Furthermore, since the autonomous cars are shifting the burden of liability on the manufactures, this would also assuage the fear of reliability that the consumers have.
What does the future holds?
KPMG conducted a survey in June 2015 to show the position of ‘Automobile insurance in the era of autonomous vehicles.’ It summarized the feedback of senior insurance executives whose companies, in aggregated manner, accounted for 85 billion dollars in commercial and private auto premium.
The survey showed most of the respondents in agreement that there will be a pressing need of changes across the core functions like underwriting, claims, etc., once the transformation starts.
Some of the effects on the insurance industry from autonomous cars will include drop in premium and elimination of excess underwriting capacity
What does autonomous cars brings for the consumers?
More safety, of course. If the stats from around the world are to be believed, it is shown that 90 per cent of the road accidents are the result of driver’s error. So you remove the driver, you reduce the risk of fatal accidents.
Who will be responsible?
Even though the driver’s role in an automated car will become somewhat similar to that of a pilot’s, liability will still rest with the one driving the car. The courts will decide who will be liable for the accident amongst the manufacturer, software developer, and the person who has serviced the car. In this context, the UK Government said that it would work to provide greater and better certainty around civil and criminal liability when an automated vehicle has collided. Until then, all these questions are to be considered by the insurers.
What about larger threats like hacking?
In the pursuit to eliminate human error, larger threats like hacking have been completely ignored. In that event, if it could be proved that the manufacturer was negligent and incapable of designing hack-resistant software, then they may be the ones responsible.
Where does that leave the motor insurance industry? Will it survive?
One way to overcome the complexity is by covering the vehicle and not the driver. This does not necessarily imply one flat premium rate for every car owner. Another option could be government tax on the autonomous conveyances, ensuring every car being insured.
As far as the survival of the motor industry is concerned, experts are of the opinion that car insurance definitely exists in the driver less future. However, there is no doubt that the insurer will have to keep pace with the advancements. While some insurers have adopted the wait-and-see approach, the others have started taking active participation and turning obstacles into opportunities.
They are focusing on the big picture and trying to deliver more value to their customers. They are evaluating the effectiveness and efficiency of the technology to identify new business opportunities that might arise.
Autonomous cars are surely posing a lot of questions for the motor insurance industry but any conclusion cannot be reached. Some believe that as premiums are tied to the cost of damage assumed for a vehicle, driverless technology would cause the profits to plummet; the others are of the opinion that the expensive equipment on the autonomous cars may inflate premiums and increase the demand for comprehensive insurance policies.
At the end, it is quite premature to question the existence and role of insurers because even the latest of safety measures is not risk-proof which calls for the help of insurers.
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