Autonomous vehicles and the technology supporting are now a mainstream subject on our daily news feeds and media. It is undoubted that the widespread adoption of self-driving vehicles will have an enormous effect on the automotive industry and subsequently a major impact on the insurance industry. According to Research and computer modeling conducted by Accenture in collaboration with the Stevens Institute of Technology estimates that the switch to autonomous vehicles will generate at least $81 billion in new insurance revenues in the US between 2020 and 2025.
The rapid emergence of autonomous vehicles – Stevens Institute of Technology predicts that as many as 23 million fully autonomous vehicles could be travelling US highways alone by the year 2035 – brings the automobile insurance industry n front of many new challenges it will have to face. So let’s have a look at 3 key changes that will potentially occur.
A. Accident Liability
The switch to self-driving vehicles will have a direct effect on insurance companies and cause drastic and immediate changes to the way the industry works. Autonomous vehicles will not only bring about a change to our driving habits and patterns but also in the ownership of vehicles which will have a direct effect on accident liability. With most autonomous vehicles likely to be owned by automotive or original equipment manufacturers (OEMs), OTT players and other service providers – such as car-sharing companies – it is “assumed” that they will also be liable for any damages caused. Many companies in the industry are already looking at the matter closely and placing insurance programs to their purchasers. Nonetheless, expect many “fireworks” and litigation here until a final framework is set a few years down the line that will crate a legal precedent to be followed.
B. Insurance Premiums
And, since autonomous vehicles will be considerably safer than vehicles driven by humans, there will be fewer road accidents, leading to reduced pricing for insurance policies. It is estimated over 94% of accidents happen due to human error and hence with this eliminated, the decline will be major. There will obviously be some initial accidents as the technology is new but as it is adapted and updated, the claim frequency is estimated to drop significantly when compared to claims for vehicles driven by humans. While insurers of autonomous vehicles will make fewer payouts for claims, this will not compensate them for lost policy revenues.
C. Private Insurance will drop
Following from the above – and as private ownership will fall – it is only natural that a lot of people will not see a reason to spend a premium to insure something they do not own. In addition, as most companies will cover the cost it will also make no sense and perhaps not even be possible. Since insuring privately owned vehicles is what the auto insurance industry has been all about, insurers have every reason to be concerned about their future growth and profitability. With fewer individual owners, there will be lower overall premiums
Conclusively, the insurance industry will not just “vanish”. People globally value their belongings and especially their cars. As long as people continue to own cars, insurance is likely to stick around in one form or another. Most consumers will always want to insure their vehicle so as to ensure compensation in the event of a theft or accident. However, there will definitely be a drop of insurance companies and offerings in the industry as private ownership will drop and of course ride-sharing companies start playing a major role in our daily transportation.
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