Driverless Cars and the State of Insurance
The thought of self-driving cars becoming mainstream is both thrilling and a little scary. The idea of spending your daily commute catching up on work, reading a book, playing a game, or even meditating sounds indulgent. The thought behind self-driving cars is that these vehicles will be able to sense and respond to their surroundings and be less prone to distraction. This would make travel by car much safer. What would this shift mean for auto insurance?
Changes on the Horizon
Companies like Tesla have started providing their own insurance with the sale of their cars in Asia. They hope to one day include insurance in the price of their vehicles. They claim this move is to account for the fact that their Autopilot makes their cars safer. In fact, crash rates have gone down 40% since 2015 when Autopilot was first installed.
What this shows is that car insurance providers will need to make a change as self-driving cars become more predominant. If these automated vehicles are indeed that much safer, premiums should reflect the reduced number of collisions. This could hit the insurance industry hard. It could cause a 40% reduction in the car insurance sector over the next 25 years.
Levels of Automation
Insurance companies will have to assess cars on different levels of automation. They range from level zero to five. Level zero represents a vehicle with no autonomous features. Level five is a car that can operate entirely without a driver.
Companies like Google and Ford are especially interested in four and five level cars. Ford actually plans on developing a fleet of driverless cars that lack steering wheels or pedals by 2021. In situations like these, it appears manufacturers would bear liability. The idea is that the computer and its programming are at fault should an accident occur. It seems a precedent has already been set regarding these higher-level vehicles. How manufacturers will handle this increased liability burden is not yet clear.
Cars in the level two and three categories are more complicated where liability is concerned. These vehicles have two automated features up to being able to handle dynamic driving tasks. They still require driver intervention. This issue arose recently when the driver of a Tesla car died in an accident with a tractor-trailer while the car was in Autopilot. Tesla claimed the computer was unable to register the white side of the truck against the brightly lit sky, so the brake was not applied. After a six-month investigation, the NHTSA determined Autopilot was not at fault. They found that the driver had enough time to brake and that the system was not expected to detect traffic crossing in front of the vehicle. In this situation, a driver was still held liable for the accident in a level two vehicle even if the vehicle is in autopilot mode. Here, insurance is not obsolete.
Today, fully automated cars are still something of the future, although much more tangible than ever before. Even if you are driving a partially automated car, you are going to need Cleveland car insurance. Until we see fully automated cars on the road, car insurance companies will operate the same as before. Change is on the horizon.
Research shows that, despite the accident involving the Tesla Autopilot vehicle, widespread adoption of self-driving cars could reduce accidents by as much as 90%. This means premium prices will have to fall to reflect the inherent safety of these new cars. Insurers are aware of the state of things and are bracing for the effects of a reality soon to come. Some have already noted in SEC filings the potential threat driverless cars present to their business models.