The driverless car has been put into wide-scale trials and the thinking has moved from “if” to “when” these cars are finally seen on the roads. This is, perhaps, positive news if these vehicles deliver on their promises of an accident free future. But there are some serious questions that insurers need to consider before they become mainstream.
Is this the End of Motor Insurance as We Know It?
Most motor insurance in the current market is personal insurance. It covers a driver against the risks of their causing an accident. But with the driverless car; why would a driver need such a policy? The “driver” will be no more than a passenger as the software and hardware deals with the driving.
Those “drivers” are going to end up arguing in court, and possibly successfully, that any action of their vehicle isn’t their responsibility. That the responsibility lies with the vendor of the product, or even the developer of the on-board car systems.
If this is how the legal environment comes down; then motor insurance may need to move up a level. Personal insurance will no longer be needed. Google, or whichever vendor gets their product to mass market, will need to ensure each car sold but the individual owner won’t need to be involved in that process. It will form part of the purchase cost (as with pretty much anything that a supplier buys in bulk – it’s also going to produce less revenue per insured party too).
This leaves insurers that specialize in personal lines motor insurance particularly exposed to the potential loss of all or a substantial part of their business. It’s going to require some quick thinking on the part of these insurers to redevelop their offerings to a new market.
Insurers will also need to consider the possibilities of hacking and the impact on driverless vehicles. Cyber-crime could move from fraud and theft to kidnapping and even murder if criminals are able to secure a vehicle remotely by exploiting failures in software or hardware.
The Silver Lining
While driverless cars may already be being tested, they aren’t a mature technology yet. In fact it seems likely that trials may continue for a few years before mass market models are given permission to enter production.
As with all new technologies the first models that roll off (or drive themselves off) the production line are likely to be expensive. Possibly too expensive to be affordable by the mass market. It may take another decade (or more) before the technology becomes cost effective.
There is also the question of consumer acceptance. People who are used to driving their own cars and vehicles may be reluctant to hand over control to software. Just because something seems like a good idea – it doesn’t mean that the public will warm to it.
Though it seems reasonable to assume that new entrants to the motor vehicle market are going to prefer to put their driving in the hands of a computer – particularly if that means avoiding the high premiums that new drivers are charged for their insurance. This will not make a dramatic initial impact on the use of driverless vehicles but as those “drivers” mature; it may be safe to assume that they will slowly become the majority in the marketplace.