Will driverless cars wipe out accident claims?

The motor industry is yet again on the cusp of radical change. Statistics show that more than 90% of car accidents are caused as a result of human error and as a result, manufacturers remain on a continuous struggle to make their cars easier and safer to drive.

In recent years, we have already seen features like automated emergency braking, lane-drift sensors and self-parking technology joining the more established safety features such as anti-lock braking and electric windows, in all new cars.

These modifications are proving to be successful for drivers and insurers alike, given that the average driver in England spends 235 hours driving every year – equivalent to six working weeks – and must concentrate on driving 100% of the time. Yet, the possibility of third-party accident claims almost disappearing entirely is now becoming more of a reality, with fully automated or driverless cars set to be on our roads way sooner than we think.

Major car manufacturers such as Volvo, Ford and BMW are already working on their take on the autonomous vehicle, as well as several of the tech giants in the USA – including Google’s parent company Alphabet, through its Waymo business.

By 2025, the percentage of cars on the road with advanced driver assistance systems is expected to jump from 10% in 2015 to close to 40% and by 2030, half of the cars on the road will have multiple advanced driver assistance systems. But as the potential to be driverless moves ever closer, so to does the rush to understand the implications of its imminent arrival. KPMG has already predicted that the normal car market in the US alone will shrink by 60% by the year 2040, and given that it supports supports 277,000 jobs and billions of dollars is cause for concern.

Waymo has already teamed up with an American based start-up called Trov, to become one of the first companies in the world to offer insurance for the occupants of driverless cars. Their model is based on selling the premiums to the manufacturers, (in this case Waymo) as opposed to directly selling policies to individuals and provides insurance for journeys on Waymo’s car-hailing service, which is set to launch in Phoenix, Arizona, in 2018.

The policy covers passengers for medical expenses, lost property and trip interruptions and the premiums will be paid by Waymo. Interestingly, Trov will not cover the cost of any damage to the vehicle that might result from an accident, or damage to other vehicles. Waymo’s other insurance policies will cover this.

In the UK, Direct Line, the country’s largest car insurer, is taking the lead by offering the incentive to encourage drivers to use this new technology that it hopes will cut down on accidents and reduce claim payouts. Their “driverless discount” product is aimed at drivers who have an active Tesla Autopilot system, which include adaptive cruise control, automatic lane changing and self-parking – with full self-driving available in the future. It’s not exactly driverless car insurance but certainly a step in the right direction.

Other insurers are being more proactive. Adrian Flux are specialist car insurance brokers in the UK who claim to be the country’s first insurance broker to offer driverless car insurance. Their Driverless Car Insurance Policy provides cover against loss or damage to a driverless car caused by hacking or attempted hacking of its operating system and failure of the manufacturer’s software or failure of any other authorised in-car software. It also covers for any updates and patches to the operating system, firewall, and mapping and navigation systems and satellite failure or outages that affect the navigation systems. The cover also provides for the loss or damage caused by a driver failing to use manual override when software or mechanical failures persist, resulting in an accident.

Although a select few insurers are making headway, the majority, including some of the major brands, are not and this is worrying.  The arrival of the driverless car has changed from being an ‘if’ to a ‘when’ and the lack of appropriate infrastructure and a shortage of self-driving car insurance is likely to mean the UK faces serious challenges in the near future, especially if it doesn’t want to get left behind in the slow lane.