Driverless cars to disrupt insurance industry


Driverless cars are set to radically reduce the number of road crashes.

But the technology is also going to disrupt the insurance industry.

Cheaper insurance premiums look likely. But that is just one of many changes that might occur.

Consulting firm McKinsey & Company has estimated that by the middle of this century autonomous vehicles could reduce road deaths in the United States by 90 percent.

KPMG has predicted that the US automobile insurance industry could shrink by 60 percent by 2040. A similar impact is likely in New Zealand.

Autonomous cars will impact everything from who pays for the cost of a crash, to how many people are employed by the insurance companies.

The changes raise issues around who will be liable for a crash.

Volvo has said that it will cover the full cost of any crash that is caused by one of its cars while the vehicle is driving in fully autonomous mode (meaning a human was not in control of the vehicle at the time of the crash).

But what if a human driver was in control at the time of the crash?

The British insurance industry is leading calls for legislation that would require the car manufacturers to provide a standard set of data from crashed autonomous cars.

This would help the insurance companies to work out who is liable.

The data would include information that would help determine whether the vehicle was operating autonomously or not, and what technology was in use. The information would not measure driver performance.

Even if every car was autonomous many people are still going to want to drive for pleasure. After all, if you buy a $300,000 sports car you are probably going to want to be able to take control of the wheel.

Even if a car is fully autonomous there are all sorts of other questions.

For example, what happens if a car is in a crash while it is in autonomous mode and it turns out that the latest software update had not been installed?

What if the car's owner had opted to delay the latest software install, the way you can delay a computer software update? Does this mean the driver has voided the insurance policy and is liable for the cost of the crash?

Even if every car on the roads was being driven in full autonomous mode that would not mean there would be no road accidents.

There would still be cases of mechanical failure. Or a car might crash into the side of the road to avoid a child that has run onto the road.

There is also the question of whether two cars in autonomous mode might react differently to the same situation. Various car manufacturers and technology companies are developing their own driverless control systems. Like computer software, each one of those systems will be slightly different.

These are just some of the issues that vehicle insurers are pondering.

The vehicle insurance industry could be very different in ten years' time. But nobody is sure yet just how different it might be.


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