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29 Jan 21

How self-drive will change vehicle insurance

In the not too distant future, we’ll be driving around in autonomous vehicles. That will completely shake up the vehicle insurance industry. Here are the three major changes. 

Electric vehicles may have won the race but make no mistake: autonomous driving is also coming our way. By 2040, experts predict, it will be a common – and perhaps the most common – mode of road travel. This will change our society in many ways, some of which we can’t yet fathom. 

More specifically, autonomous driving will also change the vehicle insurance industry. Here, we have a more precise view of what will change. Or at least the three areas which will see the most change. 

Liability: shifting

Until now, accident liability has revolved around the central question: Which driver was at fault? That question goes out the window as soon as driving becomes autonomous. In the new ecosystem, liability will be a bit trickier. 

Will it be the manufacturer who ends up with the liability? Our limited experience so far certainly points in that direction. Google, Mercedes and others already experimenting with self-drive technology have accepted liability in cases where their self-drive vehicles have been involved in accidents. But perhaps the providers of road infrastructure will one day find themselves sharing the blame. 

Premiums: cheaper

Reports from various sources find that human error accounts for more than 90% of vehicle accidents. As autonomy increases and the human factor recedes, it is expected the number of accidents will drop off spectacularly, all but eliminating both material damage and personal injury, including road deaths. 

Consequently, drivers and fleets may expect – and should demand – increasingly lower insurance premiums, as the technology advances.

Insurers: in trouble

Vehicle insurance is one of the world’s most valuable industries. In 2019, its estimated value was $880 billion. In 2018, it accounted for more than 40% of non-life insurance premiums. 

But in an ecosystem dominated by autonomous vehicles, classic driver liability goes out the window – and with it, eventually, the requirement for drivers to have individual insurance. That spells the end of the vehicle insurance industry as we know it, however massive it may be at the moment. 

Whether vehicle insurance providers will survive, depends on their ability to adapt and, in the self-driving future, find other sources of revenue. 

Image: Shutterstock


Authored by: Frank Jacobs