Autonomous Vehicles Changing The Car Insurance Market
Autonomous self-driving vehicles are anticipated to generate at least $81 billion in new revenues in the U.S. between 2020 and 2025. For auto insurers, this means the elimination of accidents caused by distraction, tiredness, and inexperience. The cost of auto insurance will fall significantly over time, and consumers might no longer have to pay directly for auto insurance. However, this does not mean auto insurance will cease to exist. Instead, the price of insurance will be determined by the hardware and software installed in the car and not by the human driver. The manufacturer and licensers of the autonomous vehicle software will be more liable than the individual. Zimlon explores the changing landscape of auto insurance in regard to autonomous vehicles.
Based on a US Market Research Report on automobile insurance, the industry revenues totaled $259 billion in 2017, quite a massive market for autonomous vehicle insurers to tap. Although autonomous vehicle tech is still in the nascent stages of development, according to the Insurance Institute for Highway Safety, it is reported that there will be 3.5 million self-driving vehicles in the U.S. by 2025, and 4.5 million by 2030.
Despite the reassuring numbers to back autonomous tech, there have been a couple of reports of fatalities that occurred during testing. There was a fatal crash in 2018, involving a Tesla Model X with Autopilot engaged. The driver died when the car collided with a median barrier in California.
Insurance Savings- In recent years, bodily injury average cost per claim has risen by around 30%. Autonomous vehicles could significantly reduce that claim. Technology makes for better drivers than error-prone humans. 94% of automobile crashes, in the U.S., involve human error resulting from speeding, drunk and negligent driving, or drowsiness. In a future without humans to cause accidents, 90% of the risk is eliminated. Premiums could drop by 12.5% of the total market by 2035.
Enhanced Safety- When it comes to advances in vehicle safety technology, auto giants like Ford, Mercedes, Tesla, Audi, Nissan, Volvo, and Toyota already have various autonomous tech features like blind-spot monitoring, emergency braking, traction control, and drowsiness detection in play.
Fraud Mitigation- In the U.S., auto insurance accounts for around $175 billion of the P&C market. Autonomous vehicle technology will result in lower claims and payouts for insurers and lead to a decline in fraud.
Regulation- Insurance is state-regulated, with some states allowing driverless cars on the road, while others do not. In 2017, 33 states introduced legislation relating to self-driving cars. Autonomous vehicle supporters and experts are looking forward to federal legislation to avoid varied regulations from state to state.
Ownership- With the decline in personal automobile sales, there will be a shift from individual ownership to corporate/fleet ownership of autonomous vehicles. Uber signed a deal with Volvo to develop self-driving vehicles together. Automated vehicles could allow for shared car ownership, which would also mean new types of insurance policies.