Self Driving Cars and Auto Insurance
By: trumbull insurance companyPublished: January 24, 2018
Ever since the first automobile was invented by Karl Benz in 1885, despite the incredible technological advancements, one thing has always remained – human drivers. Now, over 136 years later, automobiles are going autonomous. Analysts predict the market will reach $77 billion in sales around 2035. This will create an entire new eco-stream of manufacturers and suppliers for this new type of self-driving vehicle. Self-driving cars and auto insurance will significantly affect consumers in the coming years.
One of the most important aspects of autonomous cars is the projected vast reduction in vehicular deaths. Just in the United States, about 33,000 people each year die due to automobile-related accidents. While vehicles that drive by themselves won’t cut out all vehicle incidents that result in death, they will cut that number down by 99% or more.
Just think about it for a second, in 10 years that it is over 330,000 lives saved. In 30 years, these new vehicles will save 1 million lives.
Humans May Be Banned from Driving Cars One Day
Some people think that because of the safety of self-driving cars, humans might one day be banned from taking the wheel. While that is still a few decades away, the technology is moving fast, and these automobiles will hit the market in the next few years. While the technology is already here, many people are still uneasy about getting in one and losing control.
While tech-savvy millennials in Silicon Valley might embrace them, the public, in general, might take years of convincing before they ever turn over their keys to a driverless computer GPS driven car. This is one reason investment analysts and investors have had a difficulty forecasting the market going forward. It’s a brand new technology that requires a complete shift in human behavior that has been going on for over 100 years.
Tesla and Ford Are Testing Driverless Cars
One of the automobile manufacturers leading the way is Tesla. CEO and founder Elon Musk announced in early 2017 a Tesla driverless car would go from Los Angles to New York before the end of the year. Elon recently delayed the ambitious challenge, but the plan is still in place. Tesla wants to be a market leader in self-driving vehicles. It has invested tremendous resources in R & D. Not only are the tech barriers huge, but Congress will need to set-up new laws surrounding driver-less cars, which could add years to the process.
Releasing an autonomous car by 2021
Ford also announced it would be releasing an autonomous car by 2021. The vehicle will have no gas pedal and not even come with a steering wheel. Plans are to operate in an exclusive zone, under level 4. This means the automobile can drive by itself in most environments, but not everyone. In recent months, Ford has spent over $1 billion by acquiring an artificial intelligence company, and 90 test cars are currently in development. In 2021, Ford will initially sell the cars to fleet buyers, not the general public. The vehicles will be produced at the Flat Rock plant.
How Will Autonomous Automobiles Affect Insurers?
While many transportation companies like Uber are welcoming these types of vehicles, insurers are worried they could wipe out billions in revenue. One of the great benefits of self-driving cars is they will save so many lives. While this is good for insurance companies, because there will be less costly claim payouts, premiums will likely drop considerably.
The demise of the insurance carriers
In the next 20 years, it’s projected that 25% or more of all cars sold will be autonomous. Many predict this could be the demise of the insurance carriers. Most accidents involve humans making mistakes, like taking a corner at 55 in a 35 mph zone and crashing into a side railing. Human error will be wiped out when computers take over the driving. Premiums are projected to fall by 75% as a result. So if you are currently paying $1,000 a year for coverage, it could go down to just $250. That will be a major blow to insurers, but remember, their claim payouts will go down by over 95%, representing greater profit margins.
At the moment, companies are utilizing a “watchful waiting” when it comes to self-driving cars and auto insurance. Some have set-up autonomous car divisions to prepare, while others will wait until the technology is more mainstream. One thing is for sure; this technology is coming fast. Carriers will have to adapt soon. Some insurers like Trumbull insurance need to position themselves to be market leaders. Those that embrace the future and adapt will win.