When the technology age began, it looked at the way we live our lives and it decided to completely turn it on its head. Nothing was safe, in a good way. But just think about it for a moment because it doesn’t matter where you cast your magnifying glass, technology has had an impact. It has probably made that area of your life a bit simpler, or a tad easier, or more efficient or more effective.
Sure, some of these advancements we have gotten completely used to, like having baby monitors that not only ensure you can hear your child should they wake up in the night, or should their breathing start getting heavy, but also see them sleeping. Yeah, we live in a crazy world of video baby monitors. Who would have thunk it, right?
Smartphones are another piece of super-duper-tech that we have gotten completely used to. Okay, let’s be realistic; we haven’t just become used to them, we have become reliant on them, in the same way, we are reliant on three heaps of coffee in the morning.
Then there are newer technologies that we are getting our heads around, the kind that is inevitable, it is just a matter of ironing out some of the teething issues; like the Internet of Things, which will essentially make your fridge smarter than you. Or your toaster. Or your heating. It is an unstoppable force.
However, the technological advancement that is on everyone’s lips – and in every global corporation’s business forecast – is driverless car’s.
These have now been permitted on public roads in the USA, Japan, Germany and plenty of other countries, and has seen trials begin. The latest country to fall in line is the UK, which is set to trial autonomous cars in three cities for a year and a half. Ah huh, uh huh, the future has gotten here quicker than any of us expected it to.
But while the autonomous technology is ready to go – more or less – there is one big fat lingering question that no one is quite sure how to answer, what impact will driverless cars have on insurers?
Fewer Accidents But Bigger Claims
This is one of the areas we have a real interest in the minute because, while most journalists and researchers are focusing on the fact fewer accidents will happen, any accidents will cost much more to cover. Let’s start with the accidents thing, though.
In the UK alone, there are almost 200,000 injuries caused by car accidents, of which 91% are reported to be direct of human error. Drink driving, distracted driving, bad driving; that sort of thing. That’s where autonomous cars will have their biggest impact. They will remove human error from the equation. This is good for road safety, especially given that Google’s current machine has done well over 500,000 miles without a single accident. What does that mean for insurance? Bye bye, third-party insurance.
However, this is where the high cost comes in. Each car costs over $300,000 to make. That means the cost of repairs and the cost of replacement is significantly higher. It’s like everyone driving around in Ferrari’s and Lamborghini’s. However, that isn’t the only cost because should a crash occurs, well, there’ll be an intense amount of analysis to follow. The automated systems would need a diagnosis, as would the software and hardware, as standard procedure to work out why a crash happened. Talk about costly.
Of course, the technology used will become cheaper, from the sensor systems to the connected technology and the laser light details here, all of which come into play. It is only natural for the tech to become cheaper. However, the expensive costs of this tech and the software will most probably mean premiums go up for one of two reasons; compensating themselves for the reduced number of accidents and the increased need for fully comp insurance.
Not So Much About The Individual Anymore
The individual will no longer be responsible for any accidents that may happen. That is the whole point of having a driverless car. What this will mean in insurance terms is that the manufacturer will have to shoulder the risk, maybe, probably. This will depend on governmental legislation, though. What this is for sure, this will likely be one of the most all-encompassing changes within the industry.
It’s hard to say how far this will stretch, though. From where we are standing, if a crash can only become reality through a malfunctioning piece of software, then the guys and girls building these cars will probably have to insure entire fleets. There will be no individuals insuring themselves. Expensive for the car company, although they will factor this into the cost of each vehicle, of course. Basically, what we are talking about is a shift from personal motor insurance to product liability insurance. It only makes sense for that to be the step taken.
Will cars become part of household insurance? Will there still be a need for motor insurance given that autonomous cars will likely have an override option, or the ability to be driven by a human? Probably, if not definitely. If human error is still a possibility then it needs to be insured against, right? That’s how it works, that is where the liability will switch back from car to driver, which is something that needs to be considered carefully.
Say Sayonara To Fraud
The thing about autonomous cars is, there will be way more tech involved, and that means way more data will be collected on a never ending audit trail. This could be a mega-amazing thing for premiums because insurance companies will be able to paint a far better picture of what happens during a crash, meaning fraudulent claims won’t push premiums up. Hopefully, anyway. It makes sense that it would happen like this.
You see, in terms of fraudulent claims, the biggest factor is people exaggerating what happened, or even going as far blatantly lying. That’s what the big cancer of fraudulent claiming as is. However, with much more data being stored and more comprehensive information being available, insurers will be able to accurately tell if a crash was a legitimate accident or, let’s say, part of a crash-for-cash ploy, which isn’t as uncommon as people may think. Like we said, this should see premiums drop, even if just slightly.
What About Cyber Terrorism?
Yeah, this has got to be a legitimate concern for manufacturers, owners, insurers and, let’s face it, governments too. It just has to be. We’ve just had an NSA malware cripple the NHS. That is the level of sophisticated cyber-hacking we are having to deal with. Think about it. Driverless cars will drive themselves thanks to technology which will run off internet connectivity. This makes disruptions almost inevitable and could see its own stem of insurance become possible.
Perhaps it will be just spamming, you know, nuisance attacks to create congestion because a hacker is bored at home, or his wife left him for someone that isn’t a jerk. Maybe this jerk will even go as far as rerouting cars to a different destination, which would be really annoying unless you are a free spirit who makes everything an adventure. However, what if it becomes way more serious than this.
What if criminals started hacking cars, stealing them and getting away with hundreds of thousands of dollars of technology. That’s still a relatively okay scenario. What is terrifying, though, is terrorism that will look at autonomous cars as weapons. We have seen an increased use of cars being used by terrorists to drive into crowded areas. Imagine if they could have the same devastating effect without needing to be in the car themselves. That is what major security services need to be concerned with and something that insurance companies will be thinking about. Of course, illegal use of a vehicle isn’t covered by most insurers, so it may not affect premiums at all, not directly anyway. It will have to be insured elsewhere, though, because, well, all potential risks have to be insured somewhere along the line. That is what insurance is, managing risk, spreading risk, dealing with risk.
The thing to remember, though, and it is a pretty big thing to remember is the reality of all this. New cars only make up around 9-11% of all road traffic, and it takes around 20 years for this to become the majority. So, yeah, right now all this remains what one would call a pipedream, and that means the way we currently insure individual drivers is going to be around for a few years yet.
But while this subject remains theoretical for the moment, there is one thing that beams from the mists like a lighthouse torch and that is who will come out on top. Well, there is no questions about that really because those companies that start using new data effectively, and start recognizing the shifts, are going to be the companies that move ahead and start leading the field. It’s a competitive market, and the ability to find new revenue streams and maximize profits is going to be the secret to future success.