Car Insurance and Autonomous Cars

Autonomous or driverless, cars have been in the news a lot in the past few weeks. General Motors CEO Mary Barra announced in early September Cadillac will introduce a model in 2016 which will be equipped with its Super Cruise technology. Super Cruise provides, at least initially, the ability for the car to drive itself on the freeway by handling the duties of accelerating, braking, and steering the car.

In addition to Cadillac’s announcement, Mercedes Benz unveiled their future truck, FT 2025, last week. The FT 2025 video demonstrates what a fully autonomous 18 wheeler will look like. The video shows the driver sitting in a swivel chair working on a tablet while the truck drives itself at highway speeds.

The technology is advancing faster than regulators and car insurance companies are responding, at least publicly. Regulators in California, Nevada, Michigan, and Florida are writing and releasing regulations which enable and monitor on road testing of autonomous vehicles. Auto manufacturers and technology firms including Audi, Infiniti, Google, Volkswagen, Mercedes Benz, Toyota, Chrysler, Ford, and General Motors are actively testing autonomous vehicles on streets and freeways in each of these states.

When I first wrote on this, (see, I addressed a question raised in two articles, one by Eli Leher in Insurance Journal, the other by Chunka Mui for Forbes; would car insurance become unnecessary? Most agree that in the short term, the answer is no.

Initially, we will go through a transition where some cars on the road will have this capability while others don’t. The projections listed in a Los Angeles Times article state there will be about 230,000 of these vehicles on the road worldwide by 2025. That number could grow to 11.8 million vehicles by 2035, or a little over 1/3rd of all the registered vehicles in California.

In the long term, Mui believed that autonomous vehicles would bring about a shift in who is liable if the vehicle performs in a way no one expects (ever had had a PC lock up on you?). The hypothesis stated there would be a shift from needing individual liability car insurance to potential claims being handled as a product liability issue. This made sense to me until Yahoo reported that GM and other automakers are asking regulators for some type of legal immunity if the industry is required to roll out systems that make decisions for drivers. If this immunity is granted, it could be several decades before an automakers general liability policy will replace our current car insurance policies.

Given these two items, I see the following car insurance implications for semi and fully autonomous cars and trucks:

  • Owners of vehicles equipped with these technologies, including vehicle to vehicle communication, will need liability coverage for at least the next 20 years plus years.
  • All of this technology increases the cost of each vehicle, as well as the cost of repairs if involved in an accident. More expensive vehicles and repairs will keep rates high until insurance companies have enough data showing a substantial reduction of accidents.
  • If the insurance data supports a marked reduction in the number of accidents, and possibly the severity of an accident, rates could be reduced on cars equipped with these technologies vs those without it.
  • Currently no carrier offers discounts on any of these technologies as they do for antilock brakes and multiple airbags, but this should change in the next few years.
  • I see nothing replacing the need for comprehensive coverage, insurance that pays for repairs due to hail damage, flooding, a deer runs in front of you, etc.

I’m very excited about the prospect of semi and fully autonomous vehicles. I believe they will provide a level of safety for drivers and passengers who drive distracted, or tired, etc. I’m also curious as to what will the insurance industry do as these cars begin to be driven on the streets of north Texas in the next 2 to 3 years. What do you think? Share your questions, comments, and projections with me in the comments section of our blog or on our Google + and Facebook pages. I’d love to hear from you!

Evie Wise
Evie Wise


Evie Wise
Evie Wise

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