Driverless cars are coming, and they’re coming sooner than most of us think. One only has to search “driverless car” on Google, Yahoo, or Bing and there will appear over 3,000,000 results for your reading or viewing enjoyment. Google has retrofitted Lexus and Toyota models for testing, not to mention their 100 mini commuter cars that look very similar to a Little Tykes car my youngest son had.
Not to be outdone, Mercedes Benz invited NBC’s Craig Melvin for the Today Show to visit their USA headquarters in New Jersey for a ride in their driverless S class sedan. It can drive up to 12 seconds at highway speeds and longer when in stop and go traffic without any involvement from the driver. Mercedes further upped the ante last week when they previewed their driverless semi-tractor and trailer, named Future Truck 2025, on the autobahn. It is capable of driving itself at speeds up to 52 miles an hour. Volvo is working on a similar program and has gone so far as to predict crash proof cars will be available as early as 2020.
If you can’t afford the payments on Mercedes’ driverless S class at roughly $120,000, there may be a lower cost option of interest to you. Cruise, Automation, is taking initial orders for 50 of its RP-1 system. The RP-1 costs just $10,000, and while it can only be added to an Audi A4 or S4, future versions will be available for other car models.
The technology is advancing at an incredible pace. Much of the technology supporting a driverless car is currently available in a variety of models and price points including park assist, lane departure warning, blind spot warning, adaptive cruise / speed control and more (see http://188.8.131.52/~wiseinsu/advanced-car-safety-systems/).
There are a number of interesting hurdles and many more questions raised by a driverless vehicle. One of the interesting questions raised is will a driverless car do away with the need for car insurance, after all, one of the major benefits cited in the move to this technology is the ability to avoid crashes and save lives. There have been two interesting articles, one by Eli Leher for Insurance Journal, the other a seven part series by Chunka Mui for Forbes, that have outlined some intriguing thoughts on car insurance and driverless vehicles.
In the near term, most driverless cars will probably not be fully free from some level of driver control. Most likely, there will be some level of driver involvement which will require owners to still carry liability insurance to pay for at fault accidents. Since not everyone will run out and buy a “driver assisted” car (think of the move from flip phones to smart phones), there will still be a need for uninsured motorist coverage too, just in case you get hit by someone driving a non-driver assisted car without any car insurance.
Insurance rates could drop as people adopt driver assisted vehicles, however, this depends on two factors; a measurable drop in the number of accidents and the insurance companies willingness to reduce premiums without a long history of actuarial data to support such a decision. Some carriers will be early adopters of lower rates and move more quickly than other companies who drag their feet waiting on data to back up their decisions.
At some moment, there will be a tipping point where people move into vehicles that are fully autonomous and require no driver involvement. When that happens, will vehicle owners still need liability insurance? At this point, the liability shifts from the driver to either the auto maker or company that makes the self-driving system such as Mercedes, Google, Cruise Automation, or whomever. The company’s insurance would be called on to pay for damages and any injuries. In a case like this, we could easily see liability insurance being replaced with an extended warranty that covers a driving system failure.
In approaching the question, both authors’ hypotheses focus on the liability coverage of today’s car insurance policy. What they fail to address is that many policies contain coverage for comprehensive claims (hail, an object falls on the car, an animal runs into or in front of a vehicle and is struck, it catches fire, etc.), as well as medical and/or personal injury needs. I don’t see the need for this type of coverage going away even when the majority of vehicles on the road operate completely autonomously.
I believe vehicle owners will still buy car insurance even after a large percentage of drivers have purchased self-driving cars. I also believe the price for car insurance could cost much less than it does today and be offered by even more companies such as Google or the automakers. What do you think? Share your thoughts, guesses, and questions with me in the comments section of our blog or on our Google + and Facebook pages. I’d love to hear from you!