Other parts of this series:
Insurers have to deal with pricing, regulatory and data issues as they address the changing automobile market
As I discussed in my last blog, the insurance industry conversation about driverless cars has begun to focus on very real concerns about the determination of responsibility for collisions, the ownership of private vehicles and the type of coverage that personal lines insurers may offer.
The Insurance Institute of Canada report notes a number of immediate issues for insurers to address, including
- Setting the cost of coverage in the face of a sharp drop in collisions;
- Changing the claims process to determine the vehicle’s share of responsibility (if a semi-automated or self-driving car is involved in an accident);
- Working with regulators on rate approval, since current rate regulation was designed for coverage in which driver error is the cause for most collisions.
To this, we would add the need for insurers to prepare for the increase in data from a variety of sources such as vehicle sensors and on-board computers. This data needs to be organized and put to use in improving vehicle safety and in refining the coverage and pricing of policies for conventional, semi-automated and self-driving cars as they become widely available.
Although driving has become safer from decade to decade, there are still more than 1.25 million people killed in automobile accidents worldwide each year, including roughly 2,000 in Canada and 30,000 in the US. The move to semi-automated and, eventually, to self-driving cars is likely to reduce this toll significantly, adding momentum to the shift to a driverless environment. Major studies have concluded, however, that the economics of the automobile insurance industry will not change dramatically over the next ten years. A reduction in the frequency of collisions is likely to be offset by the higher cost of claims. The industry has time – although not a vast amount of time — in which to develop the products, pricing and claims infrastructure to support a very different kind of automobile insurance market.