This seems to be the year that the concept of the autonomous vehicle (or driverless car) has taken hold of the public imagination. While automakers, technology companies, automobile insurers and others with a stake in the game have been discussing the implications of the driverless car for some time, it is only recently that venues such as 60 Minutes, The Wall Street Journal, and Bloomberg BusinessWeek have devoted extensive coverage to new developments on this front.
No one really knows how the driverless car scenario will ultimately play out, of course, but a rough consensus is emerging which includes these elements:
- Automated safety features are reducing the number of automobile accidents and will continue to do so. In the near to intermediate term, this will benefit auto insurers as premiums remain level while the cost of claims decline.
- Over time, premiums charged by insurers will decrease to reflect lower levels of risk. Some insurers have already started to warn about this in their annual reports and SEC filings.
- Liability for truly driverless cars is likely to shift from individual owners to automotive manufacturers or, possibly, to fleet owners offering shared, Uber-like services.
- While there will be fewer accidents, driverless cars will be complex and expensive to repair and may be vulnerable to hacking and other forms of misconduct.
Leading automobile insurance companies are looking very closely at the issues presented by driverless cars. While the ultimate outcome is uncertain, it is clear that there will be pressure on auto insurers’ primary revenue stream. This makes it even more important for insurers to have fast, effective product innovation platforms and processes. Private ownership and operation of automobiles isn’t going away anytime soon, but there will be significant change and insurers need to be ready to respond quickly as automotive technology evolves.