In this article we will explore 3 mobile phone apps that can enhance your driving experience.
The current Audi 8, Mercedes-Benz S-Class, and Tesla Model S are all luxury vehicles that come from their manufacturers equipped with SAE Level 3 automation. Essentially these amazing machines monitor the environment and perform certain driving functions independent of a human driver.
It’s pretty realistic to believe the time is nearing when consumers will have the ability to buy a fully-autonomous, Level 5 car. Some experts predict self-driving automobiles will be commonplace by the year 2040.
So how will auto insurance carriers handle the advent of driverless vehicles? After all, self-driving vehicles provoke complex questions about how liability, claims, and premiums should be handled.
Let’s take a look at the main ways car insurance could be impacted by the next generation of motoring.
Drivers May Reduce or Drop Auto Coverage
Twenty years from now self-driving vehicles could be the norm. When that era dawns, many drivers may decide personal auto insurance simply isn’t practical. This could result in drivers reducing their policy limits or canceling coverage altogether.
Obviously it’s always best to keep some protection, even minimum liability, in place to safeguard against any financial risk. Therefore, it is unlikely auto insurance will become completely obsolete.
Instead the car insurance industry will probably find a creative way to match their products to the new needs of the auto market. Insurance carriers may also begin to rely on the Artificial Intelligence (AI) capabilities of autonomous vehicles to provide better services and more accurate premiums.
Big Changes in Liability
In October 2015, the CEO of Volvo, Haken Sammuelsson announced the car manufacturer would accept full liability whenever one of its cars were in autonomous mode during a crash.
Mercedes-Benz and Waymo (Google) eventually followed Volvo’s lead.
In light of these developments, the question remains: “Will Volvo and other auto manufacturers stick to this plan when millions of autonomous cars are on the road? Are car companies really ready to cover a multitude of liability claims?”
Legislators in the United Kingdom decided to get ahead of this question by proactively passing the 2018 Automated and Electric Vehicles Act (AEV).
UK Lawmakers Legislate Liability
The AEV bill was created to layout a clear path for how future liability claims should be handled. The law outlines in what instances liability will transfer from “The Driver” to “The Vehicle”. It also clearly states that drivers must maintain Road insurance policies and the insurance carrier is responsible for processing the claim.
According to the UK bill, insurance companies may pursue reimbursement from the auto manufacturer after the insurer closes out the claim.
The AEV bill anticipates that transferring liability to the auto manufacturer sounds great but may not go smoothly. UK lawmakers wanted to be sure they anticipated these complications.
In the United States no roadmaps are currently in place when it comes to the question of liability. So it is possible a few lawsuits will need to occur before American lawmakers decree the best way to handle driverless liability.
As always, Tesla is looking to take things a step further than other car makers.
Tesla doesn’t want to simply commit to being liable for any accidents while in driverless mode. The innovative brand is creating a complimentary insurance program for every client.
The idea is the same day you buy a brand new Tesla, you receive a service bundle agreement that includes auto coverage. This eliminates the hassle of trying to find an insurer that will take-on the risk of a driverless vehicle stocked with expensive AI features.
Tesla’s plan doesn’t sound all that far-fetched. Many car makers already have small insurance divisions within their financing branch.
Insurance Premium Changes
Perhaps insurance premiums will be affected the most by autonomous vehicles. Most insurance authorities predict auto premiums will go down because of three main factors.
Less Claims, Lower Costs
First of all, safer cars that actually help prevent accidents and lower claims would definitely contribute to lower premiums for all drivers.
It’s been reported that 94% of all car crashes involve human error such as drowsiness, distraction, alcohol, or speeding. Therefore, it’s reasonable to assume a driverless automobile would equate to a significant drop in costly accidents. In turn, insurance carriers would require less premium to pay for claims administration and payouts.
On the other hand, the advanced hardware used in each self-driving car is pretty pricey to replace. So there may be a much lower volume of claims but settling them will be quite expensive.
Different Rating Factors
As we previously mentioned, liability will shift more towards “The Vehicle” which then alters how insurance pricing is calculated.
Insurance companies typically assign risk based on the driver’s claims history, driving record, and age. In the case of self-driving cars, insurers will look to vehicle software capabilities and safety records.
Finally, fraudulent claims are a big burden for insurers and drive-up car insurance premiums as a result. However, the enhanced telematics, sensors, and AI software of a self-driving car will be able to record and report what actually occurred during a crash. This will eliminate the ability of fraudulent customers to file false claims.
Consequently, a decline in auto insurance fraud would equate to a reduction in pricing.