Driverless cars… serious game changers

From driverless cars to alternative-fuel vehicles, cars are quickly becoming the most advanced computers we use. What does the future hold for personal lines insurance when talking serious innovation in cars?

Globally, a million lives are lost and 50 million people are injured on the roads due to driver error annually. According to James Dalton, former Head of Motor at the Association of British Insurers, “Human error accounts for around 90% of road accidents.”

However, new technologies may significantly reduce this figure; and change the way insurers do business.

Navigating tricky situations

According to Wikipedia, an autonomous car, also known as a driverless car, self-driving car and robotic car, is an automated or autonomous vehicle capable of fulfilling the main transportation capabilities of a traditional car. It is capable of sensing its environment and navigating without human input.

Driverless or self-driving cars like Google’s pilot project have sensors which detect distant objects in all directions. Sophisticated software processes multiple data points to help the car navigate safely. The car’s sensors have a wide field of vision and the ability to predict and react to various stimuli. The driverless car also has the ability to learn how to navigate tricky situations without becoming tired or agitated.

The promise for road safety is clear. Self-driving cars have the potential to completely remove driver error as a factor in road safety, thereby dramatically improving the safety on our roads. This will have a substantial effect on how motor insurance will work.

Forbes’ analysis of the future of motor insurance in the context of driverless cars, argued that insurers will have to focus on product innovation, customer relationships, claims processing, expense management, and distribution to maintain market-share.

Changing traditional models

As premiums are currently based on the frequency and severity of accidents as well as with the risks attached to the driver, motor insurance premiums will inevitably be affected as these no longer feature. Theft, inclement weather, and liability risk including manufacturing faults, however, remain. Premiums will also be adjusted to reflect the potentially increased safety of cars. However, Bloomberg Business notes that insurance against cyber hacking may become an important addition to traditional car insurance models.

One way that claims could be affected is that while the frequency of accidents may decrease, the severity of accidents may increase. Even a minor collision may be worth more in insurance terms because of the hefty cost of technology. Liability may also be diverted from insurer to manufacturer, as accidents may result from manufacturer error rather than driver error.

As Forbes reports, motor insurance may evolve to be more like household insurance with rare but significant claims made against the policy.

Motor vehicle technology should be welcomed by insurers because it has the potential to improve the safety conditions of South Africa’s roads. Insurers should be perfectly positioned as having the technological expertise and knowledge to provide appropriate insurance solutions as self-driving cars become a reality.

Influencing driver behaviour

Self-driving cars offer a solution to concerns around the difficulty involved in changing driver behaviour.

There have been remarkable improvements in the driving behaviour of clients who are incentivised to drive more safely, as information about their driving behaviour is made available to them. This improvement will ultimately have a knock-on effect on the overall safety of South Africa’s roads. As engaged clients improve their driving behaviour and reduce their risks of being involved in a collision, the overall rate of accidents falls.

Progress towards self-driving cars is rapid, despite the potentially inhibitory cost and regulatory downfalls, not least of which being the transition from ‘driven’ to ‘self-driving’ cars. As technology enables reduced risk and increased safety on our roads, insurers should embrace this positive change.