Auto insurance companies are carefully monitoring the state of self-driving cars, with migration to autonomous vehicle features over the next few years potentially causing upheaval for the industry.
As automakers transition over to fully autonomous vehicles, more of the liability will be shifted from the drivers to the vehicles, analysts say. Some of the concern from insurers comes from how liability policies may differ for human-driven cars versus self-driving cars.
Increased safety of the vehicles, which is expected from self-driving cars, could cut insurance bills for consumer and revenue for insurers. The U.S. market for personal auto insurance policies, which currently generates $200 billion in premiums a year, could shrink substantially, some experts predict.
“There are going to be dramatic changes,” said Joe Schneider, a managing director at KPMG who’s part of the accounting firm’s task force analyzing the issue.
Collision-avoidance features, such as blind-spot detectors and front-end crash-warning systems, have become common safety features in new cars sold in recent years. Automakers and federal regulators also have agreed to equip nearly every new car with automatic emergency braking systems within the next six years.
Test projects have been moving autonomous technologies forward. Automakers, automotive suppliers, and Google have been participating in statewide test projects around the U.S.
Auto insurance companies, regulators, and consumer advocates warn that several questions need to be answered before it’s know how self-driving cars will be insured. One question would be how insurance policies for cars driven by human drivers will compare with policies for autonomous cars. How would insurance for both types of vehicles be written, and what would it cost?
“We don’t want to see an environment created where you have vehicles that might not be nothing more than glorified golf carts autonomously operating among big-rig tractor trailers,” said Jim Whittle, assistant general counsel for the American Insurance Assn., a trade group representing insurance companies.
KPMG estimates that over the next 25 years, the number of accidents could plunge 80% from current levels, which “will go right to the core of the business” of providing car insurance, said Jerry Albright, a KPMG principal also on the task force.
There’s also the issue of how much control will be given entirely to the self-driving car. As the federal government finalizes its guidelines for autonomous vehicles, it has been receiving conflicting public comments from automakers and other interested parties.
Automakers, technology companies, and the public have submitted diverging opinions on the long-awaited release of national standards. Key legislative issues include the testing, regulation, and whether to license operators of autonomous vehicles.
Insurance companies have also expressed concerns that autonomous vehicles could take away some of their revenue from new competitors. If it turns out that the automakers and their suppliers end up shouldering most of the liability, they might offer insurance themselves, said Donald Light, director of the North American property/casualty practice at the research firm Celent. They might even add the insurance premium to the sticker price of new cars.
“That’s another big threat to the current insurance industry,” Light said.