Tesla's Self-Driving Cars Continue To Be a Confounding Question for Auto Insurance Companies
- More self-driving cars on the road
- Smarter cars mean fewer accidents
- How can the auto insurance industry adjust?
- New car insurance players?
Tesla is one of the leaders in self-driving technology. The emerging technology is associated with a range of benefits. Besides the convenience of a hands-free experience, these cars are expected to minimize deadly collisions and accidents. This is good but experts warn that it could disrupt the car insurance industry.
Here is an overview of the insurance questions raised by self-driving cars. This article will also prepare you for what to expect as more self-driving cars hit the road.
More self-driving cars on the road
Tesla is one of the most popular manufacturers of cars with self-driving technology. While not fully autonomous, its self-driving technology is better than its competitors, but other carmakers are catching up.
Some of the notable car manufacturers driving the production of self-driving cars include General Motors and Daimler. Big Tech companies are also joining the market, with brands such as Zoox (Amazon), Nvidia, Qualcomm, and Waymo (Google’s parent company Alphabet) standing out.
Self-driving technology is also improving rapidly, especially with the help of Big Tech. It is also expected to get better as the 5G network gains more coverage.
It will be some time before self-driving cars replace driven cars altogether. Nevertheless, researchers predict soaring numbers in the foreseeable future–albeit inconsistent number. Accenture predicts that there may be as many as 23 million self-driving cars on U.S. roads by 2035.
Smarter cars mean fewer accidents
The biggest benefit of self-driving cars is that they will lower the number of accidents considerably. According to Statista, the U.S. records about six million car accidents per year, accounting for about 36,500 deaths and 4.5 million injuries. 90% of these accidents are caused by driver error.
Self-driving cars employ technology that eliminates human error. This technology also performs better and faster, reducing the risk of accidents considerably.
To be fair, self-driving cars have been involved in a handful of accidents, but this is negligible compared to the usual figures. The Tesla Model S was involved in an accident in Florida in 2016, resulting in one fatality.
Like many other similar accidents involving self-driving technology, it was blamed on the driver error. Ideally, accidents involving self-driving cars will cease as the technology improves.
How can the auto insurance industry adjust?
Car insurance policies make up a sizeable portion of the insurance industry’s $311-billion revenue. However, accidents could be reduced by up to 90% when self-driving cars take over.
This means that the insurance industry will lose an integral revenue channel. To this end, Accenture reports that annual premium auto revenues may fall by as much as $25 billion by 2035. The industry will also be forced to undergo significant restructuring to keep up with changes in the automotive industry.
For example, insurance companies will face difficulty assessing the responsible party for accidents involving self-driving technology. However, it is expected that regulators will come up with solutions to spread the risk among all involved parties.
Insurers will also have a difficult time developing new underwriting criteria. The current criteria involves factors such as the driver’s history of accidents and the number of miles they expect to travel during the coverage period. However, these factors might not count as much as factors such as the type and model of the self-driving car and its safety features.
New car insurance players?
The auto insurance industry is making the necessary changes to adapt to a self-driving future. However, other players are emerging to fill the gap. For example, Tesla is offering premium insurance coverage for its clients in a bid to ease their insurance frustrations. Other companies might follow suit, further disrupting the industry.
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