Self-Driving Cars and the Auto Insurance Industry: Knowing What to Expect
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Self-Driving Cars and the Auto Insurance Industry: Knowing What to Expect

Tuesday, August 07, 2018By Richard Alexander

The introduction of self-driving cars is expected to transform our lives in many ways. These cars should be applauded for many reasons: most notably, they offer the promise of safer roads, fewer collisions and a marked decrease in deaths from car accidents. But this is a new frontier and many questions remain unanswered, such as how the legal system will redress injuries stemming from collisions with self-driving cars. Along with legal considerations, another industry that is certain to undergo major reformation is the insurance sector. With experts predicting that self-driving cars will be ubiquitous in 20 years or less, it is helpful to explore some things that we do know about how insurance will operate once human drivers are no longer on the road.

Some Liability Will Belong to Automakers

It seems likely that automakers will assume some liability if an accident occurs in a self-driving vehicle. Some car manufacturers have already stated their intention to take responsibility when the self-driving mechanism malfunctions. This includes Google, Volvo and Mercedes-Benz. Tesla has even offered an insurance program to those who purchase its cars. But not all self-driving automakers may agree to accept full liability. Also, conflicts may arise when other factors are believed to contribute to the crash. Automakers may insist on equipping cars with tracking devices before assuming liability in a crash.

Fewer Accidents Will Mean Lower Premiums

An estimated 37,000 people are killed annually in the United States in road accidents. A steep drop in the number of accidents is expected once driverless cars dominate the road for some time. Other technologies also promise to reduce accidents, such as advanced driver assistance systems (ADAS). Insurers have already begun to offer premium discounts for cars equipped with these mechanisms. In any case, it is almost certain that insurers will lower their premiums as accident frequency decreases.  

Drivers May Lower Coverage Amounts

Experts predict that in the near future drivers will drop their coverage completely or obtain only the minimum required coverage. It is even conceivable that states could stop mandating coverage for everyone. Given the declining risk of accidents, many people will see little to no reason to pay for insurance coverage. The insurance sector will need to figure out how to remain relevant given this new reality.

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