The American public is skeptical about giving up control of their cars’ steering wheels. Despite the enthusiasm with which autonomous vehicles (AV) are being developed by auto manufacturers and technology companies, recent polls, including this one, showed that few drivers are interested in giving up control of their cars despite the potential safety and time-saving benefits.
And although there’s a long way to go (about 25 to 30 years) before the AV future takes hold, it’s not too early for auto insurers to think about how self-driving cars will affect them.
Haden Kirkpatrick, Head of Innovation & Strategy at Esurance, likens the advent of driverless cars to the beginning of the era of the horseless carriage in the 1890s. Since the first auto policy was sold in 1898, car insurance has evolved from simple handwritten contracts to the high-tech global industry that it is today.
And just as the transition to “horseless” spurred great changes in the early 20th century, the transition to “driverless” will likely mean big changes once again. This time, instead of creating the need for more personal coverage, the move to AV is set to drive the need for more commercial insurance as car manufacturers will assume much of the risk for this new tech.
Kirkpatrick says that it’s too soon to determine where exactly insurers strategy should go. “Where is the vehicle category going to end up? We don’t know yet, 10 to 25 years is a long way down the road.”
What we do know is that technology companies and auto manufacturers (OEMs) are capturing reams of data all the time, and that data can be used for actuarial models. Insurers also will need to form partnerships with the winners in the AV space.
“Insurers are having conversations (with OEMs) to solve problems and pain points. Data is central – a lot of benefits are to be gained with partnerships.”
Where does AV commercial liability responsibility lie?
The terms liability and responsibility begin to break down when there are multiple parties involved, said Kirkpatrick. “When fault is divided between consumer, manufacturer, [and the] software maker, – in the short term there is a mixed environment.” Managing the “ratio of responsibility” will be one of insurers’ biggest tasks.
So, when does the consumer exit the ratio of responsibility? “One scenario is when the steering wheel is gone, the consumer’s responsibility could be gone,” said Kirkpatrick.
What about the semi-autonomous cars that are on the road now?
The cost benefit of driver-assist features such as adaptive cruise control is not translating into lower insurance costs. “As frequency declines, severity increases, [because of] higher parts and labor costs.” However, preventing the average fender bender involving adaptive cruise control will provide a good baseline to understand the bigger challenges and will help bridge gap in 10 to 15 years.