Once an invention only seen in sci-fi movies and cartoons, driverless cars are well and truly on the map. With some predictions putting fully autonomous vehicles on the road as early as 2025, a driverless future is no longer just for the imagination. But what does that mean for insurance?
With the rate of accidents predicted to fall dramatically with driverless cars, is the insurance industry in trouble? The simple answer is no. However, insurance will have to completely change. New technology in vehicles will bring new challenges for insurers, but it’s a chance to rethink and reinvent what’s offered to customers.
So how exactly will insurance change? In short, driverless cars will flip the current insurance model on its head. Premium rates are currently weighted more to the risk profile of the driver. This would likely shift to being weighted more to the risk profile of the vehicle.
Autonomous vehicles also raise many questions about who is at fault in an accident – the person in the car or the car itself? With a change in liability and human error being removed from the equation, insurance companies may see themselves shifting liability towards product manufacturers instead.
This means that data will play an important role in helping insurance companies adequately assess risk. With algorithms behind the wheel instead of humans, knowing how a vehicle and its operating system perform will help insurers price their cover.
It’s a big change for insurers but one that comes with some exciting possibilities. As we shift to a more AI-dense world, there is huge potential for insurers to offer a more personalised service to customers. This could mean switching to highly individualised products with custom pricing and real-time service delivery.
“On-the-go” cover is predicted to rise as driverless cars become more mainstream. This pay-as-you-need model could see insurers offering cover for short blocks of time rather than annual renewals. For example, if a person orders a driverless car to pick them up, the rider could be offered multiple trip options. These trip options could include an assessment of risk and a corresponding price for each route, depending on the likelihood of an accident. When the individual picks their preferred route, the insurance cost is added to their monthly premium.
But are Australians ready for such a dramatic gear shift? According to a recent survey, over half are not ready to give up the driver’s seat just yet. While research suggests that nearly all cars will be autonomous by 2050, many Australians enjoy driving and are reluctant to let a computer do it for them.
So, while technology is accelerating at an extremely fast pace, it seems a complete change in direction is still a little way off yet. Insurance won’t be shifting overnight. There’s time for the industry to consider these new technologies and adapt their products to suit a driverless future