Scene: It’s 1 a.m. in the morning. You’ve been out on the town having a fantastic night, and now it’s time to go home. You’re physically tired from dancing and the general hustle and bustle of an evening out. You plop down in your brand new self driving vehicle and activate the ignition. After a moment of the customary beeping, whirring, and start-up noises a voice says: "Good evening (insert name), I detect that you’re drowsy. During this trip I may require your driving assistance in the event of an emergency. If you wish to proceed to the destination, you must authorize your auto insurer to increase your premium until arrival. This amount will be added to your monthly payment. To authorize, say yes."
Naturally, this is only one of many possible scenarios that could play out in the coming years. It demonstrates not only the potential of automotive advances, but also a reformed method of insuring vehicles in an era where driver liability is much rarer.
Auto manufacturers are rapidly blazing an impressive trail in vehicular autonomy. We have bountiful evidence suggesting that this autonomous vehicle technology is already an unmistakable success. According to several sources such as RAND, the Insurance Information Institute, and the Insurance Journal the facts state that the numbers of accidents/driver liability claims having to do with autonomous cars are experiencing a sharp decline. Also, with the growing use of V2V (vehicle to vehicle) communication, we can expect the number of accidents to continue to diminish.
This is excellent news for the public’s health and safety. For auto-insurers, it heralds uncharted, yet fertile territory in underwriting. Some manufacturers think they might even self-insure their vehicles, seeing as how most accidents are expected to hold the maker liable.
Because autonomous car tech is still in its early years, there remains a lot of data to be collected before we have comprehensive autonomous car insurance policies specific to it. However, as smart as self-driving cars become, consumers are still going to need coverage. For the auto insurer that maintains an expanding awareness of autonomous vehicle technology’s progress/flaws, and is flexible in its underwriting practices, there will always be opportunity to do business.
To that end, it’s important to understand that what we know about self-driving vehicle technology represents a small sample of vehicles. We’ve yet to know the dynamics of millions of autonomous cars being on the road at the same time. As advanced as these self-driving cars are, they are still just moving bundles of hardware and software. They are not now, nor for the foreseeable future, infallible. Auto insurance agencies should keep in mind that even the finest software is subject to occasional bugs, crashes, and hacks. And with the use of V2V technology, a problem with one autonomous car could cause a chain of errant information with other cars, resulting in liabilities.
Next, there is any number of logistics to consider. Remember how we mentioned manufacturers insuring their own vehicles? It’s a fine idea, but also rather expensive. These car makers are going to have to juggle the expense of covering liabilities (which will mostly be solely on the car maker) with the on-going expense of research and development of more vehicles. Likely these companies will find they are more interested in putting capital chiefly towards improved product, rather than pay out expensive insurance claims in addition.
Another point that would champion the use of a third-party insurer is risk factor as determined by the manufacturer. Remember the car from our little scene? Well let’s say the car maker self-insured that same vehicle and determined that the risk for driving it in certain areas of town due to crime rates or geographic characteristics was too great. The car might simply ‘refuse’ or be ‘unable’ to travel to your desired destination. However, if a third-party insurance carrier were to intervene, whose risk determinants were different, that would offer flexibility of travel. In addition, individual states hold ultimate sway over how autonomous car insurance agencies execute policy. As a result, the continued use of insurers should prove to be much more harmonious in the coverage of autonomous cars, rather than car manufacturers having to instate departments for underwriting, acting as liaisons between themselves and the state.
A third point to support the evolved use of auto insurers in the age of autonomous cars is simply the organic nature of reality. These are the variables that go beyond predictability and sophisticated algorithms (well, for now). Have you ever delayed performing an operating system update on your computer or phone? Well, if an owner of an autonomous car does the same and it results in an accident, it would be helpful to have an insurer step in and determine the liability implications. What about satellite failure, or communication errors from another vehicle? What if the self-driving vehicle doesn’t detect a large animal that juts out into the road at the last minute? A car can only brake so much before causing harm to itself and/or the driver. Then, of course, there are weather-related conditions. Mud could cover a sensor, gravel/debris could get caught inside particularly sensitive mechanisms. These are completely natural occurrences without respect to technological advances.
Once more, let’s have a look at our opening scene. Here is demonstrated one way in which underwriting can be reformed to suit an automotive market where most accidents, in theory, are not human error. A reduction in accidents in general yields less expensive premiums. In order offset any loss in income from reduced pricing, an insurer could temporarily raise the cost of a premium when the car detects an increased risk due to a driver’s conditions (as determined by biometric technology in the vehicle). It’s similar to an increase in premiums after an accident occurs now, the only real difference being timing. True, an accident may not occur at all-but the same can be said for a driver paying higher premiums because of a previous accident. It’s the risk/possibility due to established conditions that would drive the price difference.
As you can see, autonomous vehicles represent a commuting and traveling revolution. Technology, logistical inferences, and natural events are just a few factors that will keep auto insurers very much an expanding market. And let’s not forget other auto-related claims that don’t involve driving; where the car is garaged, being hit while parked, theft, etc. If you are an auto-insurer, this is a prime time to get ahead of the competition with autonomous vehicle insurance. That is of course, if you are willing to follow automotive advances diligently and prepared to revamp the structure of your policies.
This approach of innovative anticipation is what informs each new edition of Agency Matrix management software. We understand that there is a certain degree of fluidity that comes with running any business. Changes are imminent and every enterprise has unique needs. We believe the key to properly serving our clients now and in the future is finding that balance between those market tools that are needed by all, and customized tools/options that allow insurance agencies to tailor Agency Matrix to personal perfection.