BlankWow, I hadn't anticipated this angle. Interesting.
If you hate auto insurance, you'll love driverless cars Alex Glenn, NerdWallet
Nobody likes shelling out for auto insurance. But given the greater financial
burden of a car wreck, most of us simply grin and bear it, minus the grin.
After
all, mistakes happen and drivers are only human for now.
But as we hurtle into the age of computer-operated, fully autonomous vehicles,
car insurance as we know it is about to change including how much we need to
buy.
Most experts expect the first driverless cars to become available by the early
2020s. By the mid-2030s, industry analyst IHS Automotive projects, more than 75
million cars with autonomous capabilities will be on the roads.
"Pretty soon we won't drive off a dealership; we'll be driven," says Donald
Light, an analyst for technology consultant Celent.
The changes will only get more dramatic from there.
Autonomous vehicles will not only enable safer travel but also shift the blame
for most accidents away from the vehicles' owners and toward the vehicle and
software makers. That could leave auto insurance companies facing a dim future
in which their business shrivels as the need for personal auto insurance fades.
Driverless cars will help eliminate crashes and insurance needs
Although the prospect of using driverless cars may be scary to some, we humans
aren't doing such a bang-up job behind the wheel. According to the National
Highway Traffic Safety Administration, driver error is the main cause of a
whopping 94% of crashes. (Other causes included vehicle failure and weather.)
"We either fail to see a dangerous situation, don't make the right decision to
avoid trouble or can't execute the correct maneuver," Light says. "All three
areas are ones in which autonomous cars will perform much better than people."
Based on some projections, the improvement will be staggering. Jerry Albright,
principal of actuarial and insurance risk practice at KPMG, a research and
advisory firm, estimates that car accidents will drop by 80% by 2040.
Car manufacturers on the hook for crashes
Driverless cars will do more than just reduce collisions they'll also change
how
we assign blame for accidents that do happen.
"Many people are already hesitant to assume fault when they're the ones
driving," says Joe Schneider, managing director of corporate finance at KPMG.
"Now imagine a computer is chauffeuring you. You're certainly not blaming
yourself for a crash then."
Although the issue of blame and liability is still murky, Light says the owners
of autonomous vehicles won't be on the hook for most crashes. Instead, the
responsibility to pay damages will fall on the manufacturers and the hardware
and software designers who create the self-driving systems.
By relinquishing decision-making to our cars, we'll be able to purchase much
leaner, cheaper insurance policies. For example, imagine needing only
comprehensive coverage to pay for problems like car theft and hail damage that
carmakers can't control. Light estimates car insurance rates could shrink by up
to two-thirds.
When to expect changes
Early 2020s:
The first fully autonomous vehicles will be publicly available. Ridesharing
companies such as Uber and Lyft will begin using driverless cars, perhaps even
before they're sold to the public, says John Matley, principal of insurance and
technology for advisory group Deloitte. Albright refers to this period as the
"chaotic middle.
Self-driving cars will be in short supply, and the price tag may be too steep
for many motorists -- up to $10,000 more than today's
cars, according to IHS Automotive. Liability issues will take a lot of time to
sort through, and the auto insurance market will have yet to take a hit.
Mid-2020s:
There will be fewer cars overall on the road due to ridesharing, and at least
40% of vehicles will have partially autonomous capabilities including
frontal crash avoidance, lane-departure warnings and blind-spot monitoring
according to a Celent report. Light estimates the cost of personal auto
insurance
will have dropped by 5% to 20%.
Late 2020s to early 2030s:
There will be significantly fewer vehicles in use, and we'll enjoy demonstrably
safer roads, Matley says. By now, he believes, total annual auto insurance
revenue will have dropped from today's level of about $200 billion to $140
billion.
Late 2030s to early 2040s:
A new normal: Ridesharing companies will operate fleets of driverless cars, and
owning an autonomous vehicle will no longer just be
for the wealthy.
Matley believes the cost per mile of owning and operating self-driving cars
will
be cheaper than driving vehicles back in 2016. In addition
to reduced car insurance costs, advances in lightweight construction will lower
sticker prices for driverless cars and allow their owners to spend less on
fuel.
Crash frequency will have plummeted, and car owners will have a minuscule need
for insurance.
Some of the largest auto insurance companies will leave the market altogether,
Light says, while others will have to overhaul their business models to
survive,
focusing on commercial ridesharing or product liability coverage, or other
services such as car maintenance.
By this point, Light believes, personal car insurance could cost close to 70%
less than it does today. Or as he sums up, "We'll all be having a beer to
celebrate."
The lure of convenience
Ultimately, consumers' willingness to embrace this technology, despite initial
hic'cup's, will determine if this timetable holds true. Matley acknowledges
there may be a rocky transition period, but he believes motorists' reservations
will start to crumble once they see driverless cars being used by ridesharing
companies.
In Schneider's opinion, a new culture of "mobility on demand" will prove too
convenient to resist. "It's going to click for a lot of people that driving is
overrated," he says.
Alex Glenn is a staff writer at NerdWallet , a personal finance website. Email:
aglenn@xxxxxxxxxxxxxx