Self-Driving Cars and the Future of Auto Insurance

If you pay any attention to automotive news, you already know that self-driving cars are a hot topic. Industry leaders claim that fully autonomous cars will be available on the commercial market within 10 years. In fact, there are already many cars on the road today that have semi-autonomous driving ability.

Adaptive cruise control was first introduced on the 1999 Mercedes-Benz S-Class and is becoming an available feature on almost every new vehicle. Adaptive cruise control uses radar to maintain a set distance between you and the car you are following. The car will automatically brake if the car in front slows down and will automatically speed back up if there is room to do so.

While this technology was initially only available on the high-priced models of luxury makes, it is now available on much more affordable cars—for example, a $19,000 Toyota Corolla now comes standard with this technology.

But adaptive cruise control is just the beginning. The Society of Automotive Engineers has developed a classification system with six levels to differentiate between the autonomous capabilities of a vehicle:

• Level 0 vehicles can only be controlled by a human driver and have no additional vehicle inputs or control.
• Level 1 applies to vehicles with adaptive cruise control or other driver assistance systems. With Level 1 autonomy, you are still required to steer and keep your hands on the steering wheel at all times.
• Level 2 allows for some “hands off” driving, but the driver will still need to be ready to take over in certain situations. Some Level 2 cars require the driver to keep their hands on the wheel even when autonomous steering is active.
• Level 3 allows the driver to turn their attention away from driving. The driver may still need to intervene at times, but only when the car alerts them to do so.
• Level 4 requires no driver attention or input, but a human may still need to take over in unusual, non-emergency driving situations.
• Level 5 is full-on robot car autonomy. With Level 5, there is no need for a steering wheel or gas and brake pedals. A human would just need to input the desired destination and the car will take them there.

Today, there are numerous vehicles available that can offer Level 2 autonomy. The ability for Level 2 vehicles to allow occasional hands-off driving varies by manufacturer. While this emerging technology seems to be developing quickly, there are still many questions to be answered before Level 4 and 5 vehicles become a reality for the consumer market.

What will happen to auto insurance?

In theory, a Level 5 autonomous vehicle should be much safer than a Level 0, as you have taken out the possibility of human error. Fewer accidents leads to fewer insurance claims, and fewer insurance claims leads to lower auto insurance premiums for everyone. Of course, lower insurance premiums will lead to less profit for the insurance companies.

Some predict that autonomous cars could be the end of the auto insurance industry as we know it. But you shouldn’t get too excited yet—there are still things that can happen to the vehicle regardless of its autonomous capabilities. The vehicle could be stolen or vandalized, a tree could fall on it, flood waters could damage it, or any number of non-driving related incidents could happen.

For these reasons, auto insurance will remain a necessity for a long time to come. As long as there is car ownership, there will be a need for car insurance.

Who will be liable if a fully autonomous car crashes?

This question poses quite a dilemma for automakers, insurance companies, and local law enforcement. Ideally, the manufacturer would be liable in this scenario, as it is their product that failed. However, there are other factors—such as vehicle maintenance— that could lead to a crash.

Next time you are in a parking lot, take a look at the tires of every car you walk past. Most likely, you will see at least a few cars driving around on bald tires that should have been replaced long ago. Bald, worn, and dry-rotted tires will only provide a fraction of the grip that a new tire will provide—especially in wet conditions.

Thus, a fully autonomous vehicle on bald tires could still spin out and crash while making a turn in wet conditions. So then who is liable? The manufacturer who made the vehicle? The owner who had no control, but didn’t properly maintain the vehicle?

This is the million-dollar question that has yet to be answered. Laws and rules for determining who is at fault in an accident involving a self-driving vehicle will need a major overhaul.

Will autonomous vehicles and human drivers be able to coexist on the same roads?

While all autonomous vehicles might be programmed to operate under the same parameters and rules, every human driver is different. Some human drivers are extremely cautious when driving, some are risky. Some drivers signal every turn, others never do. Autonomous cars will need to take this human unpredictability into account in order to operate safely.

Some might think that human-operated vehicles will be extinct as soon as autonomous vehicles hit the market. In reality, widespread adoption will take many years or even decades. There are currently over 250 million registered vehicles in the United States alone. With the exception of a few manufacturer prototypes for autonomous testing, all of these vehicles are human-operated.

Those 250 million vehicles will not just vanish into thin air as soon as autonomous cars are available. It took over 15 years for adaptive cruise control to make its way from expensive luxury cars to economy cars. Fully autonomous cars will be no different. They will be cost-prohibitive for many when they first come out.

Over time, the cost of Level 5 autonomy will come down to where it is available and affordable on every car. Until then, robot drivers and humans will have to share the road.

About the Author

Jeff Henderson is a licensed property and casualty insurance producer and has been with IYC since 2010. He handles new business accounts and works with clients to quote, issue, and service policies. He is able to help any retail, restaurant, service, and professional industries. Jeff loves seeing his client’s businesses succeed and is eager to help them by providing valuable insurance coverage at great prices. In his spare time, he enjoys golf, tennis, and anything involving cars.