Automotive Blog

The insurance market is set to be the battleground for autonomous technology

Riding To Battle

Petrol heads have been the heart, soul, and brains of the automotive industry for as long as it has existed, but recently the tech kings of Silicon Valley have been getting involved, and the prediction is that the new competitive tension will help revolutionise global mobility by accelerating the development of autonomous technology.

It’s been enough to get a lot of people very excited, but the market is not expected to be saturated with self-driving cars for a few decades yet, and transitions of this scale don’t happen overnight. Yet we can certainly predict that the next few decades will be paved with technology issues, legal battles and consumer resistance.

After the bold announcement by Volvo CEO Håkan Samuelsson that they will accept full liability should any of their cars crash whilst in fully autonomous mode, it seems like the battle of responsibility for this technology has already been half written. But what does this all mean for owners of self-driving cars and those who choose to remain “in-control”?

At the moment, everyone is required to have third-party insurance as a minimum for driving on the roads, but if the announcement from Volvo is just the first from manufacturers willing to cover the risk of their vehicle malfunctioning and causing damage to other road users, comprehensive and third party insurance may not, in the longer term, be a requirement for the owners of these autonomous vehicles. Instead, they will likely shift from personal to product liability to only cover autonomous cars for fire, theft, or other insurable risk, much like home cover.  But for the private motor insurance market, this will result in a major loss of revenues which will require a major rethink, and in the short term certainly, may mean this lost revenue is transferred into higher costs for drivers of traditional vehicles.

Moreover, as the cost of repair increases as a result of expensive autonomous technology, repairers and insurance companies will face higher expenses and a greater number of write-offs. This may result in a transfer of costs to drivers of traditional vehicles in the way of higher premium, after all, 94% of road accidents are caused by human error (ABI, 2016).

Meanwhile, for owners of autonomous cars, this shift of responsibility would mean a major reduction in their cost of private insurance and contribute to a more stable cost of owning a self-driving car. Whilst the tech-resisters, petrol heads and the cautious will see the cost of remaining in a non-autonomous or semi-autonomous vehicle increase beyond what may be considered reasonable.

No one has a crystal ball, and nobody can predict the outcome of this battle for our roads, but it does seem like the final round will be won or lost on cost, as much as legislation. Whatever the outcome, these challenges will result in a transformation of automotive insurance as we know it, and although it probably won’t be the bloodiest battle humanity has ever seen, it’s unlikely everyone will be walking away with a clean nose either.

Written by Lucy Langdon

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