Technology / Driverless cars disrupting the insurance industry

Driverless cars disrupting the insurance industry

Driverless cars are expected not only to disrupt the way we drive cars, but also the way in which car insurance is sold.

“There is a lot of debate about how [driverless technology] will impact the insurance industry,” said Nick Walker, managing director of RAC Connected Solutions, when Business Reporter spoke to him at Microsoft Future Decoded. “You have very bold manufacturers saying, our vehicles will never crash – if they do we will give you a new one so you don’t need to be insured.

“It is going to affect the insurance industry greatly, because there will be more predictable behaviour of these machines,” he continued. “There will not be this erratic human driving that exists. In some ways it is going to simplify it because you are assessing the risk of the vehicle and the vehicle technology much more than that of the driver.

“But equally, it is going to make it more complicated, because how on earth do you judge that risk? It is going to be quite challenging. You will probably also see a trend where you will get vehicle manufacturers trying to also become insurers. To me there is a strong possibility things are going to merge.”

Walker explained that just because people will use driverless cars does not mean they will not need to be monitored. “Driverless vehicles are going to be fascinating because there is nobody who can actually tell you that the vehicle is experiencing trouble,” he says. “It is obviously going to have some form of self-analysis, but it will ultimately need some assistance and some help.”

Any accidents will still need to be examined who was at fault and whether it was down to human error or the manufacturer’s liability. According to the Association of British Insurers, there is potential for the vehicle manufacturer to become liable for the accident, as opposed to the driver, if the driver is unable to override the system.

Although it is still some time before the use of driverless cars will become widespread, the insurance industry has already started changing the way it covers drivers through the advent of telematics. Walker says: “Insurers can deploy telematics in your vehicle to monitor in real time how you drive and adjust your premium on a monthly basis accordingly. It brings insurance to life and gives you a daily insight to what is going on.”

Indeed, some insurers are already reducing premiums for drivers who agree to have devices installed in their cars that monitor their driving. Walker described how a fleet of over 3,000 vehicles which the RAC installed with such technology reduced its accident rates by 75 per cent over a 12-month period. “They are saving millions in down time in vehicles and repair costs of vehicles and driver risk.”

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