March 18, 2020
One of the biggest obstacles to the adoption of autonomous vehicles (AVs), is safety. The misconception that artificial intelligence is unsafe is mostly driven by media and is thankfully changing. AVs do certainly pose an original problem to insurance companies. And with the autonomous vehicle industry set to grow exponentially in the next 20 years, insurance companies are going to have to figure out a solution to the challenge, fast.
The reality is that the definition of autonomous is still very gray. It’ll more than likely take decades for future technology trends to be completely autonomous. But semi-autonomous vehicles have already begun to penetrate the market.
Dr Michael Taylor, Senior Lecturer in Finance and Insurance at New Zealand’s Massey University, and an expert in artificial intelligence technology, suggests that the biggest change will be public perception. He says that the safety of 90 to 100 percent of autonomous vehicles will force insurers to relook at their policies. Smart vehicles able to travel at lawful speeds, within established lanes and able to respond in real time to situations, will greatly reduce accidents. With this reduced risk, will come reduced premiums and a decline in sales and revenue. The answer then lies in new products.
The current status quo has car insurers providing coverage for consumers in the event of incidents caused by human error. Driverless vehicles will force insurers to redefine their core business model. We’ll see the development of insurance products that focus on covering car manufacturers in the event of technical malfunctions, such as sensor or satellite failure. Today, around 87 percent of the US car insurance market revolves around personal consumer insurance. The AV will dramatically change this as we see a move away from protecting millions of private consumers, towards a system that covers fewer commercial manufacturers and infrastructure operators. It will create a completely new pool of insurance.
Another aspect of the impact of AV is the rise of cybercrime. The systems that AVs operate on will offer the potential for malicious hacking. Disrupting internet connections, inserting malevolent code or leaking private user information are all distinct possibilities that need to be looked at. This may see the rise of cyber insurance in AVs – an altogether new product.
With future technology trends and the exponential proliferation of AVs across global markets, it is clear that insurers will need to adapt to stay relevant. Read more about how artificial intelligence is disrupting insurance. Our recent article details how new challenges present the opportunity for new products, which offer a safety net in the wake of crashing premiums.