You will think twice before buying a self-driving car when you find out how much your auto insurance will cost. A few years ago the insurance premiums on a Tesla Model X was $10,000 a year or over $800 a month. But that may all change.
Making the roads safer is one of the virtues supposedly of autonomous vehicles (AV), because self-driving vehicles are loaded with sophisticated equipment like lidar, radar and cameras that are better than our human eyes and ears. Moreover, in-car computers are not susceptible to drunkenness, texting or falling asleep at the wheel.
Dean Peate, a venture capitalist and entrepreneur in Southern California, and founder of Hixme, a health insurance provider, is now starting up an insurance firm called Avinew for automated driven vehicle modes and eventually fully automated ones, because he sees a real need for it. after he had been given the $10,000 a year premium quote for the Tesla he wanted to buy.
However, questions are arising as to who will be the primary insured entity. Will it be just the consumer/owner of the self-driving vehicles or the auto manufacturers, or the parts specialists? Or all of them?
Currently, underwriters and actuaries are charging more when pricing insurance on autonomous vehicles because they present new types of risks and there isn’t enough data they say. On the other hand, companies who are manufacturing self-driving cars collect reams of data for improving automation, so insurers can actually use their data to come up with estimates to underwrite without waiting years for that informations after accidents happen.
Peate says that with that information premiums can be cut for drivers the more they use autonomous driving.
Right now, more than 90% of accidents are due to human error, but when the human driver is removed from the equation that will mean huge changes for insurers.
Michelle Krause, senior managing director in Accenture’s Insurance client service group, in conjunction with the Stevens Institute of Technology reported that premiums could drop by 12.5 percent of the total market by 2035.
Also, because the human driver won’t be the risky part of the equation, Rodney Parker, an associate professor of operations management at Indiana University says that “Liability is likely to migrate from the individual to the manufacturer and the licensers of the software that drives the AV.” Krause and Accenture’s report agrees. Which means that automakers, and suppliers of communications systems, sensors and software will be responsible for the malfunction of their products in an accident instead of human drivers.
And could there be a possibility of mergers between insurers and automakers in the near future? Because without a driver, there wouldn’t be a driver to insure says David Ross Keith, an assistant professor of system dynamics at the Massachusetts Institute of Technology.