Though usually seen as corporate, money-hungry baddies, Insurance companies find themselves having to join forces to insure their own future in an ever-changing industry.
Insurance giants find themselves in a bit of a role reversal with the likes of AXA, Direct Line and Aviva responsible for the formation of a new group, the Automated Driving Insurance Group, which will represent the insurance company going forward as Driverless Cars start to become a more present and expected sight on British roads. Led by trade body the Association of British Insurers (ABI), the group will present a united front as the government plan to respond to the implementation of the newest driving phenomenon.
No hands on the wheel is not a problem when there is no wheel – Google’s Driverless car prototype
With autonomous cars having already been tested in various cities across America since 2012 and for the first time in Britain just last year, the inevitable introduction of these driverless cars on the road is predicted to lead to a drastic reduction in accidents. According to a study by well-established consulting firm McKinsey & Co, driverless cars could see a reduction of anywhere up to 90% in road accidents in the United States. In the UK, 23% of all insurance claims are a result of a parking incident, parking incidents that stand to significantly decrease with driverless cars. This, naturally, will have an effect on insurance premiums understandably turning the insurance Goliaths into the underdog Davids. According to Thatcham Research insurance premiums are set to plummet up to 80% by 2040.
The most prominent threat to the current status quo of the industry, however, is the shift of focus in who, or rather what, is being insured. Currently, a young 19 year old ‘boy racer’ will face enormous insurance rates compared to a 45 year old woman who has been driving for 20 years. If, or when, autonomous cars become the daily norm as many tech and automotive giants are predicting, it will be a case of insuring the car, regardless of who owns it. Therefore, unless insurers are looking to get into a murky discrimination battle, the introduction of a flat insurance rate for the vehicle is the logical assumption. So while insurance companies will stop being the scourge of newly-passed 18 year old drivers, a costly price will be paid. Research firm KPMG predicts that in 25 years the auto insurance industry could shrink to less than 40% of its current size.
A whole new meaning of cruise control could be the norm by 2020, or so hopes Google.
For cars that do not have a steering wheel, driverless cars are certainly steering the course of the automobile industry, and insurers would be wise to buckle up for the ride.
We want to hear what you think about this. Do you have compassion for the plight of the insurance firms, or do you think it’s an act of karma speeding towards an industry that has often unfairly penalised drivers?