Will Self-Driving Cars Become a Reality?

How Will Self-Driving Cars Change the Insurance Industry?

Did you know that your car insurance premiums are not solely determined by your driving history? There are a number of factors that contribute to how much you pay for car insurance, including the driving habits of everyone else on the road around you. According to the National Highway Traffic Safety Administration (NHTSA), police responded to over 5.3 million auto accidents in 2011! Statistics on car accidents play a huge part in the way insurance companies structure their policy premiums.

The NHTSA also reports that the aftermath of car accidents costs American drivers approximately $819 every year; insurance deductibles, travel delays, days away from work, and medical costs can add up quickly. In order for insurance companies to continue making money, they have to consider these numbers when deciding how much to charge consumers for insurance coverage.

As technology continues advancing, many people are thinking that self-driving cars (autonomous cars) may be a solution to the rising costs of car insurance. The idea of a self-driving car itself has floated around in every sci-fi lover’s dreams, but the think tanks at Google, Nissan, and several other manufacturers are saying this may be the real way of the future. When we say “future” we don’t mean 2050, either—we mean as early as 2015! On that kind of a progressive timeline, it’s estimated that by 2040 we may be entirely useless behind the wheel, and all of our cars will be driving themselves. Does this mean that by then we’ll have practically zero accidents on the roads?

Will Self-Driving Cars Kill Off Insurance Companies?

While the prospect of significantly safer conditions for drivers across the nation (and eventually the world) is certainly something to be excited about, this may be detrimental to the insurance companies. The algorithms that insurance companies have invested mountains of money into developing to assess the potential for risk could become absolutely worthless, and I can’t imagine they’d be too thrilled about that. Reports by the NHSTA show that 95% of all auto accidents are caused by human error. If we remove the potential for us to cause our own accidents, consumers may be paying as much as 80% less for auto liability insurance in 2022, according to a research firm called Celent.

The Future’s Not as Far Off as We Thought

As much as fully self-driving cars may seem like a distant dream, it’s a lot easier to consider when you think about how many current car models already have autonomous features to reduce human error. These autonomous components aren’t being offered by a limited number of manufacturers, either—from economy to luxury vehicles, it seems everyone is equipping their cars with some degree of self-sufficiency.

  • Automatic Emergency Braking Systems. Although anti-lock brakes have been standard in practically all vehicles since the beginning of the 1970s, manufacturers such as Fiat, Audi, and Volkswagen are taking braking systems to the next level. The next evolution of these systems involves automatic monitoring of your vehicle’s proximity to other objects, causing the car to brake on its own if you come too close to something else. Cars with this feature are expected to get into roughly 27% fewer accidents.
  • Adaptive Cruise Control. According to the NHTSA, Americans pay out approximately $40 billion every year due to speed-related accidents. Considering there are about 210 million drivers in the US, that’s an average of $170 per driver per year. Auto manufacturers like Audi, Volkswagen, and Toyota have made significant strides in developing and continually improving this kind of intelligent cruise control that automatically adjusts its speed to keep at the same pace as the car ahead of you.
  • Pedestrian and Animal Detection. In rural areas, hitting a deer is incredibly common, and equally as dangerous. According to State Farm, 1 in 40 people hit a deer while driving in rural states in the US. This year, Volvo introduced their advanced detection system that provides warning of unexpected deer crossing or dangerous cyclist/pedestrian conditions by using a system of sensors.
  • Lane Departure Warning Systems. This technology isn’t particularly new—Nissan has been using it in its vehicles since 2001—but it’s become more widely available through manufacturers like Toyota, Honda, and Audi, among others. The systems use either video, laser, or infrared sensors, and when they sense that the vehicle is starting to leave its lane, will either alert the driver or take automatic corrective action, such as steering or braking as necessary.
  • Driver Fatigue/Distraction Alerts. Volvo was the first to initiate Driver Drowsiness Detection systems, which they did in 2007, but since then others such as Ford, Mercedes-Benz, and Toyota have followed suit. The systems monitor the car’s movement, and if they detect something abnormal, they will alert the driver audibly or through vibrations. Some of these vehicles can even take corrective actions automatically.

Insurance Rates May Take a Plunge

Based on the way we operate currently, it’s safe to assume that the more we develop autonomous vehicle technology, the lower insurance premiums will go across the country. Experts estimate that if there was a 20% adoption rate of incremental driver-assist safety technology, the reduction of auto accidents would be significant enough to cause a considerable reduction in insurance premiums for everyone.

Does this mean that we won’t need the auto insurance industry as a whole if self-driving cars take over the roads, eliminating the potential for human-error-related accidents? Not exactly.

Not Everyone is a Believer

Many people are skeptical of the lofty predictions made about self-driving cars, and are hesitant to believe that the initial impact will be as significant as expected. Fred Cripe, a former head of product operations at Allstate, suggests we look at the chaos that may ensue as drivers integrate this technology into their daily routines. “Any vehicle sold as ‘self-driving’ during the next 15-20 years will be operated in both self-driven and operator-driven modes,” Cripe writes in his blog, “For the first decade or so, accident frequency will not decline as much as predicted, and may even go up slightly, as the reduction from the self-driving aspects is offset by the deterioration of overall driving skills caused by less driving experience (especially since the operators will be taking over the driving duties during the most hazardous circumstances).”

As much as the prospect of self-driving cars is attractive, and there’s reason to believe they may eliminate many of the dangerous caused by human-error, there is certainly a case to be made against the benefit of these cars. In addition to Cripe, other experts such as former State Farm executive Guy Fraker raise the question of just how expensive such a car will be to replace. It seems that a high-speed collision between two self-driving cars, both equipped with cameras, radar systems, and other pricey technology, would be much more costly than a used Honda rear-ending a used Nissan.

Many Questions Still Need Answers

Another important question for insurers and consumers to ask is, “who would be responsible in a collision involving self-driving cars?” Would the occupant be held accountable, or would the manufacturer assume all liability?

There are a whole whirlwind of questions circulating around the reality of self-driving cars, many of which will need to be answered if Nissan and Google are serious about launch dates in 2015. None of our current laws account for self-driving cars, so legislation needs to be established to regulate these new vehicles on the roadways. What questions would you like answers to regarding self-driving cars? We’d love to hear what you think—tweet to us @InsQuoteOnline, or post about it on our Facebook page!

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