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Full speed ahead: the insurance industry considers the impact of automated vehicles

Autonomous vehicles are not far off being a prominent addition to our roads, but the insurance industry is about to come under a lot of scrutiny as to how it navigates this new phase of the car sector.

Driverless cars are a technology innovation that the typically-traditional insurance market is embracing. “The industry fully supports the development of automated vehicles,” says Rob Cummings, head of motor and liability at the Association of British Insurers (ABI). “This technology has the potential to dramatically improve road safety, revolutionise our transport systems and make it easier for people who cannot drive to get around.”

This new approach to insurance has a promising forecast for the UK and the government has predicted it will bring 27,000 jobs to the industry and be worth £28 billion to the economy.

How far along the road are we with this new technology?

With most ‘futuristic’ ideas, autonomous vehicles are thrown into the same mix as technologies that seem much more suited to sci-fi novels rather than real life implementation. However, with driverless cars set to travel on UK roads as early as 2021, the sector is on track for making a very prominent impact on our everyday lives.

In 2018 we saw the Autonomous Engineered Vehicle Bill come into situ, which confirms that if an automated vehicle was to cause an accident, the insurer is liable for any and all damages, including injury to the “driver” of the car.

This is just one of the aspects insurers now need to take into consideration and with a forecast that by 2060 three quarters of the vehicles on the roads will be fully autonomous, insurers are looking now at getting their affairs in order. Companies are trialling the vehicles and it was announced at the beginning of August 2019 ‘Optimus Ride’ is operating six autonomous shuttle service vehicles on private roads in Brooklyn, NYC.

The main obstacle to now tackle is the knowledge that as-a-service (AAS) models will render an insurers business redundant, and technology takes no prisoners when it demands an adaptive and accepting market.

What changes will hit the industry?

What difference are we going to see in insurance packages and premiums for those who choose to avoid autonomous cars? We can only presume that as the technology continues to evolve and improve with new vehicles being manufactured at an accelerated rate the disparities could reach new levels where only a few individuals choose not to make the change.

In this new market, it is highly probable that car manufacturers will have more of a say in the insurance of their product. Recent research from KPMG predicts, after a number of industrial analyst’s reviewed the plans, that the continued success of autonomous cars could reduce the companies within the insurance sector by 71% by 2050. The only obvious way this can be altered is for insurers to evolve what they will offer to consumers to suit their future needs.

How do you insure a car when the driver does not have their hands on the steering wheel?

The subject of liability becomes a whole new ball game when autonomous cars are travelling alongside non-autonomous vehicles. If we go by the 2018 Automated Vehicle Act the insurer of the automated car is liable for damages, and who ever owns the vehicle is in charge of keeping the software maintained and updated.

“Policies are likely to focus more on an individual’s driving habits or routines, rather than on speed or driving abilities as autonomy levels our driving standards. Converting this data into relevant and actionable insight for insurers, and importantly customers, will become ever more important,” says Mr Howard Collinge, director at specialist telematics firm insurer Coverbox.

How can insurers adapt to this new era of technology?

The question will always remain in the back of everyone’s minds as to whether this is just another trend or phase of the industry.

Will a new law come into play that prevents the autonomous vehicles from ever reaching the roads? Either way insurers need to be prepared for the drastic change that will come to their existing infrastructure. 

“While driverless cars are often the focus of many discussions surrounding the future of insurance, current technologies such as telematics have the potential to make huge differences in the industry,” says Adam Gooch, commercial director at Insure Telematics Solutions, a telematics company that uses artificial intelligence and machine-learning to develop black-box software.

Insurers can use advanced telematics to build risk profiles that take into consideration driver data including acceleration, location and braking etc. to determine the driver’s individual risk away from the car’s technology. These models will allow insurers to make real-time estimations on policies.

The question remains that, as times are changing and technology is moving forward so rapidly. How will insurers keep on top of it or be ahead of the curve?