Could driverless cars cause a car insurance crash?

2017 has been signposted as the year when driverless cars will once and for all step out of the world of science fiction and hit the real world streets – a major technological leap that will not only have massive implications for the motor industry and each of our everyday lives, but will also raise a huge question mark over the future of the car insurance industry.
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If we’re all being ferried around in autonomous motors, insurers won’t be able to base premium prices on a driver’s age or experience simply because there will be no driver. And if accident rates fall because driverless cars eliminate human error, will the bottom fall out of the motor insurance industry?

Driving on auto-pilot

The idea of the driverless car first started to really intrigue motorists back in the sci-fi obsessed 1950s when features like auto-pilot and sonic keys were first put to the test – features which today go by the name of cruise control and remote locking, respectively. Just over half a century later and not only has Google’s fleet of automated Lexus SUVs clocked up in excess of 700,000 accident free miles between them, Nissan has been testing self-driving vehicles on Japan’s highways since they were made street-legal last year. Here in the UK, meanwhile, driverless pods are being put through their paces and are expected to be a feature on the roads of Milton Keynes within the next few years. But how is this move to driverless vehicles likely to impact upon the insurance industry?

No claims? No car insurance?

Almost three-quarters (74%) of the UK’s 26.4 million households currently has some sort of car insurance policy, meaning the motor insurance industry is  worth an estimated £13.8 billion and makes up just over a third (34%) of the UK insurance industry as a whole. The car insurance industry is also one that is driven by claims, and so if anti-collision technology reduces not only the number but also the severity of insurance claims, the reduction in payouts will naturally cause this sector to shrink. But it won’t disappear completely as there will still be the same need for cover against theft or vandalism and the areas in which we live, where the car is kept and the number of miles we travel, will still all be valid criteria on which to base premium prices. And far from disappearing altogether, motor insurance is expected to evolve so it works more like home insurance, which deals in fewer claims but has a much higher cost per claim.

The rise of the cyber-car crook?

Driverless cars should also work to clamp down on insurance fraud – each car will have a highly sophisticated on-board computer which will eliminate any disputes over who is at fault in an accident and should also put an end to crash-for-cash scams On the flip side, we could see a rise in ‘cyber car crime’, whereby on-board computers are hacked and vehicles taken over – this was successfully done by two security engineers who  were able to ‘drive’ an SUV using nothing more than a games console controller – or sensors are manipulated to display ideal driving qualities when the reverse is true, for instance, the on board computer showing the car is sticking to the speed limit when in actual fact it’s doing 100mph down the motorway. These are all concerns for another day. though- albeit one that doesn’t look too far away.
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