How will driverless cars impact your insurance costs?

Motor insurance costs could halve by 2020 if driverless cars take over British roads.
You don’t have to be an insurance expert to assume that, because the hi-tech vehicles could effectively eliminate bad driving, the cause of 90% of road traffic accidents, there would be a hefty knock-on effect on insurance premiums. Human error is to blame for almost all motor insurance claims. For example, 71% of claims are the result of a vehicle reversing badly and 23% are generated by parking incidents. But if a computer controls the car, there is no possibility of human error. The software doesn’t get tired, drunk or make mistakes.

Life and limb

Self-driving vehicles could save more than 2,500 lives and prevent more than 25,000 serious accidents a year on Britain’s roads by 2030, according to predictions by KPMG, the consulting firm. And if the rate of accidents plummets, so too should the cost of car insurance. Driverless cars could also cut the incidence of insurance fraud, again leading to a drop in premiums. It will be more difficult for a claimant to lie or exaggerate about an accident in a driverless car because of the computer software on board. Crash for cash scams could also be wiped out.

Braking with tradition

Cars that drive themselves sound like something out of science fiction but already a quarter of all new cars incorporate some kind of self-drive technology – think of autonomous emergency braking (AEB), automated parking or even cruise control. AEB, which automatically applies the brakes if the driver does not respond in time, has been proven to reduce the rate of low-speed collisions that result in personal injury claims by around 20%. So it’s perhaps no surprise that many insurers already offer a 10% discount on premiums for cars fitted with AEB technology.

Bristol fashion

Trials of fully autonomous cars are already underway in several cities, including Bristol, Milton Keynes, Coventry and London, albeit with a human on hand to take the wheel if necessary. Most experts therefore predict that driverless cars will be a common sight on the UK’s roads by the middle of 2020. The technology is impressive but it is not necessarily faultless. After all, a computer can crash, too. Also, if the computer is in control of a car, a system failure could be catastrophic. It also raises the issue of responsibility. If an accident is caused by a computer failure, is the driver or the car to blame and who should foot the bill? The driver will almost certainly continue to be held liable in the event of a crash if they are able to override the technology to take control of the car.

Connectivity issues

The big change will only take place when driverless cars become ‘connected’ to other vehicles and a human is no longer expected to monitor the system. In other words, when the car is truly autonomous. Liability for any accident could then shift from the driver to the manufacturer.

Insurance reminder

Motorists will not be able to forget about insurance completely in the brave new world of autonomous vehicles. They would still need to buy cover in case of fire, theft or damage by a falling tree or a flood. Insurers would also have to take into account cyber risk when setting premiums. Imagine the havoc a hacker could cause by gaining access to the computer system of a fleet of driverless cars… Spam jams, perhaps. The FBI has even warned of a potential threat from terrorists who could gain control of self-drive cars to mount an attack. As with many technological innovations, the reality is likely to differ from the predictions in many respects. One thing we can be sure of, however, is fundamental and permanent change.

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