The nature of the invention is to disrupt. The horse, the telephone, and the internet each disrupted how the previous invention relayed information. People will always choose the option that yields faster, more efficient results; such is the case with communication and transportation. Self-driving cars are no longer simply something you would expect to see on the Jetsons; they are now on select streets and coming to an “everyday life” near you.
But with the inevitable proliferation of the self-driving car, what happens to the auto insurance industry?
The Death of the Insurance Industry
Without the potential for human error, insurance companies may have the foundation for their policies to be yanked out from beneath them. National Public Radio published an article in April 2017 wherein they gathered input from some of the big players in the insurance industry on how self-driving cars would affect them. Warren Buffett, whose company, Berkshire Hathaway, owns the insurance juggernaut Geico, shared his thoughts on the impact of self-driving vehicles in an early 2017 interview with CNBC:
“If the day comes when a significant portion of the cars on the road are autonomous, it will hurt Geico’s business very significantly.”
The investment guru’s sentiments are echoed by many other players within the insurance industry. If 90% of accidents are the result of human error, then removing that component in favor of autonomous vehicles will result in accidents in which machines are completely at fault.
Well if the machines are at fault, who assumes liability? Manufacturers.
The shift in liability would create a long-term expense that would “create disincentives for the development of a technology that… [leads] to safer roads.” According to James Lynch, chief actuary for the Insurance Information Institute.
Will the industry be able to adapt and survive?
On the opposite side of the discussion are those that believe the auto insurance industry will be “just fine” in the face of self-driving cars. While the U.S. auto insurance industry generates $220 billion in annual revenue and supports nearly 600,000 jobs, some predict the self-driving vehicle will shrink the market by 60% by the year 2040 and cripple the market.
Those opposing side this view feel that the auto-insurance industry will adapt to the change by shifting models. Some of the proposed insurance models include:
- Self-Insured – Developers of self-driving vehicles, like Google, Mercedes, and Volvo, are insuring their own products. While a viable solution, it presents the risk of impeding innovation and the freedom to travel.
- Micro-Risks & Micro-Premiums – by utilizing sensors and a flood of real-time data that cars generate, “real-time insurance” becomes a possibility. Vehicles that sense that you’re drowsy or have consumed alcohol could increase your insurance rate for a specified period of time.
There is a multitude of ways in which the industry could adapt to the disruptive presence of self-driving cars. Ultimately, it will require multiple pieces to be moved between insurance providers and policymakers before a viable option is discovered. For a Risk Management Information System as advanced as Claims Manager®, the impact of self-driving cars on the industry becomes a waiting game. Much like a spider after it has crafted an intricate, yet functionally simple masterpiece with its web, Claims Manager® has been and continues to be meticulously pieced together. Claims Manager® easily captures First Notice of Loss Information and makes designated parties aware via automated alerts, documents, and notifications. Data within the system is also easily exported onto other platforms, like Windows Excel, granting distribution versatility to clients. When a change to the insurance industry comes, our RMIS will be ready to catch it, package it, and make it easily consumable for our clientele.