The increasing popularity of driverless vehicles heralds a revolution not just for car manufacturers but also for car insurance. It will be necessary to incorporate the greater capability of self-driving cars in traditional models of car insurance. Autonomous vehicles are likely to significantly improve safety, reduce the incidence of accidents, and shift liability such that the way auto insurance is arranged and priced will change dramatically.
Probably the single most important way that autonomous vehicles could alter car insurance would be to reduce the number of accidents, as human error accounts for practically all traffic accidents today, and with self-driving cars, such mistakes would either be eradicated or minimized to a great extent. Equipped with advanced sensors, cameras, and artificial intelligence, autonomous vehicles react faster than human drivers, strictly adhere to traffic laws, and communicate with other vehicles on the road to avoid accidents. By considerably bringing down the accident rate, insurance companies may reduce their claims and hence bring down consumer premiums.
The reduced accident rate, however, will force insurance companies to alter how policies are structured. Traditional car insurance is based on the assumption that the driver is responsible for causing accidents. With self-driving cars to become very common on the roads, insurance will no longer center on drivers but manufacturers of such vehicles and their software developers. This raises the important question: who would be responsible in case an accident involves an autonomous vehicle?. Is it the owner of the car, the manufacturer, the developer of the software, or some combination of these? As the liability issues become more complicated, so will insurance companies have to be innovative with new policies tailored for such unique challenges.
One such possibility is that product liability insurance will surge, with car manufacturers taking greater responsibility for accidents provoked by autonomous vehicles. In such a case, much greater emphasis would be placed on insuring the technology rather than the driver. They could sell their own policy directly to buyers upon selling a vehicle, covering malfunction or software failure that may lead to accidents. This may potentially reduce the need for traditional personal car insurance in case the technology is very reliable.
Finally, the data that an autonomous vehicle can gather may have a serious impact on the future of car insurance. Enormous amounts of data production in relation to driving pattern, vehicle performance, and environmental conditions are possible with a self-driving car. Insurance companies can leverage this data to come up with more accurate risk assessments and premium prices. This could result in very customized insurance policies where the premiums will be based on real-time data rather than driving history. For instance, if the self-driving car has always been driven under low-risk conditions, then one would expect a reduction in the insurance premium.
Another would be the transition phase—the period during which there is going to be shared usage of autonomous and human-driven vehicles on the roads. Insurance companies must, therefore, balance the risks associated with both during this period. We may have hybrid policies, wherein there is one type of coverage when the car is driven manually and another type when the vehicle is driven autonomously. As this technology evolves over time, so will the insurance models to accommodate changes in transportation.
In the end, car insurance with autonomous vehicles will likely be very different from what we know today. The reduction in accidents, the shift in liability, and the role of data will all combine to transform how car insurance is structured and priced. The sector of insurance will need to revolve around the handling of self-driving cars, which are fast becoming a common feature. Since the complete effect of the autonomous vehicle on car insurance is still unfolding, obviously, this field is standing on the threshold of probably one of the most crucial revolutions in its history.