Changes in ownership, coverages and the way claims are evaluated are just a few of the ways self-driving cars will impact the auto insurance industry, according Jared Smollik, actuarial director of personal auto product development for Verisk Insurance Solutions. Though there is expected to be a transition period, Smollik said auto insurers need to begin planning for autonomous vehicles sooner rather than later.
According to Smollik, driverless cars are expected to be safer, accident frequency will likely go down, and there will be lower costs associated with insurance coverage and claims payouts.
“People expect that driverless cars are going to be much safer, so just from that standpoint we might expect the accident frequency is going to go down,” said Smollik.
There will be a transition period, he said, and it will take a long time to see gains. That’s because a simple fender bender could be very costly to repair, since bumpers will likely contain several sensors and cameras.
The ownership of vehicles is also expected to change. It’s anticipated that vehicles will go from personal ownership to commercial ownership.
“So, we’d be looking at a shift from personal auto insurance to commercial auto insurance, as a lot of these autonomous fleets are owned and managed by companies that maybe have a subscriber sort of business model,” he said.
There is some question on whether driverless cars will end up lasting longer, Smollik said. On one hand, cars will be maintained better because they can automatically go to a repair shop when needed. On the other hand, if the utilization rate is higher, as cars go from passenger to passenger and operate continually, they may not last as long.
He said that there will likely be a reduction in comprehensive claims, given that vehicles could move away from storms headed their way.
There will be rating changes once driverless vehicles hit the road, he said. Now, rating is based on driver habits.
“We need to start thinking about how do the vehicles differentiate from each other as opposed to how human drivers differentiate from each other,” he explained.
Smollik doesn’t think the way insurance is administered will change. There will still be coverage for drivers. Additional coverages on personal auto policies will include cyber liability insurance, he said.
Financial responsibility laws that outline the minimum amount of insurance required by a state aren’t expected to change.
Changes to claims handling is also expected, he said. Vehicles recording data before and after a loss can contribute information to help analyze the conditions prior to and during a crash. In addition, recorded information like acceleration and deceleration may make liability determinations easier. Once all cars on the road are autonomous, repairs will be cheaper and faster, Smollik said. That’s because repair shops won’t have to maintain a large inventory of replacement parts and the car will be able to communicate the parts needed to complete repairs.
Fraud should go down since data from the vehicle can help validate and provide verification of the crash and possible injuries, he said. This information along with video from inside and outside of a vehicle could reduce padded injury claims.
The move to autonomous cars will be a big shift for society. Smollik said auto insurers will need to stay on top of technological advances and begin plans for a new business model.