The era when software becomes a driver is near
Auto insurance is one of the oldest and most familiar insurance. Leveraging data accumulated over a century, you can assign risks based on vehicle type and model, driver age and gender, where the vehicle is parked, and hundreds of other factors.However, car insurance is built on one important premise.
Whether the driver is a middle-aged woman driving a $ 30 million Ferrari or an 18-year-old man driving a 5 million dollars, the insurance industry is good enough to assess the possibility of the car being involved in an accident. I have a lot of data. The insurance company can set premiums and determine how much you have to pay if your car is damaged or if the driver damages another car or property.
But what if the premise that it’s humans who control the car breaks down?
Automakers around the world are now developing driving technologies that do not depend on human hands. This is a completely different car than we have ever seen. So to speak, it is a robot that can carry people from one place to another, and its behavior is controlled by software.
Today’s vehicles include cruise control to help maintain distance and speed, intelligent braking to slow down and stop before the driver reacts, and a lane departure prevention support system that allows the driver to maintain a predetermined lane. We provide many convenient functions to assist safe driving, but in principle, the driver is still responsible in the event of an accident.
But now, we are approaching an era where cars have no pedals, gears, or handles. In such a world, there are no drivers, passengers just sit in the car after telling them where they want to go, without worrying about what’s going on outside. Therefore, the driver’s driving mistake will not cause an accident.
Autonomous driving obscures responsibility
Current car insurance is such that if a car is involved in an accident, the driver will take responsibility according to a set rate. But what if the driver is software? Let’s say two automated transport robots collide on the road. How can an insurance company clarify its responsibilities?
What if the software worked as intended, the collision saved lives, prevented passenger injuries, and minimized property damage? If the car works as intended, can the insurance company justify the car owner for excess or out-of-pocket payments?
Another problem for insurers is that the incidence of accidents is expected to drop significantly and the risk calculation method will need to be changed. Self-driving cars do not operate independently. Eventually, it will work with traffic management systems to drive the most efficient and safe routes.
Therefore, when a car departs, it communicates with other cars on the road and adjusts the route to avoid potential dangers. For example, you may choose a safer route, avoiding the risk of slipping even in a slight detour. In this way, risk is avoided by more predictive than human drivers.
It will also allow the car to escape on its own so that it is not stolen, and may even reduce theft.
Insurance company business shifts to companies
Today, car sharing is becoming more widespread and the values of car ownership are changing. Insurers may have fewer individual customers and more transactions with companies. Even more so, when it comes to self-driving cars, drivers may not need to be insured as long as there are no drivers. What happens to car insurance when that happens?
When these changes occur, insurers will turn to ecosystem providers. Automakers who develop algorithms and software to drive new self-driving cars will be held accountable.
According to a report by US research firm RAND, manufacturer liability insurance is expected to increase and personal liability insurance is expected to decrease. In the United States, some states, such as Michigan, have already passed legislation that holds automakers liable for errors in autonomous driving systems. The British government is considering a similar law.
Insurance issues can be more complicated if manufacturers and drivers share responsibilities. While these changes are favorable because insurers have experience in complex responsibilities calculations, the number of factors that need to be considered changes and historical data for building models is available. It’s also a big challenge because it doesn’t exist.
Insurance companies need to build new models for accident cases
Insurance is essentially a data-centric business. The new ecosystem of robotic automated transportation will collect a lot of data on how vehicles that aren’t involved in human driving behave. Such data will help insurers shift their business from individuals to car makers and build new models.
It will take decades for the insurance industry to build such a model, but the amount of data generated annually by 2000 fully autonomous vehicles is that of data generated by drivers around the world in 2015. It is said that the amount will be the same. This is what Dr. Chang Huang, co-founder and vice president of Horizon Robotics, said in the 2019 CES Asia Keynote on the theme of self-driving cars.
In any case, it is certain that insurers will need to consider different scenarios and build a model of the likelihood of an accident leading to a claim. In the future, big data and analytics will be used to link them, and prices, risk assessments, and simulations will be calculated based on the data.
Insurers will have to adjust their data models and business practices as self-driving cars become more prevalent. But it’s still a long way off when humans no longer have to drive and insurers have access to sufficient data.
By working with the creators of the new ecosystem and exploring new data models, insurers will be prepared for the changes that autonomous driving will bring.
Keywords:
Automated Driving technology
UK insurance companies after automated driving technology
