Insurance Companies’ Opinions on Autonomous Vehicles

By  //  November 20, 2020

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Only a few years ago, self-driving vehicles were believed to be the Achilles’ heel of insurance providers. The hype of autonomous vehicles made it seem as though the new technology would take the market by storm.

However, today’s reality paints a different picture. Technology is coming to cars at a more gradual pace than expected, and insurance companies are embracing this steady change rather than rejecting it.

The Current Autonomous Vehicle Landscape

Self-driving vehicles no longer seem to pose an immediate disruptive potential as they once did. Gartner Inc., a worldwide consulting firm, describes self-driving cars as a great example of a “hype cycle”; where technologies in their infant stage first reach a peak of inflated expectations, then fall to a “trough of disillusionment” before finding a plateau of productivity.

Right now, driverless vehicles are in this trough of disillusionment. Experts at CounterPoint Research are estimating that fully self-driving cars may not even be a reality this decade.

Even if that technology advances sooner, autonomous vehicles will most likely not have any significant market share before 2030.

The high-profile accidents involving autonomous vehicles over the last few years have really set automakers back in the eyes of the public. Even during a hearing on self-driving cars in February, Tesla was called out for the inadequacies in its Autosteer technology by the National Transportation Safety Board.

Insurance Companies’ Response

On the other end of the spectrum, insurance providers like Progressive, Allstate, and Geico have been actively contributing to the technological advancements of cars, but not in the same way Tesla is.

Rather than focusing on safe self-driving technology, which would theoretically make them obsolete, insurance companies are investing in information technology that could help their customers lower the cost of insurance.

This technology could allow insurance companies to monitor actions like speeding, swerving, and sudden braking to determine insurance rates. The aim is to base insurance premiums on how customers actually drive and use their vehicle rather than their driving history.

Although it is not a foolproof method of preventing accidents like autonomous vehicles claim to be, usage-based insurance has seen great success in encouraging drivers to make safer choices on the road.

According to Allstate spokesman Justin Herndon, the average customer who uses Allstate’s Drivewise or Milewise app saves 8%-12% on their policy, meaning these customers are driving more safely to earn the discounts.

“It’s always a good idea for drivers to practice safe driving habits, but the technology that incentivizes safe driving can help those drivers that need a bit more encouragement.” said Attorney Bennett Schiller with Schiller & Hamilton Law Firm.

“Technology that tracks our driving can be great for fighting aggressive driving habits, and can also be beneficial in filing insurance claims, such as using dashcam footage to prove liability in a car accident claim or using a Snapshot device to prove you were following the speed limit.”

The Future of Auto Accidents and Insurance

Only time can tell how evolving technology will impact car manufacturers and insurance companies. Even without self-driving technology, cars today are being outfitted with more advanced safety measures like lane departure warnings and automatic braking systems.

However, accidents and insurance claims both have not seen much decline. This is due in part to the number of old vehicles without advanced safety features still on the road. So, it can be expected that as time goes on and older vehicles phase-out, insurance companies should see fewer accidents and less of a need for coverage.

Self-driving technology also needs to be a part of the conversation as time moves on. While the technology still seems far off, automakers such as Tesla are confident in its progress.

Elon Musk has personally attested to its potential, as he claims he is able to go from his house to work purely on autonomous driving. The end goal for Tesla is to create a functional autopilot system and subsequently offer their own insurance for drivers. Tesla already offers insurance in California, where typical insurance rates may be anywhere from 25%-50% of a lease payment.

They believe that with the advanced capabilities of their cars, they can better track drivers than major insurance providers and offer more comparable rates. Combine cheaper insurance with autonomous driving, and that certainly gives insurance companies something to consider in years to come.

The world of insurance providers will not be changing overnight. While automobile technology has come a long way, there are still important milestones that have yet to be surpassed. However, the perspective changes cannot be ignored. Insurance companies need to adjust to the changing trends and technologies in order to stay competitive in the market.