Article originally written by James Bryant
What happens when driverless cars catch on? As much as $160 billion per year in insurance premium could vanish amid improved vehicle safety and reduced vehicle ownership.
While autonomous car technology is years away, driver-assist technology is here today and has already made an impact on the reduction of accidents and premiums.
There would be a shift from individual liability insurance premiums to the auto manufacturer and their suppliers who develop the software that drives these cars.
The car manufacturers would then accept the liability for accidents involving their driverless cars, which would mean the individual is only responsible for comprehensive and collision. A 2015 report by KPMG estimated that the personal-auto insurance industry would contract 40% within 25 years.
Part of the erosion comes from direct completion from the automotive industry. Instead of competing with each other they should join forces to share data and other valuable information. For example, Toyota formed a joint venture with Aioi Nissay Dowa Insurance. The two companies are working together to develop insurance products based on driver behavior data.
In the driverless car future, there will have to be different actuary models that eliminate the human factor of driving a car.
There is time to figure all of this out according to KPMG. They expect a fully self-driving car to be widely available by 2025, however the Wall Street Journal quoted that we are still operating in an era of millions of recalls for the simplest of technology, such as ignition switches failure, floor mats and air bags. This paints a picture that is not so optimistic for the autonomous car.