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Ken Gratton7 Nov 2016
NEWS

Autonomous cars to kill insurance?

Kiwi academic predicts shrinking revenues for car insurers as self-driving cars take to the world's roads

The global insurance industry is already predicting that safer, autonomous cars will begin to influence the road toll – and the consequent need for car insurance – from as soon as 2030.

But Dr Michael Taylor, the Senior Lecturer in Finance and Insurance at New Zealand's Massey University, argues that the industry is being a wee bit optimistic.

In a wide-ranging report, 'A Perfect Storm in Insurance', Dr Taylor writes that the advanced technology will disrupt the car insurance market long before then.

"Semi-autonomous car technology will have a substantial impact far sooner," he writes.

"There is mounting evidence that autonomous drive cars are safer than human drivers. As of August 2015, all the crashes the Google cars have been involved in, have been caused by human drivers either running into a Google car, or in one case, a human deciding to put the Google car in manual mode."

Dr Taylor observes that the perception – fuelled by the media – that autonomous cars will be slow to arrive in the market and won't immediately affect the insurance industry to any large degree, is based on the inferred view that autonomous cars must be "fully autonomous" like the Google cars.

But autonomy is all about shades of grey, and there are already practical, functioning examples of 'semi-autonomous' cars on the road.

"In April 2015, an Audi with Delphi technology drove from San Francisco to New York, 3400 miles of road it had never driven on before. Its human driver only took control on one per cent of the densest city roads.

"Note that these are 90 per cent autonomous cars, but have the advantage over Good cars, as there is no need to intensively pre-map roads like Google does.

"2016 is seeing extensive trials of cars which will incorporate 80 per cent of the technologies required to be fully autonomous..."

The functionality Dr Taylor anticipates will be at the forefront of fully autonomous motoring – and is already available in semi-autonomous applications – includes autonomous emergency braking, 'stop&go pilot' and self parking. These and other, more sophisticated features will be introduced progressively, Dr Taylor says, to allow consumers time to make the adjustment, and face up to the next wave of new technology.

"There will thus not be a big moment when cars go from 100 per cent human control to 100 automated; instead cars will go from 40 per cent to 60 per cent to 80 per cent to 100 per cent over the next decade or so."

Dr Taylor believes some basic autonomous functionality will be operational in suburban streets from 2020, and he cites other industry authorities who suggest that as many as 50 per cent of all cars on the road could be fully autonomous by 2025. The more cars migrate to autonomous operation on the world's road networks, the quicker the rollout of WiFi infrastructure to support the autonomous traffic flow, Dr Taylor says.

While he doesn't say precisely how he sees the insurance industry reacting to this change, Dr Taylor does foresee the future being safer for us all. That will have a concomitant effect on an industry that makes its money from protecting people's assets from risk.

As cars become inherently safer, the insurance industry will possibly develop new products – such as a reverse-third-party cover that protects you and your car from damage committed by a (non-autonomous) car owned by someone else.

Or personal comprehensive insurance policies become may harder to obtain and more expensive, as more users cease to own vehicles for themselves, opting to go places in the back of an autonomous Uber taxi instead.

The insurance industry faces an indeterminate future – and not a distant one either – in which sales volumes shrink, revenue will also shrink and products will have to change.

But risk should be drastically reduced, there's little doubt.

Related reading:
Bosch Australia President: Autonomous driving next major advancement in road safety
Tesla adds 'Level 5' autonomous hardware
Autonomous cars won't fix traffic problems
Save the driver, says Benz

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Written byKen Gratton
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