Autonomous Vehicles Could Drive Car Insurance Companies Out Of Business
When autonomous vehicles rule the roads, they will eliminate the estimated 90 percent of traffic accidents caused by human error, which could save 30,000 lives per year and, according to an advisor to car insurance companies, wipe out car insurance companies.
“Cars are not going to crash nearly as frequently, and they’re not going to crash as severely as we’ve seen in the past, so you could say it could be the demise of the car insurance industry,” said Lawrence Burns, a retired GM executive and professor who advises corporations, including Allstate and Google, on mobility issues.
A study last year found driverless cars are more likely than human-operated vehicles to be in accidents, but the accidents documented in the study were all the fault of the human drivers of other cars. None of the driverless cars caused an accident. Often, the driverless cars were struck because they were adhering to traffic laws, Burns said, like making sure an intersection is clear before proceeding when a light turns green, only to get rear-ended.
“There will be liability,” Burns said Wednesday at the University of Chicago Booth School of Business, “but most traffic safety issues will be resolved when we eliminate 90 percent of the crashes.”
Burns wouldn’t reveal Allstate’s plans to survive this transformation—”I do advise Allstate. I can’t talk specifically about what they’re doing. But because I’ve studied the insurance industry more broadly I can tell you the opportunities and the risks that they see.”
“A connected vehicle allows an insurance company to really look at you individually in terms of your actual driving and your real risk and real time situational awareness, so they can innovate a lot of products and a lot of pricing strategies aimed at trying to keep you out of harm’s way, and almost pivot from selling insurance to selling assurance.
“So the goal isn’t to financially reward you when you get injured in a car crash. The goal is to not have you get in a car crash.”
But if a driverless transportation system is fully realized, individual auto insurance itself makes little sense. To survive in that new world, car insurance companies would have to reinvent themselves.
Source of article: www.forbes.com