How do you set insurance rates for cars without drivers?
With driverless cars predicted to become ubiquitous by 2025, the insurance industry is facing a new challenge when it comes to establishing auto coverage rates for these vehicles. If current auto insurance rates are based on driver history, how do you determine insurance rates for a car with no driver?
The Future of Driving
Ford Motor Company, the famed American automaker, is leading the way towards the future of affordable, driverless cars. It plans to offer the new technology to ride-hailing and taxi services, before eventually presenting low-cost options to individual consumers. Ford says these vehicles will not be equipped with any of the normal machinery that drivers are accustomed to, like steering wheels and brake pedals.
In addition, the vehicles will be produced not by a single manufacturer, as has traditionally been the case, but by an entire host of companies — making it even harder to establish insurance rates on the basis of production. Ford has cited potential partnerships with various tech brands that provide high resolution GPS mapping services, computer vision and machine learning software, lidar sensors, and more. Other household automotive brands are jumping on the bandwagon as well — for example, BMW plans to partner with Intel and Mobileye for the production of their own driverless vehicles.
In the initial phases of testing and driverless car distribution, most insurers will be monitoring developments with a keen eye. Many have brought up questions regarding safety, particularly following last year’s self-driving Tesla accident. Manufacturers are confident, however, that the safety of these vehicles will far outpace that of their human-driven counterparts, with 93% of all fatal car accidents projected to be a result of human error.
Determining New Rates
Insurers will need an entirely new host of tools to determine driverless auto rates, including data resources and tech monitoring. Michael Macauley, CEO of pricing analytics provider Quadrant Information Services, noted: “it’s not going to be up to the property and casualty insurance industry to determine when driverless cars take to the road, how they operate, and what kinds of technology they use. It is, however, going to be up to insurance carriers to understand the situation and evaluate the risks posed by different operators — if that’s even the right word — in different cars on different roads and in different weather, using a variety of technologies.” He points to cloud-based computing and high-speed data analytics as necessary tools for these evaluations.
Telematics, for instance, are already being used in some instances to calculate individualized rates for drivers — a trend that could certainly be amplified with the proliferation of driverless cars. Driverless auto technology would allow for the storage of cloud-based records of everything from daily mileage and frequently traveled routes to weather patterns and driver behavior. Sharing this auto data with insurers could allow them to better establish an accurate rate on a driver-by-driver basis.
As far as government intervention is concerned, federal agencies are looking to regulate how driverless cars are manufactured across the country; but for the time being, they’re allowing individual states to handle the insurance question themselves.
Beyond the determination of rates for driverless auto owners, more questions will arise as we get closer to the widespread usage of such vehicles. Who is at fault when two driverless cars collide? How does an insurance agency respond when a covered vehicle is hacked? If the car’s automated system cannot be overridden, to what extent should driver behavior factor into rates? These are just a few of the considerations that insurers will have to prepare for as we approach a Jetsons-esque future.