Self-Driving Cars: Hurdles, Advantages, and What It Means for the Auto Insurance Industry

Self-driving cars may save the lives of 21,700 people and could be responsible for more than $447 billion in economic and financial benefits, according to a new study.                                                           

The Eno Center for Transportation was the group responsible for the study, and the final numbers were arrived at by assuming that 90 percent of the cars on the road were self-driving.

“There will be many steps before we get to that, but it does feel like there is a whole new world that completely changes everything in terms of our perspective on driving that could emerge eventually,” said Joshua Schank, Eno’s president and CEO.

If only 10 percent of automobiles were self-driving, estimated reduction in yearly traffic deaths would be 1,000 with $38 billion in economic advantages.

However, There Are Hurdles to The Self-Driving Revolution. 

Cost: Self-driving cars will essentially be an entirely new form of transportation with added sensors, engineering, power, computing requirements, and software. Getting one in your garage currently runs around $100,000 per vehicle. While they would have less reliance on gasoline and could save more money over an extended period of time, the buy-in is rather high.

Car Culture: In the United States, you’re dealing with a heavy car culture. People still like to get out on the open road and feel like they’re in control of their destiny. Driving has long been symbolic with independence, and it could be a long time before the typical American is ready to give that up.

Hack-ability: Obviously, these units would depend more heavily on computers and modern technology, all of which we know is hack-able by the computer-savvy. The idea that someone could take control of your car is even more frightening than when they illegally use your credit card. There are measures you can take to fight credit card fraud. There’s nothing you can do if someone decides to drive you through the middle of a supermarket.

Despite These Hurdles, Self-Driving Cars Are Already Here, And They Do Hold A Number of Advantages. 

More Productivity: Imagine being able to climb into the front seat and put some last-minute touches on a report for work or school! You could also hold conference calls when traveling on business, catch up on email, check LinkedIn — the possibilities are endless.

Better Safety: Aside from the findings of the Eno study, automated cars and trucks would also greatly reduce the number of deaths caused by operator error (which accounts for about 25 percent of vehicle deaths) and accidents caused by drinking and driving or texting. In that sense, you could see a lot of parents more willing to loan their teens the keys.

Being Lazy: At the end of a long day, you could turn off your brain and play on your smartphone/laptop/tablet/etc. If running late for work, you won’t have to skip breakfast. If you’ve been traveling for hours and get sleepy, just recline the seat and sleep the rest of the way to your destination. Had too much to drink? No more causing accidents or getting jailed for driving while under the influence. (Of course, you shouldn’t be doing that anyway, but if you had a smart car, your own poor judgment would be less of a factor.)

But What Will It Mean for The Insurance Industry?

Obviously, insurance isn’t going anywhere. In fact, of all the industries that self-driving cars could disrupt, auto insurance is perhaps the least likely.

For starters, as the Eno study itself indicated, widespread adoption of self-driving cars is entirely cost prohibitive at this juncture. The first places where they could conceivably gain traction are with taxi services and public transportation. With these industries, revenue could be generated through the purchase of tokens or fares, thus compensating the initial $100k expense. Individual drivers would not have this option, so they’re less likely to fork out that kind of money for a car that limits their driving privileges.

And on the topic of limited driving privileges, many of these cars would have some way to override, thus making auto insurance a necessity for whoever’s taking the wheel.

Companies could also experiment with the levels of computer and mechanical safety features, thus bringing car costs up or down depending on how loaded/sparse their spec sheets are. Safety features would have some bearing on the price of an insurance policy.

Finally, the US has an enormously diverse landscape filled with city streets and rural roads. We’re spread out all over the place, and we like our independence. In a country of 310 million people, you’ll never get everyone to hand over their keys. And since there is always room for operator error or poor human judgment, there will always be a need to protect yourself and your passengers out on the road.

Could self-driving cars change the insurance industry? Certainly. By offering more affordable premiums to risky drivers, who switch from manual to self-driving cars — i.e. people with a DUI history, disabled persons in which their impairment affects the ability to drive, senior citizens — it could actually be a boon for the industry.

Do you think self-driving cars will catch on? If so, how do you foresee them affecting the auto insurance industry?

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