Self-Driving Cars To Transform Insurance and Other Industries

MarkWhittington writes: The advent of commercially available self-driving cars is about five years away, but already some are thinking about how they will disrupt the economy and how society operates in general. One industry likely to suffer is that of auto insurance. Since the vast majority of auto accidents are caused by human error, having more autonomous vehicles on the road will almost assuredly result in fewer overall accidents. Further, once we've transitioned to a society that mostly gets around using self-driving vehicles, most accidents will be the result of hardware and software malfunctions. Insurance for self-driving cars would more resemble product liability coverage than the sort of auto insurance we have today. Indeed, the technology will also likely impact diverse industries such as auto mechanics, taxi services, and health care, as well as policing.

Comments

Insurance companies suffer?

[taustin]

Really? As long as liability insurance is mandatory, and comprehensive required for as long as you have load on the car, and as long as it takes action on the part of a state legislature followed by years of court battles to force insurance companies to lower rates, no, insurance companies will not suffer from lower accident rates.

In fact, in most states, they will probably use the changing market as an excuse to raise rates, knowing they will continue to sell the same number of policies while paying fewer claims.

Anybody who believes that the legal requirements for insurance will change for self driving cars is smoking dope.

Re:Insurance companies suffer?

[Anonymous Coward]

Insurance companies can only raise rates if they can prove that their losses are higher than their permissible loss ratio. Almost all states require a filing that follows standard actuarial procedures in order to prove it. A lot of states, like California, have strict requirements on how much rate can be taken, and how much your permissible loss ratio can be. Some states are now banning the use of price optimization, which eliminates any possibility of using non-loss information to set rates. Insurance companies can't raise rates due to the "changing market".

So yes, in the long run the insurance companies will suffer to some degree. But, it just means that they need to change their business model.

Re:Insurance companies suffer?

[frovingslosh]

Absolutely. As long as the insurance companies keep the lawmakers in their pocket, they will only gain by fewer accidents. If you have liability insurance (the only type that is legally required by most state laws), you are required to have it on each vehicle that you drive (even if there is only one licensed driver in the household). Yet the driver can only drive one vehicle at a time. The industry claims the insurance is on the vehicle and not the driver, but that argument wears thin as soon as you have a teen driver in the household or the driver get into an accident or even gets a ticket. The insurance is clearly on the driver, but the industry is allowed to charge for it for each vehicle. One obvious problem with this is that we claim to want to reduce pollution and improve air quality and have poured millions and millions of tax money into private industry all electric vehicles like the Volt. But because of the limited range, many people who would buy a Volt don't get one because they would have to have a second vehicle for longer trips if they did (particularly in single driver households) and be charged liability insurance on both.

Personally, I drive a larger vehicle than I would like. I do so because I feel that I need to ability to haul things around occasionally. If I could have a smaller vehicle without the double hit on liability insurance I would also have a small two seat vehicle (or maybe even one, or a motorcycle). The insurance company would win because statistically I could do less damage when I drove the smaller lighter vehicle, but they have their hooks into the lawmakers and they insist that they deserve the insurance payment on each vehicle even when there are more vehicles than drivers in a household.

Re:Insurance companies suffer?

[gstoddart]

More than that ... if we have self driving cars, why would I pay for insurance at all?

So that some company can sell me a product which mostly works, and when it fails will throw control over to me and make it my liability?

Yeah, sorry ... but no.

Your car is either autonomous, and whoever made it/is responsible to maintain it pays the liability .. or it will hand back to me when it runs out of options, in which case I'll just drive the car myself because I don't trust it.

Either we trust the autonomous cars, or we don't. But I'm not taking any liability for it, and I'm sure as hell not paying for liability for it.

That's just companies wanting the best of both worlds.

You want autonomous cars, fine, then I'm a passenger with no controls. At which point these things are only economically viable in a rental model ... because why the hell would I pay to own one?

Re:Insurance companies suffer?

[CanHasDIY]

No, I want to make sure everybody has liability insurance to pay for expenses when they cause a wreck.

That's not the same thing as "no-fault."

"no-fault" implies that regardless of how the collision occurred, everyone pays for their own stuff. Like in parking lots.

See, that works in parking lots because it's often hard to determine who screwed up, especially considering how poorly some lots are marked.

It does not work that way on public streets, for lots of reasons. Namely because innocent parties who are harmed by the negligence of others shouldn't, per our legal system, be required to bear the burden of that other person's mistake.

A "no-fault" world would mean that if you were crossing an intersection and got t-boned by a drunk driver who failed to stop at the red light, your family would pay for your medical expenses, funeral, etc, and Drunk Moron would only have to pay for the damage to his own vehicle.

Five years away?

[ArcadeMan]

Is that the same kind of years that are used by a lot of other technological advances? Because if it is, we won't have commercially available self-driving cars before 2040.

And by then, I hope they're freakin' flying cars, too.

Re:Five years away?

[tompaulco]

Is that the same kind of years that are used by a lot of other technological advances? Because if it is, we won't have commercially available self-driving cars before 2040.

And by then, I hope they're freakin' flying cars, too.

I like how the article is written, "Unsupported and extremely unlikely assumption is true. Based on that unsupported assumption, everybody will start behaving according to another unsupported assumption. Once this happens, the only accidents will be due to a third unsupported assumption. Given all this, how does this affect the insurance industry?"
Well, I say who cares? The first assumption is not likely to occur. The second one presumes that everybody will accept this and completely change their lifestyle to not own a car. The third one assumes that only hardware and software errors could possibly cause a crash. Once you pile conjecture upon conjecture upon conjecture, it is not even worth talking about it.

Re:Five years away?

[jamesborr]

These cars might work out fairly well in sunny southern California -- but the NorthEast during significant parts of our driving season? I drive an AWD drive sedan with studded snow tires from November to April, and when one gets into not too atypical conditions (snow/ice covered highways, no lane markings visible, snowing/reduced visibility, etc.) -- driving becomes almost a black art. You can forget about cruise control in these conditions -- unless to have a strong desire to end up in a ditch. Nuance is the rule, and the expectation that your vehicle will go where you steer/drive/stop to -- well, you are more hopeful then I am in these conditions. Turn down the radio, turn off cruise control, light touch on the wheel, paranoia re: other cars on the road -- assume the worst, etc... My suspicion is that self driving cars will resolve this issue by significant slowing, which then presents is own set of danger issues (i.e. everyone else on the road expects traffic moving 50+ even in fairly bad conditions, and cars going 10 or 15 in limited visibility on divided highways -- well, I wouldn't want to be around for the resultant carnage...

Re:Five years away?

[Ravaldy]

It all comes down to having the right sensors and the right algorithm to handle the situations. The fact is that the computer can process far more road condition data than a human being. I too drive/drove in rough conditions (used to live far north in Canada). Based on my experience I'd bet the a well designed self driving car would do much better than most drivers.

Visibility (possibly limited), steering, 2 pedals, g-force are the only elements most drivers use to drive their vehicle. For most of us this feedback is often responded to late resulting in slight over compensation.

The computer has unlimited visibility and 4 wheel traction control not limited by slip diffs and other slow response technologies. Instead all 4 wheels are controlled independent (I'm assuming these cars will all be electric by then). The computer is much quicker at responding to change in road conditions and is able to adapt much quicker.

Drunk Driving

[tom229]

If I can pile into one drunk and it will drive me home, sign me up. My hunch is that the our current nanny-state way of thinking will never allow this. We will be required to be sober and attentive even if not driving. You'd probably get a ticket for merely reading a book or sending a text message.

Bars thrive

[gurps_npc]

Bars would thrive.

Police in small towns would lose a ton of money - much fewer speeding and traffic tickets.

Similarly, the elderly would participate more in life - go out, party, and socialize a lot more.

Movies ( and a bit of books) will increase - think of all the stuff kids do while you drive them around.

But all of this will take 10-20 years, after the first sale, not immediately

Re:Bars thrive

[CrimsonAvenger]

Similarly, the elderly would participate more in life - go out, party, and socialize a lot more.

Not sure where you're coming from on this; how? Do you think the automated cars are going to be free/cheaper than existing taxi cabs and public transit? Or are you basing this claim on some rationale I have yet to consider?

Just as an example, my parents are getting into their 80's now. They can no longer handle long drives to visit family, and are increasingly worried by flying.

Autonomous car means "take me to CrimsonAvenger's house", go to sleep/read/whatever instead of watching traffic for ten+ hours.

As to public transportation, not all of our parents live in cities. Some, like mine, live out in the boonies (about 40 miles from the nearest city, in their case).

From my own POV, it means a few more hours per week doing what I want instead of "peering through a dirty pane of silica glass" watching out for lunatics who are doing the same.

And the whole "you can stay out a little later, since you don't have to be 100% awake to drive home from the party/whatever" is appealing. Or get off on trips a little earlier, because you don't need your coffee to kick in before you can drive safely....

Private Ownership?

[Anonymous Coward]

My bet... insurance companies will make it nearly impossible to own a human driving car. Since humans create accidents and they do not wish to pay out, liability coverage for a human driven car will increase greatly while robotic cars will drop. Eventually it will be nearly impossible to own a human driven car because of the costs.

Or, alternately ...

[gstoddart]

The alternate vision of the future is that, as usual, futurists are all hot and horny about how their technology will revolutionize the world, but it will continue to be far too expensive for society to change over and it will never happen on the claimed scale.

So, like when I see things about how we'll have smart cities in which the roads are interconnected and technology will be everywhere .. I'm forced to conclude we're not going to tear down the world and start over to build this shiny stuff the futurists keep telling us is inevitable.

At the end of the day, these are products someone wants to sell us. And if the world doesn't feel like it has billions or trillions of dollars to rebuild everything for your shiny new technology, then either it will never happen, or it will be rolled out in a few limited places for the wealthy.

Take the average age of a car in North America .. hell, take the average age of a car in the world.

Now, ask yourself who is going to replace all of the cars on the planet with your super awesome technology?

From there you can pretty much realize that this stuff will never 100% replace what we have, will only ever benefit a very small amount of people, and likely won't be able to coexist with what we have now. In which case it sounds good on paper, but will never come to fruition.

Technology is cool, and it does move forward. But the economics of technology often means it will never be as practical or achievable as claimed by its proponents.

The world isn't going to rush out and buy self-driving cars just because the people who want to sell self-driving cars tell us how awesome they'll be. It just doesn't work that way.

As usual, I'll believe it when I see it.

Re:Or, alternately ...

[timholman]

The world isn't going to rush out and buy self-driving cars just because the people who want to sell self-driving cars tell us how awesome they'll be. It just doesn't work that way.

Thirty years ago, you could just as easily have written the following:

"The world isn't going to rush out and buy cellular phones just because the people who want to sell cellular phones tell us how awesome they'll be. It just doesn't work that way."

Back then, Ma Bell ran the U.S. telecom industry. Nearly every home had a landline, with regulated rates. Public phones were everywhere. What possible motivation could people have to buy a $400 smartphone every two years, and pay $50 or $100 a month in connection fees on top of that? Yet here we are today.

Self-driving cars aren't going to overturn transportation because they're "awesome", but because they'll be so damned useful to so many people, not the least of which will be the large segment of the population that wants the convenience of personal transportation, but cannot drive.

Add to that the estimated 250 billion USD cost each year in the U.S. alone due to auto accidents, along with 35,000 deaths and millions of injuries (some permanently disabling), and there is in fact an enormous financial (and humanitarian) incentive to get self-driving cars on the road ASAP.

Twenty years from now we'll be looking back and wondering how we ever managed without autonomous transportation, just as we now wonder how we managed before the cell / smartphone era. People can kick and scream about the future all they want, but it's coming nonetheless.