It’s predicted that driverless cars will account for 25 percent of global car sales by 2035. How will this affect your business and your employees?
Features such as adaptive cruise control, blind-spot monitoring, automated parking and lane departure and forward collision warnings are already making the majority of new cars semi-autonomous. The next level of innovation, implementing automated acceleration, braking and steering, will make cars completely autonomous.
How Will Insurance Coverage and Premiums Be Affected?
Obtaining and reviewing driver profiles for insurance purposes could be irrelevant, or at least less critical, once cars are autonomous. The culprit in an accident will be the technology, with liability for injury or damage placed squarely with the car manufacturer. Insurers in the UK have already developed “dual insurance policies” for driverless cars, which look directly to manufacturers for reimbursement of collision claims paid.
When the car (not the driver) is the insured, underwriting is a lot easier. Companies like Tesla in Asia are already including insurance as part of the sales transaction. Some types of loss, such as from theft, vandalism, wind and floods (the “comprehensive” perils), would probably still need to be underwritten in the traditional way, evaluating risks such as where a vehicle is garaged, miles driven and possibly the insured’s financial profile.
Will Employee Driving Records Be Necessary Anymore?
Data from the Institute for Highway Safety and the Highway Loss Data Institute show that cars equipped with forward-collision warning and automatic braking have far fewer accidents. Safety experts believe removing human error from the equation entirely should be the goal. If this happens, then as long as employees are not able to override the autopilot features of the cars they’re in, employers won’t need to worry about driving records anymore. It’s questionable whether that’s practical, though. Even though airline pilots seldom override autopilot controls, they need to be able to do so in emergencies. Employee driving records can also provide valuable information to employers for other reasons, particularly in making hiring decisions.
One of the major benefits of driverless cars is safety. With fewer accidents there should also be lower insurance costs, at least in the aggregate. However, with more technology comes new hazards. If faulty technology causes an accident, all vehicles with the same technology will need an upgrade. That could be very expensive. Also, it may be true that with both driver and driverless cars on the road, there will be fewer accidents. But if a driverless vehicle is involved in a crash, repair costs will likely be much higher than for traditional cars because of the complex and expensive parts and technology.
In 2013, the average bodily injury claim in a car accident was $15,443, and $3,231 for a property damage claim. Even if aggregate property damage costs from driverless cars do not go down (meaning fewer claims but much higher pay-outs per claim), total bodily injury claims and costs should decrease significantly, since bodily injury payouts are nearly five times greater than property damage payouts.
In addition to saving premium dollars on auto insurance, fewer bodily injury accidents would mean lower workers’ comp costs.
By the way, if your business or a part of your business involves transportation, driverless cars and trucks could significantly affect your employee costs, since you may no longer require drivers!
Cyber Risk
Maybe the most troubling aspect of driverless cars is the possibility of cyber risk. Vehicle technology could be hacked to create traffic problems and cause accidents and even terrorist events. In July 2015, Fiat Chrysler had to recall 1.4 million Jeeps when security researchers discovered a way to hack into the Jeep’s steering controls.
Changing Car Ownership Patterns
In the past few years, automobile ownership has been declining, with more people using public transportation and ride sharing. There also seems to be less enthusiasm for cars, particularly among Millennials. Once self-driving cars become the norm, maybe only a few people will actually drive cars anymore, and maybe they will be able to do so only on designated roads.
Some scholars wonder if people will even own cars in the future. Owned by private companies or municipalities, self-driving vehicles may be parked in various community centers and summoned by phone when people need them.
A University of Texas at Austin study showed that each shared autonomous vehicle (SAV) used in this way would replace about 11 conventional vehicles.
If that happens, many employers will no longer even require automobile fleets. That would be a significant cost reduction for many companies. For additional information, please either call or email Barker Phillips Jackson at: 417-887-3550 or ins@bpj.com.