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Self-driving cars: What will 90% fewer accidents accidents do to insurers?

| March 9, 2015 | 0 Comments

Human drivers are responsible for the vast majority of car accidents. A recent McKinsey study on self-driving cars is bad news for insurance, companies, it’s good news for just about everyone else. The research firm predicts that autonomous vehicles could eliminate around 90% of all automobile accidents in the U.S., saving thousands of lives and preventing up to $190 billion in healthcare costs and damages yearly.

Google car

According to preliminary studies, insurers can expect their profit margins on auto insurance to shrink dramatically once self-driving cars are on the road. Image from Pascal Terjan.

Far from a futuristic fantasy, self-driving cars are almost a reality (and one we’ve reported on before). Existing cars already feature some autonomous technology: blind-spot monitoring, lane-departure warnings, and forward-collision warnings, for instance. Some of the predicted changes are promising, too: smaller parking spaces would save up to 6.8 billion square yards in the U.S., while the average commuting time would drop by 50 minutes. (Self-driving cars may be able to drop passengers off, then park, eliminating the need for extra room for doors to open.)

Early adopters’ self-driving cars are going to be sharing the road with traditional vehicles within 10 years, with “mass adoption” likely by 2040 or so, according to the McKinsey study, “Autonomous Driving — 10 Ways in Which Autonomous Vehicles Could Reshape Our Lives.” “Autonomous vehicles and the path toward them is one of the most shaping trends in the auto industry today,” Hans-Werner Kaas, a McKinsey automotive practice senior partner, told the Journal.

The insurance industry in particular is gearing up for what AutoBlog calls “massive changes,” with possible losses of $1,020 per car per year. Autonomous cars will also likely cast more liability on automakers, and less on drivers. As the study points out, insurance companies will likely begin focusing on vehicles’ technical failures, rather than driver risk profiles, as autonomous cars are more widely adapted. Insurance companies may also consider the driving records of particular manufacturers and models, rather than drivers’ driving records, or they may push for no-fault insurance.

Aside from potential revenue loss, however, is the question shifting liability from a driver’s shoulders to the automaker’s when autonomous vehicles do, inevitably, crash. How will car manufacturers program their vehicles to behave in situations where a fatality — or fatalities — are unavoidable? As Patrick Lin writes on the ethics of autonomous cars for Wired, “It’s generally better to harm fewer people than more, to have one person die instead of five. But the car manufacturer creates liability for itself in following that rule, sensible as it may be.”

Of course, while these are informed projections, they are still projections. “McKinsey’s view that fully autonomous vehicles will begin to dominate roads by 2030 isn’t a sure bet,” reports the Journal, citing an example that, in 2000, auto execs and research firms forecasted widespread use of hydrogen fuel-cell powered vehicles by 2020, “but some car companies have backed away from that technology.”

As the Insurance Information Institute notes in a February 2015 report, insurance companies will be better equipped to gauge which technologies reduce the cost and frequency of collisions as crash avoidance technology evolves and becomes standard. “They will also be able to determine whether the accidents that do occur lead to a higher percentage of product liability claims, as claimants blame the manufacturer or suppliers for what went wrong rather than their own behavior. Liability laws might evolve to ensure autonomous vehicle technology advances are not brought to a halt.”

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Category: New Products, Transportation

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