Will Driverless Cars Affect Auto Insurance?

By: Lucy Zemljic on May 8, 2014

Remember that 90’s sci-fi flick Total Recall, where Arnold Schwarzenegger takes a ride in a driverless taxi? Or that scene in I, Robot, where Will Smith relaxes behind the wheel of his self-driving car as it speeds through futuristic traffic?

Well, the future is near, and that means driverless cars are no longer just a thing of science fiction. Google has driverless technology moving ahead at full speed with the Google Chauffeur, and traditional automakers like Ford and GM have teamed up with researchers to be part of the game.

But when (not if!) autonomous cars fill our highways and streets, where will that leave car insurance? What kind of impact – if any – will this wave of the future have on the industry? As usual, opinions are mixed, but there are a few predictions out there that may provide a glimpse into the future of auto insurance in an age of driverless cars.
Some See Plummeting Premiums
One of the obvious advantages of self-driving cars is safety. An autonomous car doesn’t text behind the wheel, or drive under the influence, and can watch for road hazards in every direction. According to University of Michigan engineering professor Dr. Larry Burns (who is also a former vice president of research and development at GM), driverless cars could eliminate more than 90% of auto accident injuries and fatalities – that means about 1,800 lives saved each year in Canada. What’s more, autonomous vehicles would cut property damage by 90%. According to some analysts, that will cause premiums to plummet, leading insurance company profits to take a nosedive.
Many Auto Insurers Say “Not So Fast”
Many insurance companies, however, don’t think that the future will be so grey for their industry. Many insurers believe that the opposite will happen – that the pricey software and equipment needed for self-driving cars may in fact cause an increase in comprehensive policies, and a rise in premiums.
According to Carol Csanda, innovation project director at State Farm, the frequency of automobile accidents may very well decline in a future of driverless cars. The cost of the accidents that do happen, however, will likely skyrocket. Csanda believes that, when these cars loaded with pricey high-tech equipment are damaged and need replacing, the cost will inevitably be much greater, not to mention that the cars themselves will be much more expensive than their human-driven counterparts.
Csanda also believes that new forms of coverage may be needed in a future of driverless vehicles. Cyber coverage that protects driverless cars’ computer software and hardware may become part of the essential insurance package. "Recalls may no longer involve going to the dealership,” adds Csanda, “instead they'll be downloads to your car's computer." Along with cyber coverage, hacker protection may even become necessary, as new risks emerge for self-driving cars of the future.
No Cyborgs Required  For Now
Whether insurance claims are reduced and premiums go down, or new coverage is needed and premiums go up, the auto insurance industry will have to adapt to the emergence of driverless cars. While this future will be upon us soon enough, and driverless cars may very well be populating our roads in the not-so-distant future, the technology won’t likely be widely adopted for years to come. That means that, until then, you’ll need to make sure you’ve got that trusty auto insurance as you’re driving down the road the old fashioned way – no cyborgs required.