What is the impact of driverless cars on insurers?

Will the car insurance industry expand their offering to accommodate the driverless trend that could hit our roads in the next couple of years? That’s the question, folks, and with the world of transport rapidly becoming the biggest “consumer” of advanced computers, it is one that needs to be properly investigated.

According to a study undertaken by Deloitte, a modest 47% of South Africans are keen for limited self-driving technology, followed closely by 39% who are interested in the full-on enchilada of convenience and supposed safety that self-driving cars offer.

With these figures, it seems that we’re edging ever closer to driverless roads and if that’s in our not-so-distant future, then how ready is South Africa? More to the point, how will this change the way our local insurers handle this new kind of risk profile?

NAVIGATING DRIVERLESS
For starters, there’s a difference between “limited self-driving” and “driverless”. While the limited variety allows your car to take over driving functions under certain traffic and environmental conditions, the driverless option lets your car take over all driving functions for an entire trip.

If you’re the type to clench up at the thought of zero human control, then it might help to know a bit more about projects that have gone from the purely theoretical to actual physical entities. Like Google’s pilot project, which has already seen their self-driving cars cover 2.7 million kilometres and be involved in 11 accidents.

A few specs of Google’s driverless car:

• Sensors with a wide field of vision to detect distant objects in all directions.
• The ability to predict and react to various stimuli.
• Sophisticated software which processes multiple data points to help the car navigate safely.
• The ability to learn how to navigate tricky situations without becoming tired or agitated.

THE IMPACT OF DRIVERLESS ON INSURERS
Another important hurdle is how South African insurers will handle the complex implications that driverless cars bring to their world.

Currently, policies are created using (amongst other considerations) an array of risks factors. In particular, risk factors attached to the driver play a significant role, like how long you have had your license for, how old you are, and who the regular driver is. However, if there is no driver, then should there even be personal car cover?

Some have argued that this cost should be made the responsibility of the car manufacturer, because essentially, their software is the driver. However, this might by wishful thinking because certain factors remain, like where you choose to park the car most often, how much mileage you do in an average month, theft, bad weather, and security.

Clearly, new criteria will need to be carefully considered when it comes to underwriting these new risk factors.

A few insurance specs that could change:

• A potential rise in third party claims must be accounted for.
• Liability issues, such as in the case when an accident involves two driverless cars.
• Cover for cyber hacking.
• Repairs will cost much more, because while there may be fewer accidents, the tech is more expensive, so even small collisions will cost more to fix.

In addition to these considerations, insurers may also need to up their game when it comes to their customer relationships, product innovation, and claims processing.

WHAT DOES DRIVERLESS MEAN FOR SOUTH AFRICA?
From a global perspective, the US has passed laws to permit testing of driverless cars, while the UK has allowed testing and has promised a full review of current legislation. In Europe, only Germany and Sweden have reviewed their legislation.

So, what has South Africa got to say about it? From a legislative point of view, nothing has been said or done. We can speculate, however, that the first step in this journey will include a comprehensive review of current legislation. Furthermore, we will most likely use foreign jurisdictions as guides when the time comes to developing our own transport laws for driverless cars.

A few specs of South Africa’s stance towards driverless cars:

• Deloitte’s study indicates an increased desire for advanced vehicle technologies.
• The study notes that younger South Africans would be more willing to pay for technology than older generations.

A PICTURE OF THE FUTURE
The Legislature will have to catch up, because studies have shown that car ownership is making less sense to South Africans – particularly to urban dwellers. As a nation, we are starting to expect a measure of limited self-driving and total driverless features to come as a standard part of our car purchase.

There is even considerable research and technology going into driverless taxis, although with Google still sitting with a robo-taxi prototype that’s in the testing phase and a quarter of our population unemployed, this might not take off in our country for many years to come.

Ultimately, a million lives are lost and 50 million people are injured on the roads around the world every year due to driver error. Around 90% of these road accidents are considered the result of human error. The introduction of driverless cars might just see a drastic reduction in accidents, injuries, and loss of life.

It could also, as we all hope, mean a significant drop in car insurance premiums.

Edited By: Darryl Linington
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