How Will Autonomous Vehicles Affect Insurance Agents?
According to just about anyone in the forecasting business (Morningstar, McKinsey & Company, Accenture), we are now in the decade of self-driving cars. Or, to put it more accurately, since trucks and other modes of transportation are also being planned and manufactured—we are in the decade of autonomous vehicles (AVs).
It’s hard to know exactly how many AVs are now on the road in the U.S. (probably less than 2,000), but the number is widely predicted to rise rapidly by 2030, especially in the luxury-car market. This trend is likely to affect the insurance industry in several ways.
Less human error means fewer accidents and lower premiums.
Sensors don’t look down to read a text or accidentally spill their coffee or misjudge how close they are to a vehicle in front of them. While there have been a few high-profile instances where an AV has been involved in an accident (in some cases because a human took over the driving), the expectation is that AV technology will make our roads safer over time.
This is a wonderful development to look forward to. More than 42,000 people died in vehicle crashes in 2020, and many, many more were injured and had their lives disrupted or permanently altered. Features like auto-braking that slow a vehicle down before it reaches impact can be literal lifesavers.
This does mean, though, that there will likely be fewer auto insurance claims for AVs than traditional vehicles, which could then translate into lowered premiums for AV drivers.
More technology means higher claims.
For the insurance industry, the offset to fewer accidents is the amount of technology that is under the hood and throughout the body of an AV. Sensors placed on bumpers and doorframes help AVs find the curb for parking. Global positioning systems (GPS) tell the vehicle where it is and where it’s going. Odometry sensors track wheel speed and distance traveled. Infrared and light-detection sensors “read” humans and other objects in the vicinity that need to be avoided.
There’s more, but you get the idea. Falling tree limbs, floods, parking lot hit-and-runs…there are a lot of ways vehicles can be damaged that don’t involve traffic accidents. It’s going to take some time before the technology used in AVs is as common or cheap as a carburetor or an oil pan.
More players may enter the insurance space.
One other factor that could affect insurance agents is that Tesla, one of the leading makers of autonomous vehicles, now offers auto insurance to its customers in California. The company could expand to other states, and other manufacturers may decide to follow suit. It’s too soon to tell how this development could affect the larger insurance space. So far, though, auto is Tesla’s only insurance offering, which means they don’t offer the discounts and convenience associated with bundling insurance products.
While AVs will certainly affect the insurance industry, there will be a time lag before they are widely used. Most people don’t have the means to replace their vehicles frequently, and there is a fair amount of skepticism in the general public about AVs. It’s going to take time before many of us feel comfortable getting into a driverless steel box hurtling down the highway at 65 miles per hour.
If you’re curious to see for yourself what an autonomous vehicle is like, head to Phoenix. Waymo One, a subsidiary of Alphabet Inc (Google’s parent company), has been growing its AV ride-hailing service since 2017 within a 50-mile radius on the east side of town. All you have to do is download the company’s app, and just like other services, you can track your vehicle on a map as it arrives to take you where you want to go. The only difference is you won’t have to decide whether or not to make small talk with the driver.
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