In the wake of the innovation called driverless cars, we looked into how driverless cars will impact the auto insurance industry.
Technology has proven to be one of the blessings that are sharpening humanity and our existence. There is so much ease in the dispensation of our day-to-day activity and it is all thanks to the advance in technology we have enjoyed in recent times.
The processes involved in carrying out some actions have been greatly eased and life is becoming less stressful. One of the many advances in technology that is being recorded in the 21st century is the manufacturing of driverless cars.
Driverless cars like the name implies are cars that do not require any human input or effort to engage motion. They are cars that are designed to be driven by themselves without the need for a driver.
These cars have software installed in them that makes them safe and less susceptible to road accidents and crashes. Seen by all as the car for the future, driverless cars are believed to be the world’s solution to safer highways and fewer auto crashes.
This article tries to examine the impact of driverless cars on the auto insurance industry. It is important to note that whether auto insurance companies like it or not, driverless cars will have a noticeable impact on the industry and it is wise to begin setting up modalities to curb any discrepancies.
I listed some areas where driverless cars will impact the auto insurance industry so that car insurance companies can begin to strategize ahead of the future. The truth is, companies that are solely in the business of providing car insurance policies would be greatly affected.
With that, here are some of the areas wherein driverless cars will impact the auto insurance industry:
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1. Driverless Cars Will Cause Less Demand for Auto Insurance
The first and most important area where driverless cars will impact the auto insurance industry is in the demand. There would be a reduction in the rate at which auto insurance will be demanded.
How do you serve car insurance to a car whose driver is a software? When driverless cars grow in popularity and usage, there would certainly be a decline in the need for auto insurance.
In a KPMG report, predictions project an 80 percent reduction in accident frequency by the year 2030. What this suggests is that the risk of accidents on our roads will be reduced by about 80 percent and with a decline of that nature, there would definitely be a decline in the demand for auto insurance.
Furthermore, the report has it that there would be a likely 60 percent reduction in low costs and a 150 percent increase in average loss severity. Projections such as this will improve the use of driverless cars and with the assurance of safety in their usage, auto insurance will lose its relevance in society.
When the number of driverless cars begins to increase and man-manned cars go down, auto insurance will join in the declining motion.
2. Driverless Cars Will Lead to Fewer Premiums for Insurance Companies
With a decline in the need for auto insurance, there would definitely be a decline in the number of premiums paid to insurance companies. The more driverless cars are normalized, the less the need for auto insurance which translates to fewer premiums payable to car insurance companies.
Manned cars will still be on the road no matter how popular driverless cars become. The few manned cars available would account for the number of premiums that insurance companies will receive from policyholders.
Auto insurance will still be in vogue but would be served to almost half the number of policyholders today. Let’s not forget that these driverless cars are subject to fire outbreaks, break-ins, and software failure that leads to crashes.
Looking at such tendencies, it is safe to say that auto insurance will still be needed for driverless cars. Although this is just a projection. If the facts shared in the KPMG report are anything to go by, auto insurance will surely lose relevance in the insurance industry.
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3. Shifting of Focus to other Insurance Policies
So they do not face insolvency or possible closure, insurance companies will have to shift their focus to other insurance products. To maintain profit, it would be a wise move to channel their energy towards the sale of other policy types.
No doubt, auto insurance will definitely suffer a decline in sales and demand. For companies who only sell auto insurance, this will be a good time to explore other options so that when the day comes and auto insurance starts losing its demand, you can easily switch emphasis to other options.
There are a variety of other insurance policies you can try out as an insurance company. They include:
- Business insurance
- Travel insurance
- Home insurance
- Pet insurance
- Boat insurance
- Flood insurance
- Health insurance and so on
Even though the future has a dose of uncertainty attached to it, one can say for sure that driverless cars will pose serious impacts on auto insurance. One little consolation for auto insurance companies is that these driverless cars will need a level of car insurance.
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This is because these cars are susceptible to fire outbreaks, break-ins, and software failures which could lead to road crashes. In lieu of this, it is possible for driverless cars to still demand auto insurance but then the demand will be reduced.
An important disclaimer goes thus: the information shared is the writer’s opinion and the writer will not be held accountable for any issue arising from the use of the information shared.