Insurers Fear Driverless Cars Are An Existential Threat

At first glance, the only people to whom the driverless car appears to be a threat are those that drive them.

Given their small size and relative defenselessness they dont seem all that ominous, nor revolutionary. More of an evolutionary design away from distracted motorists whose fascination with technology and resultantly declining household incomes seem to render them incapable of owning anything more muscular - and expensive.

But less we forget, it is the services wrapped around the product that have long provided manufacturers and others with the profit margins to drive the industry, as it were.

Insurers are, ironically, concerned about a 'catastrophic' decline in accidents thanks to dramatic improvements in road safety. Aside from suggesting where their priorities lie, this also betrays a lack of faith in humanity's ability to gum up the works. If phone 'jailbreaks' are commonly available, one can only imagine what the automotive variant will offer. And the plethora of features presently offered like self-parking and emergency braking suggest that drivers will adopt and adapt, though with what degree of success should give the insurers a greater sense of optimism about their future. JL

Alastair Gray, Murad Ahmed and Claer Barrett report in the Financial Times:

“Driverless cars will ultimately mean the elimination of conventional motor insurance,”
Motor insurers will need to overhaul their business models to remain relevant in the coming decades, executives and consultants said on Wednesday, after driverless cars were given the green light to drive on British roads from January.Vince Cable, business secretary, launched a £10m competition for up to three cities to bid as locations for trials and announced a review of road regulations.
The trials are expected to start in January 2015 and last between 18 and 36 months.He added, “We will not see a sudden glut of driverless cars on the roads . . . Putting a car on the road is the easy part – getting the technology at the right price so people can afford to buy one will be more difficult.”
However, some in the motor insurance industry, which writes £16bn of premiums a year, went as far as to argue the technology poses an existential threat to traditional car insurers because of expected improvements in road safety.
“Driverless cars will ultimately mean the elimination of conventional motor insurance,” said Andy Haynes, chief operating officer of Insurethebox, which offers personalised cover.
David Powell, underwriting manager at the Lloyd’s Market Association, said: “The majority of insurance premiums today go towards covering third-party damage. In the long term that’s largely going to disappear [if driverless cars become the norm].”

One of the most competitive areas of the car industry, driverless vehicles are seen as the next big profit centre, pitting traditional carmakers such as GM against tech giants like Google.

This week Baidu, the Chinese search engine, announced it was experimenting with a self-driving car that would be “highly autonomous” rather than driverless, and include an “intelligent assistant” to help the driver.

This follows Google’s announcement in May that it would produce 100 prototype driverless vehicles that dispensed with steering wheels and pedals. The two-seater electric cars have a top speed of 25mph, and foam bonnets to minimise the impact of a crash.

Innovations in our current cars, such as autonomous emergency braking, adaptive cruise control and self-parking, precursors of fully driverless cars, are already making a positive difference to drivers’ experiences said Iain Gray, Technology Strategy Board

Each car will have two motors, so that if one fails, the other can steer to safety. Google said it hoped to run pilots of the cars on public roads in California in “the next couple of years”.

Nick Connor, UK managing director of Volvo Cars, said the company would examine the detail of the UK government announcement with interest.

Using whole towns as test centres was one of the recommendations of the robotics strategy published this month by the UK’s Technology Strategy Board. This examined how the UK could win a bigger share of the world’s robotics market, estimated to be worth £70bn by 2025.

George Osborne, chancellor, first pledged £10m to support the technology in December’s Autumn Statement.

The coalition government has been keen to promote the UK as a place to build luxury or high-tech vehicles, encouraged by Nissan’s decision to make Sunderland its European production site for its Leaf electric car.

Nissan has said it will bring a self-driving car to the market by 2020, but fully autonomous vehicles could take much longer, some analysts say, citing the legal and legislative hurdles that would arise from accidents.

Other countries have been quicker to court developers. The US states of California, Nevada, Michigan and Florida have approved tests of “autonomous” vehicles.
Google’s driverless cars have already travelled more than 300,000 miles on Californian roads, mainly motorways. The company has also tested them in Mountain View, where it has its headquarters and has been able to map the streets with the detail required for their running.
Last year, Nissan carried out its first test of an autonomous car on a Japanese motorway, while the Swedish city of Gothenburg has given Volvo permission to test 1,000 driverless cars in a trial starting in 2017.
Insurance industry groups have expressed concerns, saying lawmakers needed to address questions such as who would be liable in the event of a crash.
However, executives at traditional car insurers downplayed the threat to their business, highlighting the industry had coped with a range of past changes.
“There’s going to be quite a long transition period,” said Murray Raisbeck, partner at KPMG. For a start, he said, “only about 6 per cent of cars on the road are new”.
If driverless cars become prevalent, consultants said there would still be a need for insurance but the type of cover may shift towards that bought by manufacturers or technology providers, such as product liability or cyber cover.
This could be provided by a wide range of underwriters, such as the Lloyd’s of London market, which specialises in “big ticket” corporate risks.