Impacts of Driver-less Cars on Insurance Companies

Table of Contents

1. Introduction
2. Driverless Technology
3. Limitation of driver-less car
4. Risks that associated with driverless cars
5. Impact of driverless cars on the Insurance Industry
6. Challenges faced by insurers
7. Works Cited

Introduction

In this paper we talk about the functionality and the impacts of driver-less cars with Automated Driver Assistance Systems on the insurance companies. Automated cars are an emerging trend in the automobile industry. They have revolutionized the way we travel now, which makes it even more intriguing for the common man to experience the driver-less journey. Automobile insurance is mandatory in Canada regulated by the government, which makes the introduction of Driver-less cars to the common man a challenging idea. The fundamentals of automobile insurance will require amendment, to cater to the future of automobiles. Car manufacturers of automated cars are now offering insurance themselves on their vehicles as an option to their customers, posing as a threat to the current insurance companies.

Insurance companies are faced with a bunch of obstacles and risks to overcome with this technological transition. This gives rise to new risks and exposure to unique accidents which cannot be foreseen yet. The mechanism of Artificial intelligence can think critically at a greater magnitude in complex situations than that of a human mind, making accidents less likely and severe. 

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Driverless Technology

In today’s world, human life is more off related to the use of technology. Many people are happy to use the technology while some are using it because they don’t have another choice. But anyhow technology is helpful for people. Any technology has both positive and negative impact but people mainly focus on the positive side. As looking at different technology used around the world, I found one of the upcoming technologies which are taking my interest towards it i.e. the driverless technology. I had seen many cars, Motorbike which is made with a better technology to provide a different feature, safety, speed, but those all technology is controlled by a human.

Nowadays, there is the latest technology being used as driverless technology in the automobile industry. Now the car or any driverless vehicle can be controlled by the computer software system or a program set up on the car. The driver needs to sit at driving seat and have to just start the car and put the location where they need to go then everything will be controlled by the system of the car. The driverless technology is being tested by many companies like Tesla, Mercedes-Benz, BMW, Google, and Audi. In Canada, Ontario province has only allowed the driverless car to be tested on public roads with some condition on them as while testing the car there should always be a licensed driver at the driver seat all the time and to have an insurance of at least $5 MillionInvalid source specified.. There is a different level of testing for the autonomous car it starts from level 0 which includes normal cruise control and is still level 5 which is fully automatic, the car doesn’t need a human behind the wheel to achieve this level Google Waymo is working on it. The driverless technology industry is expected to be worth of £900 billion globally by 2025 and is growing currently by 16 percent a year Invalid source specified..

The driverless technology is built in such a way that can help in reducing accident as the machinery will follow the rules better than human. There will be a radar sensor for the car to monitor the position of the nearby vehicle. An ultrasonic sensor in the wheel that will help the car to find a position of the curb and another vehicle while parking. The video camera will detect the road sign, traffic signals, pedestrian, another vehicle, and any other obstacles. Lidar sensor also supports in the driverless technology to detect the curve or edges of the road and identify the lane of the other cars and to maintain a safe distance from the other cars and to change the lane if required. Finally, there is a central system which will analyze all the data from the various sensor to handle the steering, brake, and acceleration of the car. So, this is how the driverless car technology is used with the help of various sensor and software system which is programmed by the car manufacturing companies.Invalid source specified.

Limitation of driver-less car

The driverless technology has a certain limitation for the people and the economy. The main impact of the driverless car will be ‘Jobless Drivers’ as many taxi or cab driver will become jobless as there would be no use of a driver to drive a car. The price of the driverless car is costly as compared with normal cars so ordinary people won’t be able to afford it. There would be more possibility of the accident as the self-driving car is monitored and function by the computer system if there is any breakdown in the system then there are more chances of an accident. So in this situation, there is no one to be found guilty and it can lead to dispute for the reason of accident. There would be a privacy concern and security issue that if someone hacks the system and control the car will create a big concern. The driverless technology will face difficulty if there is any problem related to weather. And the main limitation of a self-driving car will be that it will take the pleasure and driving experience from the people as the car is driverlessInvalid source specified.

Risks that associated with driverless cars

Accidents on road

Driverless cars may operate on the streets of a city, highways and roadways. Therefore our current infrastructure of road is not designed for the use of these type of vehicle which are automated and rooting to be the prime cause of accidents. Even driverless cars may not be able to navigate the road when there is a situation like heavy snowfall or heavy rain because these types of situation can hide the painted lines on highways and on normal road, so this can make car’s system not all useless but on the least make it inconsistent. In fact, self-driving vehicle’s each capacity must be personalized in a computer software. That means there is no covered wires, no strong speed breaking point or turning path signs, and exceptional paint would help the vehicle navigating its way around. This can pose a threat because of the fact that the streets are rarely unsurprising and something can happen anytime without a notice, and the driver-less vehicle probably won’t have the capacity to adapt to these sudden changes.

Hacking of the vehicle

As we know driverless cars are operated through the help of computer system, it can be hacked just like the computer or any other smart device. An high skilled hacker can hack this type vehicles and control the acceleration or steering and this can be contradicting  the safety standards for the riders in the vehicle. Additionally, quite possibly the framework can malfunction or experience some surprising glitch that makes the machine’s performance change erratically or stop anytime on road while travelling especially at high speeds.

Increase contact to radiation

Driverless cars can be operated through different types of electronic devices, which can emit radiation. As there are many devices which are installed in the vehicle such as, the stereo system and radio, GPS device, remote controls, WIFI and Bluetooth connectivity and other powered accessories, it may create conditions of ill health, like migraines, headaches, and sleeplessness. Some people develop electromagnetic hypersensitivity to devices and may often experience fluctuations in blood pressure and shortness of breath from such extensive radiation. (Vest, n.d.)

Impact of driverless cars on the Insurance Industry

It is estimated that losses will be reduced by 11% by 2025 with the help of the Automated Driver Assistance Systems, this be because the technology will help reduce the severity as well as the frequency of accidents. It is said that automobile accidents are caused a 93% due to human error, but when the human factor is removed from the equation the frequency as well as severity would decrease significantly. (Dr. Anand S. Rao, 2014)

It is forecasted that there will be a drop in individual premiums, the private ownership of vehicles will be less. It will reduce the need for acquiring individual automobile insurance, ride sharing as well as young driver would seem to have lost interest in ownership of vehicles. It will put an immense pressure on premiums due to lack of demand.

Companies using vehicles for strictly business purposes such as FedEx, UPS and other similar businesses are also expected to switch their fleets to autonomous vehicles. However, this shift towards self-driven vehicles will be slow and gradual, it may take a few years or even a decade for the transition to happen, which eases the burden for insurers. (John Cusano, 2017)

Vehicle manufacturers like Google, Volvo, Mercedes Benz assume liability for any incidents involving their self-driven vehicles in case of accidents and crashes caused due to faulty functionality of their auto-pilot systems in their vehicles. Tesla on the other hand has started offering insurance services themselves to their customers. This proves to be a great business opportunity for Tesla, but this is driving the sales away from the insurance companies. (O’Very, 2018)

The impacts of Automated Driver Assistance Systems on the insurance market will be clearly visible in the long run. Say by 2040, it is estimated that drivers will only subscribe to the minimum legal coverage necessary as per law, as there will not be a need to subscribe to personal accident insurance. Since accidents will become rare with the improvement in technology with years to come, the government will also be compelled to change their opinion of mandatory requirement of automobile insurance. As artificial intelligence cars become more common to people, insurance companies will have to re-assess the changes and impacts it has on the industry. This doesn’t imply that the insurance industry in the automobile sector will be demolished, the industry needs to formulate a plan on how it will counter the challenges posed by autonomous cars on their current stream of revenue from insurance premiums. (O’Very, 2018)

Challenges faced by insurers

There are a lot of challenges that insurers face to insure self- driving cars. As of now, insurance is based on what kind of a driver you are and how safe you are as a driver. It is important to know that insurance is based on the driver’s profile. If there is no driver, there would be difficulty in deciding insurance will be based on what stand. Hence, the first challenge they would face is deciding insurance. I think to mitigate this factor insurance will be based on premiums of how he vehicle will handle risks rather than how the driver performs. It will be the exact opposite of what we see today.

Another challenge that would happen with self-driving cars is with insurance itself. Companies like Audi, Mercedes and Google are debating on having their own insurance for a car. They think it would be better as they can decide the circumstances that the car is feasible to run in. Any areas that are prone to high risk of accidents will not be entered. This will be a challenge for the insurance company as they would be losing a lot of potential clients.

Tesla a very well – known insurance company has started giving out insurance to its customers in Asia. It is a very small attempt that they have made in trying to self- regulate the industry themselves. This is a challenge in itself, as a lot of insurance companies worldwide will lose their clients and lose out on money. The primary reason why accidents are caused is due to human error and it is a risk that driverless cars have the potential to eradicate. Since, driver less cars will be a lot safer on the road, it will reduce insurance premiums by as much as 75 percent. Another major change they would have is there would not be a higher premium rate for people with bad driving records or impaired driving. Even though, one is drunk or has bad driving record the car will still be sober and hence, that would also be a challenge in the industry. (Andrews, 2016)

To conclude, we can say that there is a positive and a negative to everything. The positive about having driver less cars would be safer roads, insurance premiums depending on the car and its safety rather than on the driver records. There would be negatives as well since insurance companies would lose premiums. Driver less cars are not 100 % safe and there are instances when they have proved that. This would be a point of discussion as well as a lot of road accidents will take place due to misjudgement by technology.

Works Cited

• Andrews, M. (2016). How will driverless cars impact the insurance industry? Retrieved from Beta News: https://betanews.com/2017/05/08/driverless-cars-insurance-industry/
• Dr. Anand S. Rao, M. A. (2014). https://hbr.org/2017/12/driverless-cars-will-change-auto-insurance-heres-how-insurers-can-adapt. Retrieved from PWC Canada: https://www.pwc.com/ca/en/insurance/publications/pwc-impact-of-driverless-cars-2015-12-en.pdf
• John Cusano, M. C. (2017, December 5). Driverless Cars Will Change Auto Insurance. Here’s How Insurers Can Adapt. Retrieved from Harvard Business Review: https://hbr.org/2017/12/driverless-cars-will-change-auto-insurance-heres-how-insurers-can-adapt
• O’Very, P. (2018, January 26). 3 ways self-driving cars will affect the insurance industry. Retrieved from Venture Beat: https://venturebeat.com/2018/01/26/3-ways-self-driving-cars-will-affect-the-insurance-industry/
• Shutterstock/chombosan. (n.d.). Australia could benefit from driverless car development and technology. PHYS ORG.
• Vest. (n.d.). Top 3 Possible Dangers Of Self-Driving Cars. Retrieved from Vest: https://www.vesttech.com/top-3-possible-dangers-of-self-driving-cars/
• (n.d.).Will autonomous cars make roads safer, or just make money. The Irish Times.