The automobile insurance industry will require significant changes as driverless cars and collision prevention sensors become standard in the automotive industry.
Geico, Progressive, Allstate: An average television viewer is bombarded daily with advertising related to the automobile driver insurance industry.
But what if there are no drivers?
The automobile driver insurance industry is under subversive attack. It is not a direct assault on the billion-dollar industry; rather, it is a sideways attempt to make what they offer obsolete.
Driverless cars, the rage in both the technology and automotive fields these days, would ostensibly make the roads safer, as cars are programmed to avoid each other. But with safer roads and less dangerous vehicles, the need for insurance drops, as does the price of premiums.
What is an entire industry to do?
Fortune magazine pulled an old quote from Warren Buffett, who owns Geico, to illustrate the point. “If you could come up with anything involved in driving that cuts accidents by 30 percent, 40 percent, 50 percent, that would be wonderful,’’ Buffett said. “But we would not be holding a party at our insurance company.”
Speaking to Insurance Business America, auto insurance industry analyst Meyer Shields of Keefe Bruyett & Woods predicted the end of the business altogether.
“Ultimately, these advances are likely to actually eviscerate the personal auto insurance industry,’’ Shield said. “The one thing we can’t say with any confidence is how long it will take.”
Predictions on the inevitability of driverless cars are widespread. Some believe in 20 years at least 50 percent of all cars on the road will be operated by sensors.
The technology involved in driverless cars is still in the experimental phase, although such cars are hitting the roads (and hitting each other, as occurred recently). But what isn’t as experimental are sensors that issue warnings when cars are too close to each other, or to close to other objects like walls.
The Highway Loss Institute issued its 2014 study of insurance claims and found that bodily injury liability losses dropped by 40 percent from 2013 and medical payments dropped by 27 percent.
While the industry will suffer as the need for coverage among driver’s decreases, there will be an increased need for insurance for auto manufacturers. Riders and drivers will be dependent upon the new technology for safety and if those systems fail, the manufacturer could be liable for damages to body, property and life.
However, some in the industry believe the owner of the driverless car will remain liable for damage and injury related to the operation of the vehicle. Some sort of coverage policy will be required upon the purchase of the car that transfers from the manufacturer to the owner.
“You may not be buying a liability policy anymore, but you may need a cyber-policy or an operator policy or any number of new insurance products,’’ said John Tiene, CEO of Agency Network Exchange in New Jersey, to IBA. “The reality is there is still going to be a huge need, maybe even a greater need, for professional insurance agents and risk managers to help owners of driverless cars navigate what will be a much more complicated insurance world than it is today.”
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.