To quote the 3 March Wall Street Journal: ‘The Driverless Car, Officially, is a Risk’.

Car insurers are starting to include driverless cars as Risk Factors in their annual reports.  Why?

Because they will reshape customer demand, the way policies are priced, and the incidence and severity of accidents.  All of a sudden, the driver is not the pivot for pricing risk.

I was prompted to comment on this matter by an article I’d read recently about a Boston Consulting Group report ‘Revolution in the Driver’s Seat’:

http://www.consultancy.uk/news/2065/bcg-autonomous-car-market-to-hit-42-billion-by-2025

These are interesting findings, but to my mind they seemed flawed in a couple of significant ways.

Setting aside reservations about the level of optimism expressed by the 1,500 respondents, which is perhaps inevitable in a survey looking ten years out, I think that talking to today’s car buying ‘man or woman in the street’, the focus for this survey, is fundamentally talking to the wrong group of people.

We have all been brought up on the idea that owning your own car is aspirational and necessary, so of course we are likely to see the future as a continuum of the current personal motoring culture we have been brought up in and bought into.  

Wouldn’t it have been far more relevant and interesting to have asked a group of Millennials, the Uber and  Zipcar users, or today’s 16 year olds whether they share that aspiration, as it is they who will be shaping this future market?

It is also they who will be amongst the 74 per cent of the global population living by the year 2020 in crowded cities and large urban conurbations with all the associated traffic congestion that implies, according to a recent United Nations report.

What makes BCG so sure that there will be a mass private motoring industry in 2025? Surely one of the huge opportunities that driverless vehicles offer us all is to free ourselves from the shackles of owning our own cars.

Why would any Government want simply to replicate the current chaos and overcrowding of our transport systems by just replacing human-driven vehicles with a similar number of autonomous ones?  It makes absolutely no sense at all.

Attitudes to privately owned transport are shifting more rapidly than ever before.

The UK’s wealth and prosperity is no longer measured in the output from our motor plants, but in cleaner air, health and safety and the efficiency of its public infrastructure.

So it is more likely that the arrival of the driverless car will simultaneously revolutionise our relationship with personal transport.

Owning a private car is a luxury, it is an ineffective use of resources, financial as well as physical.

It is a rapidly depreciating asset and if you drive less than 10,000 miles a year it is not cost effective.  You would be better off using public transport, hire-cars or taxis.

So, at best, the vision of private ownership of driverless cars as painted by the BCG report is likely to be a short-lived step on the path towards a public, commercially or community-owned transport systems.

I anticipate that we will very soon see privately owned autonomous commercial vehicles (they exist already in Australia) such as vans, trucks and lorries and that the big hauliers will be early as they will need their own specific vehicle fleets.

This will be driven by economics and safety.  A driverless truck can work 24 hours a day and does not have the risk associated with a sleepy or distracted driver.

Driverless-car ownership will also come with additional costs and responsibilities for the private motorist, such as regular and compliant software upgrades.

Putting to one side the increased costs of purchase currently being quoted in the BCG report, there is the much bigger question of who is going to manage the autonomous transport ‘grid’.

Whilst large internet giants such as Google, which has invested heavily in this technology, would like to believe this is a role they could fulfil, it is far more likely to be local authorities and national agencies taking the strain. It’s unlikely that they would want hordes of private driverless cars cluttering up their roads, running on old software or causing parking issues.

So I would guess that it won’t be long before driverless cars are owned mostly by big taxi or hire car companies as part of an integrated public transport system managed by consolidated authorities such as ‘Transport for Europe/London/Scotland’.

This implies that that motor manufacturers will sell mostly to large corporate fleet buyers and it is they who will bear the cost and responcibilitiy of the insurance.

What’s on offer here is a prize worth having: an efficient, clean, safe and reliable transport system on call via an App.

It would revolutionize the quality of life and mobility for the elderly, infirm and disabled.

Deaths and injury on the roads should fall dramatically. Our cities will be much better places to live in.

So, what will happen to the motor insurance industry?  Answers on a post card please.