After every few years, there is always a technological breakthrough happening and the pace or rate at which these significant events happen will increase. Gordon E. Moore, co-founder of Intel, stated that every 18 to 24 months the number of transistors will
double on a single chip, therefore allowing for more features or complexity to be used on the same small piece of metal as before. With autonomous vehicles already being a hot topic and having lots of experimentation since the 19th century, it is inevitable
that they are influenced by Moore’s law as well.
The development of Artificial Intelligence has also been a catalyst to help the vehicles achieve high levels of autonomy. "AI" has recently become one of the core aspects for a business to have and also has been the centre of great development and experimentations.
If you want to find out how much efficient an autonomous car is then, you should look to how many of its functions have been integrated with AI. According to experts, this integration paves the way for the next industrial revolution.
Going by its core definition, an autonomous car is a vehicle that is capable of analyzing its surroundings and act according to it’s given directive, plus the information it obtained. An autonomous vehicle can have a single pilot or driver to oversee its
system or make up for a miscalculation but it depends on what stage the vehicle runs on, cars with a high stage of autonomy do not require a pilot or human guidance of any sort. The cars gather information via instruments like sensors, lasers, radar signals
or computer information systems like a GPS, after having the knowledge of all relevant paths or obstacles, the car determines the best course of action or path and follows it.
Despite not being guided by a human entity, such as a driver, driverless cars have gained the trust of people but why is that so? Does the absence of a driver not scare people off? How do people invest so much of their attention in this new technology? This
is because the advantages autonomous cars offer are more thorough and significant than this myopic fear.
One of the biggest advantages of autonomous driving is the reduced risk of accidents. According to a research, 94% of all automobile-related accidents occur due to human error, the rest of the 6% attributed to factors such as a technical fault in the vehicle
or an environmental condition. It is estimated that autonomous cars can eliminate 90% of these accidents in the United States and can help prevent billions of dollars of damage, health-related costs and save thousands of lives. As of right now, none of the
human drivers has been able to beat an autopilot system when it comes to safety.
This assurance of safety also opens up options for the young, poor, elderly and people with disabilities. These vehicles can be a significant boon to travellers by relieving them from there restrictions such as not knowing where to go, being intoxicated
(drunk etc.) or extremely tired, vulnerable to seizures etc. People can now save more time by not having to focus on driving and getting to their workplace on time. Some of the cars can be modified to have better and more spacious interiors since the need
for a driver will be long forgotten, thereby allowing the cars to give better comfort to their passengers.
All cars will be interconnected
Another otherwise overlooked advantage is about how it allows the traffic to have a streamlined flow. As all of the cars will be interconnected via a single GPS system, they will be able to communicate their locations with others, deduce where they should
go to prevent a traffic halt or congestion and search for an optimal path that will be the best solution when it comes to effectiveness, traffic jams will become a thing of the past. This will grant us higher speed limits, as there are rare crashes, increased
road capacity and an uninterruptible flow of vehicles.
This will make things easier for the appropriate authorities to manage traffic flow by giving them predictability and making them use fewer resources such as traffic signals or police. Currently the maximum number of vehicles on lane is about 2,200 passenger
vehicles according to the US Highway Capacity Manual, a study estimates that with interconnected vehicles this capacity could be increased to 12,000 passenger vehicles (up by 445%) traveling at the speed of 120 km/h and with a gap of about 20 feet from each
Bad future for auto insurance companies
The future for the auto insurance companies may look grim as with accidents becoming rare to non-existent, people will find no need to have such an investment. The safety advantages of autonomous driving overweigh the concern for them to dysfunction all
of a sudden, and even that is a rare occurrence. A few insurance companies are given their very first steps in this direction, predicting what might happen in a few years ahead, for example,
auto insurance is not going to be mandatory
anymore. The first state who opted for a mandatory auto insurance was Connecticut and Massachusetts in 1925, so, the prediction says that they will be the first to make auto insurance
no mandatory anymore.
If we talk about autonomous vehicles then the majority of them will be owned by the corporations or manufacturers that make and would operate them, this will remove the need for an individual ownership and will implement a “fleet based” operation, i.e. a
single company will operate multiple vehicles. Since the economy generated by these companies will be significantly higher than a regular working person then they can pay of the debt very easily.
Less people investing in auto insurance
Some of these manufacturers have already been testing out their plans for fleet ownership, examples of them being, General Motors partnering up with Lyft and Volvo working together with the transportation service Uber. Since there will be less individual
owners due to the introduction of fleet operation then, there will be fewer people to invest in the insurance. Also, the fact that the autonomous vehicles have very high safety and less probability of accidents, then claiming that insurance will be rare as
Another area of concern is the public transportation and delivery services; they will be shifting towards autonomy as fast possible due to the efficient operation the system offers, thus resulting in less individual insurance for a single car, they could
just buy a fleet-based service instead. A minor factor that can also be included, is the less interest developed for cars when it comes to young enthusiasts, there would be less of a need for insurance if they do not buy the vehicle individually and just have
better and less costly alternatives.
While we can’t predict when the society will adopt autonomous vehicles but it is pretty clear that auto premiums will decline significantly, this means the auto insurance companies need to create a new revenue plan to help their business stay afloat in the
future times. Fortunately, many new opportunities for insurance are emerging.
We can identify three areas where auto insurance will be needed significantly for the time period from 2020 to 2050:
- Cybersecurity. As cars are being automated it is a high chance of trespassing through the software. At this instant cybersecurity is needed by anyone who has autonomous vehicles. Car insurance companies can deal with cyber issues and can
guarantee a theft-free experience for the user.
- Product liability: sensors and chips that are auto-related are very expensive but here the real risk lies for the manufacturers because there is a potential threat of failure through software bugs, memory overflow, and algorithm defects.
- Infrastructure insurance: Cloud systems, signals and other security measures that will be used to protect the riders offer a massive revenue for property insurers. The need to secure public infrastructure is very vast.
Insurers will come up with sophisticated modelling and safety techniques
On an average, the above-stated areas can generate billions of dollars from 2020 to 2026 with some fluctuation and can offset the losses in premiums that are expected. Building an expertise market in big data and playing effectively in the autonomous vehicle
market means controlling big data generated by the communication and software. Market personnel who can handle, organize and work efficiently with this amount of data can inherit advantages over the coming years.
Secondly, they can develop an actual framework and models. The world has already seen partially autonomous features. Insurers should come up with highly sophisticated modelling and safety techniques to keep up their business work smoothly. The insurers will
also need to collaborate with the car makers to get a better understanding of the safety loopholes which then can be covered by the insurance company. They should already be working with the ecosystem partners.
Auto insurance will change definitely
In short, change is inevitable for auto insurers, but the change can be positive. Insurers that vigorously pursue the short- and medium-term opportunities presented by cyber insurance, product liability insurance, and infrastructure insurance – while making
careful strategic decisions about their partner ecosystems, operating models, and value propositions – are most likely to thrive in a driverless environment. Providing more sophisticated procedures for safety to the people while also studying the ecosystems
perfectly will help them thrive in the long run. Upgrading their procedures time to time to stay in the today’s world will help them achieve success.