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Self Driving Cars: Affecting Insurance

February 24, 2020

self driving

Self driving cars are what many in the industry are looking towards. With the invention of Google Smart cars and massive efforts from automakers like Tesla, these cars could be here sooner than expected. Unfortunately, there are an infinite amount of variables that each carmaker needs to factor into their algorithms, but once that is ironed out, these cars will be on the road. The question prevails, though. When someone buys this type of car what is going to happen to their insurance?

Insurance Rates Will Decrease In Self Driving Cars

With the human factor now removed, insurance agencies will also have to make major adjustments. The major factor that is removed is simply human error. Insurance agencies will base their policies on the driver they are dealing with. Well when there is no driver, it comes down to algorithms. Today, if you have a few dents on your driving record, then this affects how much you pay. It is simply based on reliability as a driver to ensure that your premiums don’t go up. With a car that doesn’t need a driver, where do these premiums come from?

We haven’t figured it out yet. Since there are no official self-driving cars currently on the market, there is no data. All we can do is merely speculate. But when push comes to shove, it looks like these premiums will drop sharply.

Insurance off of Algorithms

One major speculation regarding the use of insurance for self-driving vehicles is the reliance on each car companies use of AI. Where each automotive manufacturer is setting up its own patented self-learning system, insurance agencies will monitor the effectiveness of their AI. Much like a person, we all learn differently (some slower than others) and algorithms like Bayesian take a long time to develop and structure itself.

Insurance companies will typically look at the reliability of these programs and continue to move in that direction. If Ford doesn’t have an as-effective AI system in place, insurance rates for their vehicles will adjust accordingly.

It Comes Down To Statistics

In the end, we speculate (and we can only speculate at this point in time) that when self-driving cars hit the road, it will be based on the specific algorithms. These are then based on traffic accident statistics. Rates of driving, speed the AI utilized the most, how the car has interacted with others on the road while under self-driving status. These are all that insurance agencies will look for in case of an accident.

Does a Honda self-driving car accelerate a little too quickly? This can cause the numbers to tilt away from them. This is also a variable that insurance agencies will look for. Will the Toyota vehicle not jam the brakes? Or have they been known to jam in certain scenarios that don’t necessarily need it? That decrease in effective percentages is going to factor in the insurance policy.

Self Driving >Human Driving

While not quite there yet, self-driving cars have been able to decrease the number of accidents on the road. Effective driving methods have improved dramatically over the course of the past few years and multiple state officials are more willing to put these cars on the road. Without the use of a driver, many insurance policies will go down for those who venture into the self-driving car market.

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