Will self-driving cars mean we no longer need car insurance?

Ninety-three per cent of car accidents are caused by human error. Take away the human element and, goes the thinking, you take away the risk of a mistake – and thus, the risk of crashing.

That’s the very promise of autonomous cars, which will revolutionise safety on our roads by making the crash-proof car a reality.

But some are now taking the logic a step further. If there are no crashes, will we still need car insurance?

It's an incredibly relevant question given the speed in which the technology is moving, people are already being offered the chance to test 'driverless pods' in London and legislation being pushed through in the Queen's speech this week.

It is therefore, no wonder that the big wigs of the industry got together to discuss the issue at a high-level panel discussion organised by Volvo Cars and Thatcham Research in May.

Top US stock market investor Warren Buffett thinks autonomous cars will mean the end of car insurance. “If there are no accidents, there is no need for insurance,” he said in an interview recently.

If there are no accidents, there is no need for insurance

Volvo doesn’t go as far as Buffett, but does believe car insurance may radically change with the onset of autonomous cars. “Volvo believes the insurance industry will have no choice but to react to these seismic challenges to its existing business model by fundamentally restructuring – or face competition from new entrants into its market from technology-savvy disrupting companies,” said its president and CEO Hakan Samuelsson.

Volvo is no stranger already to making headlines for driverless car technology after announcing a trial for early next year (2017) that will see a limited number of semi-AD cars will take to the streets of London.

Needless to say, the car insurance industry disagrees. “Predictions about the demise of the insurance industry in the context of autonomous vehicles are wide of the mark,” said James Dalton, ABI Director of General Insurance Policy at a London conference recently, undoubtedly in response to Buffett’s remarks. So who is right?

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What is an autonomous car?

The confusion surrounding the technicalities of autonomous car insurance is perhaps not helped by misunderstanding of the various terms involved.

That’s why the industry is trying to discourage the phrase ‘driverless car’: this is a vision that will probably never actually exist.

A pod that zooms you from point to point with no input whatsoever may never become a reality.

Instead, it is an element of autonomy that is important: cars are going to increasingly have autonomous functionality, taking over from the driver to ease the workload.

And it’s in the area of safety where such autonomous functionality will first grow.

Modern cars already offer Autonomous Emergency Braking, or AEB.

Global NCAP is pushing car makers to standardise this: if the car detects a crash up ahead, it will sound a warning and, if the driver doesn’t respond, automatically brake to either avoid the crash or lessen its impact.

Other features such as active cruise control, where the car will keep a set distance from cars in front, even braking to a complete halt (and getting underway again), are being combined with lane departure warning systems that monitor the white lines on a motorway – and even autonomously steer the car to keep it within the lane.

Tesla has done just this, so its Model S has an auto pilot that will ‘drive itself’ on motorways.

Eventually, cars will carry enough autonomous functionality to fully drive themselves. The addition of technology today, usually branded as advanced safety features, will add up to tomorrow’s autonomous car.

The technology is moving steadily towards the 'fully-autonomous' goal and getting closer everyday, both Volvo and Google have predicted motorists will be using their self-driving cars by the end of the decade, however, it has not clearly been addressed how insurance will evolve to match this.

The evolution of car insurance

Some have questioned just what Buffett means by there not being a need for car insurance.

Is it because cars will become so safe, it’s simply irrelevant – a waste of money? Or does he expect car companies to assume liability instead?

Volvo has already said it will bear responsibility for the implications of a crash in one of its ‘crash-proof’ autonomous cars.

But other companies haven’t gone this far.

Dalton criticises the approach of companies such as Volvo, arguing that “there can’t be different legal outcomes depending on the brand of vehicle involved in an accident. Public policy and regulation is not brand-specific”.

The views of some vehicle manufacturers “seem to be based on brand self-promotion rather than contributing to a coherent regulatory framework of the future”.

A sensible discussion is required, where new types of car insurance such as strict liability, temporary car insurance or ‘first party’ car insurance are considered, although they are a long way off, argues Dalton.

In the medium term, he says, the current car insurance model is suitable – and will be so as long as non-autonomous cars are on our roads in significant numbers.

“I find it difficult to see how the driver of a conventional vehicle will accept a scenario where they are required to purchase third party motor insurance to protect the driver of an autonomous vehicle, but that the reverse does not apply.”

The interim danger of autonomous cars?

There’s even a danger that the rollout of autonomous cars could actually make our roads less safe, and their drivers more at risk of a crash.

This is because there could be confusion as to the limits of a car’s autonomy – drivers may be unsure about when the car will drive itself and when they need to take over.

Legislation arrives in 2018 that will legalise a degree of fully hands-off driving for cars fitted with advanced self-driving systems.

But this could give motorists a false sense of security, and if they relax too fully they may not be alert for when they do have to take over.

Or if something does go wrong, they’ll again have just seconds to react. 

It won’t be until 2021 when fully automated cars arrive on our roads.

Such cars will drive complete sections of a journey entirely under their own control and will be able to respond without driver intervention in an emergency.

Until then, any self-driving functionality will only be limited in scope.

It is important motorists understand the strict boundaries of this, warns the car insurance industry.

“The danger is that as technology develops, and drivers become more confident, they will start to use it in conditions it has not been designed for,” says Peter Shaw, chief executive at safety testing organisation, Thatcham Research.

"Our clear message is that until 2021, drivers need to stay on the ball and observe the rules of the road.

If you’re unclear on the functionality of any feature on your car, then check with the vehicle manufacturer or dealership."

Dalton agrees.

Referencing the arguably misleading concept images of people reading newspapers behind the wheel of an autonomous car, he says that “only when vehicles are fully automated should drivers consider themselves completely free to do other activities behind the wheel”.

READ MORE: The five most advanced driverless cars currently on the market

The crashproof car is coming: but the end of car insurance is not

The utopia of autonomous cars is that crashing them will be impossible. Volvo has already stated that, by 2020, nobody will be killed or seriously injured in one of its new cars.

A world of autonomous cars will be fully interconnected, constantly monitored and, with a ‘virtual crumple zone’ not unlike opposing magnets, simply won’t get close enough to hit anything or anyone.

But we’re not there yet. Not by a long way.

It will be many decades before the world consists solely of cars with autonomous functionality.

It takes three decades even for officially-mandated features on new cars to make up 95% of all cars on the road.

It could be 2060 before every car in the world has autonomous features.

Until then, even the most high-tech self-driving car will have to share the road with cars with no emergency crash avoidance technology other than the person behind the wheel.

And this grey area is where the idea of not needing car insurance starts to fizzle out.

Car insurance will change and evolve in the future, and the reduction in car crashes will in time start to benefit motorists with reduced premiums – already, drivers of cars with autonomous-assist safety features are benefiting from this.

But the demise of the car insurance policy? Not in this generation: car insurance protects against risk and, until everyone drives an autonomous car, would you like to share the road with someone without insurance?