Autonomous cars will shake insurance market to its core

The world of insurance—and the wider world beyond that—will be changed by the advent of the driverless or autonomous car, according to Vincent Branch, chief executive of Accelerate at AXA XL.

Speaking at a presentation titled ‘Autonomy and the challenges for the risk & insurance industry’ at the Intelligent InsurTECH Europe 2018 conference in London on October 15, Branch said it was no longer a case of ‘if’ autonomous cars would come to mass production, but more a case of ‘when’.

Branch explained there are currently five levels of vehicular autonomy: level 0 means no automation, while level 5 means that a vehicle does not need a human driver. Current trials by driverless car companies have been aiming for level 4, which can mean that a human can participate in the driving process if needed.

According to Branch, automation is not confined to cars, but might also have uses in warehousing, construction, airports, shipping, logistics, mining, space exploration and more, removing people from a wide range of dangerous workplaces.

Branch said that over the next 20 years autonomy will not only change the world, but will transform it. Ninety percent of all car accidents are currently attributed to human error, so autonomous cars would lower accident rates. In addition, more efficient driving would reduce carbon dioxide emissions by 60 percent, and transport costs would also be lower, he said.

In terms of how quickly autonomous cars might come on stream, Branch pointed out that the take-up rate of technology was accelerating. He commented that it took 30 years for 90 percent of US householders to own a fridge, and 20 years for colour TV to reach the same population, but just 10 years for mobile phones to do the same.

Branch stated that autonomy is here and not a distant prospect, with pilot trials already being carried out. He said that over the next one to five years autonomous vehicles would be rolled out in controlled environments such as warehousing, farms, etc; in five to 10 years they would appear in general logistics and transport; and in 10 years and onwards in world transport and general ownership.

This poses important questions for insurance: who is at fault when an autonomous vehicle crashes? How will car ownership change? Will anyone steal a driverless car? How will urban planning change? How will humans react to autonomy? What will be the nature and magnitude of cyber aggregation? Does insurance have the capacity to cope? Will we need car parks in the future?

Branch stressed that the market does not yet know the answers to these questions, but added that the insurance market will be different from where it is now, as it will in effect be insuring software—something that will shake it to the core, he predicted.

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