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Insurance Rates in an Age of Self-Driving cars

September 21, 2016

Will the coming of self-driving cars mean a big drop in your automobile insurance premiums?

CCIG’s Matt Genova.

It would make sense to assume that premiums will drop, right? After all, human error was a factor in 94 percent of car crashes that killed more than 35,000 people in the U.S. last year.

The reality, however, is that while the emerging technology may eventually help make roads safer, there are a number of reasons rates won’t decline overnight, and the decreases might not be very dramatic at all. In the end, it could take years, if not decades, before we see any significant lowering of rates.

Let’s start with the technology.

“Knowing what I know about computer vision, I wouldn’t take my hands off the steering wheel,” Jitendra Malik, a researcher in computer vision and professor at the University of California, Berkeley, said recently in offering his assessment of self-driving cars thus far.

Malik was referring to a fatal crash in May of a Tesla Model S electric car that was equipped with its Autopilot driver-­assistance system and crashed into a tractor-trailer. Regulators are still investigating the accident, but it appears the driver placed too much confidence in Tesla’s self­-driving system. The same may be true of a fatal Tesla accident in China reported earlier in September.

In a move welcomed by consumer and safety advocates, the U.S. Department of Transportation published guidelines this week giving it a prominent role in setting various standards for automated vehicles before they can be sold or operated on public roads.

In doing so, the government was actually trying to catch up with manufacturers. Beyond Tesla, Uber Technologies Inc. has deployed driverless cars in Pittsburgh, Pa., while Google is testing autonomous vehicle technology in four states.

So, while some carmakers might be keen on moving ahead quickly, the new standards issued by government regulators could force the companies to slow down, if not halt, their operations.

That’s why the full development of computer-operated vehicles remains years away.

The pace of adoption by consumers is another big question.


A survey of 1,500 drivers last year by the consultants at the Boston Group found that 55 percent were “likely” or “very likely” to buy a semi-autonomous car. Forty-four percent of the respondents said they would buy a fully autonomous vehicle in 10 years.

Those numbers would still leave a huge share of drivers behind the wheel of a traditional vehicle. Presumably, that includes people who distrust the technology, have a fear of having their vehicle hacked, love driving or just can’t imagine spending whatever it takes to buy a self-driving car.

Of course, discounts on insurance already are available for things like anti-lock brakes and other collision-avoidance features. But insurers aren’t likely to go very far in cutting premiums if half of the road continues to be filled with humans driving their cars.

Assuming autonomous cars do become commonplace, at least some liability will no doubt shift from drivers to the auto and software makers at fault in a crash. But just how much liability will those companies be willing to assume? Volvo says that when one of its vehicles is in autonomous mode, it will be responsible for what happens. But so far, it’s alone in going that far. Will others follow?

Also, it’s important to remember that the volume and type of claims today hasn’t changed much despite the rising adoption of technology that keeps you in your lane or beeps a warning to help you with your blind spot.

It took about 80 years after cars first become commercially available for the adoption rate to reach 90 percent. How long will it be before we reach that adoption level with autonomous cars? At what point will anyone but the wealthiest of us be ready to buy a self-driving vehicle?

Jeffrey Zients, director of the National Economic Council, promised this week that automated vehicles “will save time, money and lives.”

That may well be true. But it could take a couple of decades – if not longer – before you notice any change in your premiums.

Matt Genova is the Personal Lines manager at CCIG. Reach him at or 720-330-7936.

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