In the next decade or so, it’s predicted that our roads will be awash with driverless cars, with estimates that they will account for a quarter of global car sales. This will present either a huge opportunity for the insurance sector or a challenge that could lead to its downfall. Car insurance has long been a lucrative business, generating billions of dollars in annual revenue and supporting thousands of jobs. So the disruption promised by driverless cars is a genuine concern.
The primary challenge comes from the fact that 90 percent of road traffic accidents are caused by human error, a risk that driverless cars have the potential to eradicate, sparking a significant improvement in road safety. And while safer roads are always a welcome development, the knock-on effect would be to cause the need for third-party damage insurance to almost disappear. With fewer accidents and fewer claims, Forbes estimates that premiums will reduce by as much as 75 percent.
It’s no surprise then that insurance companies have been watching the development of driverless cars closely, looking at how they can adjust their business model for the future. The majority of new cars now have added autonomous systems, such as adaptive cruise control, automated parking and lane departure warnings. Insurance companies are constantly changing their rating algorithms as these features become available, meaning they are ready to adapt further still as