How Are Insurance Businesses Expected to Adapt to the Evolving Nature of the Self-Driving Car Insurance Industry?

Highlights:

• Introduction
• Evolution of self-driving car insurance plans
• Innovative partnerships between industry participants

The emergence of autonomous or self-driving cars has transformed the automobile manufacturing sector and helped establish many other ancillary industries. The self-driving car insurance landscape is one such example. Experts in car insurance services highlight the need for a separate segment for autonomous vehicles due to the intricacies arising from the involvement of more stakeholders. Furthermore, there are six levels of automation in self-driving cars, each requiring separate consideration for insurance coverage.

Also, many experts point out the fact that traditional insurance coverage essentially involves assessing risk based on the driver. However, with the advent of autonomous cars, the liability has shifted to car manufacturers and software developers along with the driver. The legal complications and the regulations enacted by that specific country or region regarding liability make it necessary to have an independent industry of self-driving car insurance.

Assessing the different levels of insurance coverage for autonomous vehicles

Since there are multiple levels of automation in self-driving cars, insurance companies, too, have rolled out distinct plans for different types of AVs. Level 0, Level 1, and Level 2 of AVs come under the category of partial automation while, the other three categories – Level 3, Level 4, and Level 5 – come under full automation. As of 2024, no car manufacturer has developed a fully autonomous Level 5 vehicle, and Level 3 and 4 vehicles are in the stage of testing. Hence, currently, self-driving car insurance companies have launched their plans only for partially automated cars.

Compared to traditional insurance coverage plans, these plans are costlier as the number of stakeholders is higher and due to the higher number of stakeholders and the increased difficulty in assigning liability. Insurance experts also highlight that, in the case of autonomous cars, the distinction between comprehensive insurance, liability coverage insurance, and collision insurance becomes even more important. Moreover, insurance companies need to take into account three major aspects while framing any policy viz., cybersecurity, infrastructure, and product liability.

For example, the hardware and software used in self-driving cars are vulnerable to cyberattacks and threats which might increase the risk of accidents. This issue needs to be considered while framing the insurance policy. Similarly, cloud infrastructure that provides safety signals to drivers should be considered in underwriting. Thus, self-driving insurance plans need to have a comprehensive approach that takes into account the impact of technologies like Artificial Intelligence, GPS navigation, sensors, and cybersecurity.

Car insurance companies adapting to the changing dynamics of the landscape

The self-driving car insurance industry is expected to register huge growth in the coming period owing to the growing advancements in autonomous technology. The North America region is predicted to have the highest revenue share in the landscape on account of the presence of multiple automobile and technology companies in the region. At the same time, the launch of dedicated insurance plans for AVs by leading companies has created numerous growth opportunities in the sector. In March 2024, Aviva, a multinational insurance company, announced the expansion of its autonomous vehicle insurance project. For this, the company has partnered with Darwin Innovation Group, a connectivity solutions developer for AVs, and the University of Salford.

As part of this partnership agreement, a Darwin Autonomous Shuttle service has been launched which is powered by advanced technologies like LiDAR sensors, self-driving software applications, cameras, etc. The shuttle service in Manchester will provide Aviva with important insights into the claims, risks, and underwriting processes related to self-driving cars. The company has stated that this partnership will help it to come up with products and solutions that will address the demands of the evolving automobile sector.

In conclusion, the emergence of self-driving automobiles has led to the advent of a new segment of car insurance that specifically caters to the technicalities associated with autonomous vehicles. Moreover, the growing popularity of AVs is anticipated to increase the importance of comprehensive insurance, liability coverage insurance, and collision insurance plans. Finally, the partnerships between insurance companies and automotive manufacturers are projected to generate new investment opportunities in the landscape in the coming period.

For tips and suggestions on how to capitalize on the opportunities offered by the landscape, feel free to contact us.

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