self-driving — James Saye

As we all know autonomous cars will arrive in the next 10-20 years (if you don’t have a read of my previous post here. The effects on you or I will be extraordinary and the affect on businesses in all industries will profound with one in particular - the insurance industry.

A recent KPMG study [1] found that the majority of insurance companies thought that autonomous cars were too far in the future for them to worry about now. This I think is a major error on the part of the insurance companies. There’s likely to be two paths to autonomous cars with the regular manufacturers such as BMW, Audi, Ford, etc slowly introducing self-driving tech in to their vehicles over the next 20 years or so while high tech companies such as Google, Apple and Tesla will completely leap frog the regular human-driven car and go straight to autonomous vehicles in the next 10 years (I know Tesla makes regular vehicles but their autonomous driving tech is well ahead of others). What this means is that insurance companies are likely to be taken by surprise sooner rather than later as consumers start wanting/needing insurance products that they don’t yet offer for vehicles from these high-tech companies. The advance of autonomous vehicles from regular manufactures will also creep up on them just as the continual advance of mobile has snuck up on so many industries such as retail.

There’s currently around an 85:15 split between personal and commercial insurance [2] across the industry but as mobility on demand increases, spurred on by the introduction of autonomous cars, insurance companies will need to refocus their products to the commercial side. The ‘uberisation’ of autonomous cars will remove the need for the majority of personal car insurance policies. As an aside and in the shorter term though is the increase in car sharing services such as BlaBlaCar - I’m yet to see insurance policies specifically designed for people that regularly use these services.

Data is already prolific in our lives but one aspect that its yet to really arrive in is our cars and particularly our car insurance. While there’s a few companies offering black box policies they’re few and far between and mainly aimed at new young drivers. With the increase in data in our cars there’ll be a huge shift to data based insurance policies but one has to question how many insurers are ready for this change, how many have a data analysis skill set, do they have the processing, storage and security requirements - I suspect not.

One of the major reasons for the introduction of autonomous cars is to increase safety. Today, around 94% of crashes are caused by human error (the rest a mix of component failure and environmental factors) [3] so with the introduction of autonomous cars will inevitably come a huge reduction in crashes and therefore insurance claims. This you’d think would be good news for the insurance industry but consumer demand and competition in the industry will most definitely lead to much lower premiums. In addition to this there’ll be much fewer cars being purchased and therefore fewer policies. With the huge advancements in technology and the naivety of the current industry players there’s bound to be start-ups offering insurance products that people want - I could quite easily see black boxes in cars with dynamic pricing based on how much you use the autonomous features, if you drive manually then you pay more (this goes back to the previous paragraph). You could also see manufacturers themselves offering this insurance as part of the vehicle cost (remember that we’re unlikely to own cars in the future but rent them per thousand/miles).

The aggregate of all of this could spell bad news for many of the big players - who will be the Blackberry and Nokia of the insurance industry?

[1] Automobile Insurance in the era of autonomous vehicles. Survey results. June 2015. KPMG.

[2] UK Insurance Key Facts 2013. Association of British Insurers.

[3] Traffic Safety Facts. Crash Stats. February 2015. National Highway Traffic Safety Administration.

Automation has been the theme of the last 10 years or so with many forms of manufacturing being automated, unmanned aerial vehicles (UAVs) becoming the norm for the military and soon to become the norm in the civilian world. Cars, however, seem to have been rather slow in joining the technological band wagon. Cruise control as we know it came in to being in the late 1950s and early 60s and it is only in the last 10-15 years that further developments have taken place with Mercedes-Benz introducing adaptive cruise control in 1998. Again, since then progress has been slow. Automatic parking has only been available on production cars since around 2007 when BMW and VW debuted the systems. Compared to other sectors this progress seems painfully slow. There are still no car manufactures likely to introduce completely automated vehicles in the near future and actually, I don't think we're ready for them anyway. I believe that the entire concept of a car has to change for self-driving cars to really be popular. Interestingly, it is not a car manufacturer that is leading the way in self-driving cars. As I'm sure you're aware Google have been developing their very own car that can drive itself around on public roads with other cars around. Since May 2012 Google have been testing their driverless cars on the roads after several US states including Florida, Nevada and California introduced laws to allow these cars on the road.

This is all brilliant and is a massive step in the right direction but as I've said previously I think the whole idea of the 'car' needs to change for self-driving versions to really take off.

The whole concept of a traditional car revolves around a driver; there's a steering wheel, a gear stick, pedals, a huge dashboard etc. Why would a driverless car need all this?

For these kinds of new vehicles to be successful I think the whole concept of the car needs to change.

Rather than all the passengers facing forward why can't the front seats now face the other way making interaction with everyone else so much easier and nicer. There'd also be much more room if the traditional dashboard and centre console were removed. You could even fit in another seat in the front.

In terms of controlling the vehicle (entering destination etc) there could be a smaller control panel in the centre of the vehicle that any passenger could control.

Of course, for anything like this to ever happen the perceptions and thoughts of the users needs to change too. People need to realise that the traditional vehicle concept and layout would be unnecessary and useless. Travelling in a car could be so much more comfortable and interacting with passengers could be so much better.

The law needs to change too. Does there need to a person 'in charge' of the vehicle? What about insurance? The current system where an individual person is insured to drive a vehicle would need to change, instead I think the vehicle would need to be insured.

There's so many points to make and so many things need to change with governments, vehicle manufacturers and most importantly with users before any kind of driverless car becomes successful.

What do you think? Would you buy a self-driving car even though the layout and concept is still inefficient? What else needs to change for driverless cars to be successful? Please leave your comments below.