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How This One Weird New Vehicle Invention Is Turning the Entire Auto Insurance World on Its Head

The way we drive is about to change forever. In fact, the changes have already begun. Self-driving cars have been tested on roadways, and as bugs are fixed and new safety features are added, they will become available for consumers within the next few years. It is expected that there will be 10 million of these cars on the road by 2020.

There is debate, however, over how this will affect the insurance industry. After all, so long as the technology is reliable (which, if it’s put on the road, it should be), the number of accidents should drop dramatically. Does that mean insurance rates will go down?

They might. But remember: the manufacturer’s aren’t taking today’s cars and making them self-driving; they’re adding lots of new parts and sensors to make them work. If an accident does occur, these parts will make repairs more costly. As the technology improves and more and more of these cars are on the roads, accidents should almost never happen. But until then, repairing one is simply too costly.

Beyond that, there are two possible paths that your auto insurance could take:

Path 1

Let’s say, self-driving cars become available for everyone. These cars will likely be thousands more expensive than cars are today. But let’s say you sell your old car, and you buy one of these. Switching your old insurance to this one may cause for some changes.

Because of the changes in repair costs and the smaller likelihood of an accident, your monthly premium would go down. However, depending on the insurer, any claim you make will likely raise your rate at a higher amount than a claim today would.

Not only that, but you may no longer qualify for many of the discounts you had before. After all, having a good driving record or good grades will no longer prevent accidents. You may be taking the car out of autopilot at times to drive on your own, so these discounts may not disappear entirely, but they won’t be as significant.

Here’s the good news; if your car gets into an accident while in self-driving mode, you may not be liable at all. Many auto manufacturers, such as Volkswagen, will claim responsibility for any accidents while the car is in autopilot. This isn’t just a stunt to get you to trust the cars; so long as the parts are in working order, it’s the computer’s fault, not yours.

Path 2

Path two will lead to some drastic societal changes in the way we travel, but it has a high probability of happening.

In this path, you don’t need to buy insurance at all. In fact, you don’t even need to own a car. That’s because self-driving cars will replace pickup services, like taxis and Uber. You will simply call a car to you using an app on your phone, or by calling the company (it will likely be Google or Apple). A driverless car will be there to pick you up within minutes, and take you to your destination at a low cost.

In this path, it would make sense for the the companies if the cars were electric. The costs of using and maintaining one would be low for both you and the company, maximizing profits for both parties. However, it’s unlikely that the oil companies will want to let go of their profits. This may turn into a political battle by the next election, so keep your ears peeled.

Also worth noting is, where would all the cars be stored? Creating storage buildings all over the country would be too costly. Instead, they may be stored and maintained in repair or gas stations. Or, by signing up to use the service, you may need to agree to store a car in your (now unused) driveway, provided it passes a safety inspection.

A lot from path two is still to be determined, but if it means not having to pay thousands for a more expensive car, or pay insurance on it, this path will likely save you a lot of money.
But no matter which path ends up happening, prepare for some drastic changes in the way you travel, and in the way you pay for insurance. The future is on its way, and it’s self-driving.

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