With driverless cars in the future, you may wonder about the future of auto insurance for self-driving cars. The National Highway Traffic Safety Administration (NHTSA) leads the regulatory process for autonomous vehicles (AVs) that will be the next generation of transportation.
The administration says that 94 percent of all U.S. automobile accidents are the result of human error. That means self-driving cars could save the lives of many drivers and their potential victims.
“What NHTSA is trying to do is make an overarching policy. Then states are supposed to develop what they think are best practices consistent with what is done on the national level,” explains Lynne McChristian of the Insurance Information Institute. “There are state-by-state regulations based on how quickly self-driving cars will be part of our everyday lives because it’s regulated on a state-by-state basis.”
As our government prepares the way forward for autonomous traffic, we’ll need to figure out auto insurance for self-driving cars. McChristian says there’s a good reason why this insurance makeover is slow going.
“The shift is going to be from insuring individual drivers and passengers to insuring a product. It’s a software product that’s going to be steering these cars,” she explains. “Insurance is based on the cost of claims and we don’t have a lot of data yet on what self-driving cars will do.”
In fact, the pace of the projected rollout of AVs over the next two decades could well depend on whether lawmakers, car manufacturers, and the auto insurance industry can agree on how to compensate humans for errors made by machines.
The 5 Levels of Self-Driving Cars
According to the Society of Automotive Engineers, there are five levels of self-driving cars that we can expect.
- For levels one and two, a human driver remains in the driver’s seat. That means there’s a variety of smart features automating functions such as weather monitoring, acceleration, and steering.
- For level three, the self-driving car is actually driving. But a human driver must stand ready to seize control at all times.
- For level four, the self-driving car takes control of all safety-critical driving functions but still offers the driver an override.
- For level five, the vehicle is fully autonomous. Therefore, the cab doesn’t have any driving equipment.
We’re already driving with level one and two vehicles. They automate features such as blind-spot monitoring, forward-collision warnings, and lane-centering technology. If these automated features stop working, they automatically default to the driver to control.
Level three through five self-driving functions will either alert a driver to take control or automatically bring the vehicle to a safe stop.
The Future of Auto Insurance for Self-Driving Cars
According to the Insurance Institute for Highway Safety, there will be 3.5 million self-driving cars on American highways by 2025 and 4.5 million by 2030. Two key factors that may affect their arrival are liability auto insurance and winning over drivers who may be hesitant to let go of the wheel.
Indications are that liability auto insurance, coverage required by most states, will undergo a fundamental change. As car manufacturers and suppliers assume more responsibility, they may provide more auto insurance for self-driving cars. McChristian says the financial reset that’s expected to accompany that sea change could be a welcome one for car owners.
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Will the Cost of Auto Insurance Go Down With Self-Driving Cars?
“I anticipate that we will pay a lot less for automobile insurance,” she says. “That remains to be seen because we still have quite some time before self-driving cars are the norm. Taking humans out of that equation with self-driving technology will mean fewer accidents, fatalities, and injuries. And that should mean a lower cost for auto insurance. Individual drivers will be less liable for any accidents caused.”
The expected drop in prices also may help address consumer uncertainty about auto insurance for self-driving cars. But there are still fears of hacking and other computer threats related to self-driving cars.
McChristian says consumer disinterest or distrust of AVs will likely keep America’s roadways a mixed bag for the foreseeable future. “There’s going to be a high number of people who don’t want to give up driving. And there will be a fair percentage of people who trust themselves more than they trust technology,” she says.
“Some people might want to keep the car they drive right now as an antique, an heirloom, a collector’s item. But as long as people have options to buy a self-driving vehicle or one they drive themselves, there’s going to be more than just self-driving cars on the road. And if there’s a mix of self- and human-driven cars on the road, you’re still vulnerable to human-caused accidents.”