Despite the recent wave of articles forecasting that the rise of autonomous vehicles will lead to a decline in auto insurance premiums, we believe it is more accurate to say that the advent of self-driving cars will cause the personal auto insurance policy, as we know it, to disappear at some point in the future. As self-driving cars begin to enter the auto market, auto insurance will shift from driver liability to product liability, as an increasing number of auto accidents will become the responsibility of the self-driving software and not the driver. Auto policies will need to evolve alongside these technological changes, and autonomous vehicles will require an entirely new type of insurance product, one which might retain some features of auto insurance, but with the addition of cyber and product liability coverage. The question then is who is going to be best positioned to create this insurance product of the future? We suspect that it won’t be today’s auto insurers.
One of the greatest advantages of being at Cooley is that we have a front row seat into how new technology is already beginning to shape the insurance market. Behind the scenes, car manufacturers are already positioning themselves to leapfrog over insurtech startups and traditional auto insurers. Manufacturers believe that their proprietary data, which no insurance company has direct or full access to, gives them an important advantage over the traditional auto insurance carriers when it comes to evaluating and understanding the new and emerging risk of autonomous vehicles. Car manufacturers are well positioned to sell their insurance directly through their existing customer network, without the need for traditional insurance brokers, and manufacturers also benefit from not having any insurance-related legacy systems that aren’t integrated with each other. Putting all these pieces together will enable the auto manufacturers to build a new and completely integrated technology platform that allows risks to be assessed in real time and claims to be resolved quickly, at a fraction of the administrative costs currently spent by traditional auto insurers. This is an intriguing and exciting idea, which if executed properly, could revolutionize the auto insurance market.
Currently, the biggest edge car manufacturers have over traditional insurance carriers is their ownership of vast quantities of driver data, but that may soon change. P&C carriers, rental car providers, telematics providers and consumer advocates have allied together to form the Global Alliance for Vehicle Data Access (GAVDA) to ensure that the vehicle owners have ultimate ownership of the data being generated by their vehicles, not the manufacturers. GAVDA has begun to lobby both Congress and the National Association of Insurance Commissioners at its 2019 Spring National Meeting to pass laws to ensure that vehicle owners have “open, secure, technology-neutral and direct access” to the data generated by their vehicles. If these laws pass, this could significantly shift the balance of power for control of the future of the auto insurance market from the auto manufacturers to the vehicle owners, and ultimately to the insurance carriers; arguably positioning insurance carriers to better compete with car manufacturers when it comes to offering the auto insurance policy of the future, and thereby increasing the level of competition in the market.
With the advent of self-driving cars fast approaching, auto insurers must ask themselves when auto insurance will end and product liability begin. As the nature of the auto insurance market changes, the companies with the best data will likely win the race to offer this auto insurance policy of the future, providing an insurance solution that meets both the auto and product liability needs of autonomous vehicles.