Will Self-Driving Cars Lower Your Auto Insurance Premiums?

Reviews.com Staff
Reviews.com Staff

Reviews Report

  • Great progress in the development of self-driving vehicles has been made but it will be some time before they dominate highways.
  • It will take some time for legal courts and regulators to develop data that determines how insurance rates will change with self-driving cars.
  • Self-driving cars are still vulnerable to cyber-security attacks.

The idea of a self-driving car was first presented by General Motors at New York’s World Fair in 1939. A driving force for the concept is the goal of reducing accidents, 94% of which are caused by driver error. This original idea, with some fits and starts, has been moving closer to reality ever since. 

Now, most cars contain certain automated driving features such as lane departure warnings, automated brakes, and parallel-parking guidance. Despite some predictions of a completely autonomous vehicle without the need for any driver control by 2020, design, manufacturing, and legal challenges have slowed the final steps for fully self-driving cars.

Self-Driving Cars Autonomy Levels

The National Highway Traffic Safety Administration (NHTSA) and SAE International have developed six tiers to describe and differentiate the levels of driver autonomy achieved in self-driving cars.

  • Level 0: no autonomy. These are the cars previous generations drove. All of the control of the vehicle remains in the hands of the driver. 
  • Level 1: driver assistance. This vehicle is what is commonly on the road today in some feature-packed vehicles. While the car is controlled by the driver, some assistance is provided with features such as ADAS (Advanced Driver Assistance System), which provides steering and, on occasion, braking assistance.
  • Level 2: partial automation. The main difference from Level 1 is that the car has an ADAS feature that can assist with steering and braking, under certain conditions at the same time. The driver is still required to pay full attention at all times.
  • Level 3: conditional automation. The vehicle must always have a driver but the driver does not need to monitor operation at all times, only on notice.
  • Level 4: high automation. Under specific circumstances, the ADAS can perform all driving functions with the driver having the option to do so. The driver does not need to pay attention while the ADAS is in control.
  • Level 5: full automation. In this final tier is the fully automated vehicle envisioned in 1939 and the TV show “The Jetsons.” The vehicle can perform all driving operations and occupants may simply be passengers.

How Self-Driving Cars Will Affect Insurance

Fully- or partially-autonomous vehicles, like the Tesla electric vehicle, could dramatically impact drivers and their habits. Others will be affected and the greatest impact may be on the insurance industry. At first, we might think that the relationship between self-driving vehicles and insurance premiums is straightforward. Because self-driving cars will virtually eliminate accidents, premiums could drastically reduce accordingly. 

“Not so fast,” says John W. Spratlin, certified insurance counselor of Hub International Insurance Limited in Columbia, South Carolina. “We simply don’t have enough data yet about the real impact self-driving vehicles will have on risk and liability to reach any firm conclusions on insurance.”

Spratlin likens the current situation with autonomous vehicles to the cybersecurity threat and the insurance response, pointing out that “initial cybersecurity policies and premiums were based on one assessment of risk, which over time changed dramatically with more data involving actual breaches.” 

Like cybersecurity, the self-driving vehicle insurance industry and its changes will take time to fully develop, explains Spratlin.

He adds that it is important to remember that insurance follows the vehicle, not the driver. 

“Sorting out liability arising from accidents between self-driving vehicles will generate new types of litigation that will involve deep-pocketed manufacturers much more than lawsuits do today,” Spratlin says. “Larger judgments are likely and appropriate policies and rates will adjust accordingly.”

In the interim, insurers are taking small steps in altering coverage in response to automated driving. For example, many insurers are now offering discounts to drivers who use in-car monitors able to measure reduced bad driving habits such as rapid acceleration or sudden braking.

Self-Driving Cars Pros and Cons

With a greater focus on the possibility of a self-driving world, it is useful to look at some pros and cons of automated vehicles:

Are Self-Driving Cars Safe?

A 2020 study conducted by the Insurance Institute of Highway Safety (IIHS) has provided some cautionary data about the ability of self-driving cars to eliminate accidents in the near future. Despite the hope of many in the industry that it is only a matter of time before self-driving cars flood highways and eliminate car accidents, the IIHS study concludes that only about one-third of accidents will be eliminated with self-driving vehicles if driving patterns remain the same as they are today.

IIHS analyzed over 5,000 crashes reported to the police. To qualify, accidents needed to be serious enough to have at least one vehicle towed from the scene and emergency medical services called. IIHS determined that only one-third of overall accidents will be reduced by self-driving vehicles. But the study concluded that most accidents between self-driving vehicles will remain for the following reasons:

  • Errors involving “predicting” what another driver will do such as accelerating were not eliminated.
  • “Planning and deciding” mistakes such as operating a vehicle at speeds not right for conditions also continued to cause accidents.
  • “Execution and performance” errors involving inappropriate maneuvers to avoid a collision or overcompensating in reacting to a situation also remained a cause of accidents. 

Not everyone has agreed with the IIHS conclusions. Brad Templeton, who was involved in the self-driving efforts of Google, commented in Forbes that “I think if you asked most self-driving car developers where the hard problems are, they would say that [perception] is the hard one, and [planning and deciding] and [execution and performance] are the easiest to get right.”

Self-Driving Cars FAQ

About the Authors

The Reviews.com staff is dedicated to providing you with all the deep-dive details. Our writers, researchers, and editors came together from Charlotte, Seattle, San Juan, Fort Worth, Fort Lauderdale, San Diego, and Chicago to put this review together.

Table Of Contents