How Do Self-Driving Safety Features Affect Your Car Insurance?

Many drivers are ready for autonomous vehicles, even if the insurance industry isn’t. And while the safety features of self-driving cars can reduce the risk of accidents, that may not translate to cheaper car insurance premiums for drivers.

The National Highway Traffic Safety Administration says that more than 3,450 people were killed by distracted drivers in 2016, the last time it compiled such data. It notes that sending a text takes the driver’s eyes off the road for five seconds, which is enough time to cover the length of a football field if you’re going 55 miles per hour. As a result, drivers are more inclined to share the road with automated cars than with texting drivers.

A survey by InsuranceQuotes found that 73% of consumers think a texting driver is more dangerous than a self-driving vehicle. Though there are concerns about technical failures (51%), hacking (22%), lost driving jobs (13%), and the cost of self-driving vehicles (9%), the insurance industry is already seeing the benefits of certain driver-assisting technology.
“Safety features, like automatic emergency braking, appear to lead to a reduction of accidents on the road,” says Pete Gulbrandsen, vice president of auto product, personal insurance at Travelers. “The features provide additional safety in situations when a driver’s alertness has decreased.”

While entrepreneurs like Dan Peate, whose autonomous-vehicle insurance startup Avinue has been featured by Bloomberg and Crain’s, figure out a way to capitalize on that decreased risk, drivers are about to get a big break from their misfortune. According to a study by insurance firm Accenture and the Stevens Institute of Technology in Hoboken, N.J., the more than $225 billion insurance industry will see traditional premiums drop by $25 billion by 2035 and by $41 billion by 2050. That’s a nearly 20% loss over the next 30 years, with any offsetting gains coming only in theory.

“Insurers are bracing for long-term declines in auto premiums as new and safer autonomous vehicles gain adoption,” said John Cusano, a senior managing director at Accenture and global head of the company’s insurance practice, in the study’s release. “However, our research suggests that auto premiums will increase before they decline on this trend, so insurers that can navigate the changing technology environment could win market share.”

Janet Ruiz, director of strategic communications for the Insurance Information Institute, notes that it will still be some time before many drivers see significant benefits of electronic safety features. As Ruiz notes, the first semi-autonomous features didn’t find their way into cars until about 2012. Meanwhile, the average age of a car on U.S. roads jumped to 11.7 years old in 2017, according to IHS Markit. If that trend holds, Ruiz says the benefits of even the earliest, most basic autonomous features may not trickle down to younger used car buyers until around 2023.

“Safety is always a great benefit, so reducing risk as early as you can is a good thing,” Ruiz says.” With this kind of technology, it’s good to be a first adopter.”

Meanwhile, it may take some time before insurers adjust to a new, less-risky normal. In 2015, a study by the Insurance Institute of Highway Safety (IIHS) covering the very first automated safety features available in 2011 and 2012, found that safety technology – especially electronic stability control – decreased the likelihood of a driver dying in a crash of a late model vehicle by more than a third over three years. Nine car models had zero fatalities per million registered vehicles.

Though more recent data from the IIHS and Highway Loss Data Institute (HLDI) found decreased property damage liability and collision claims for cars equipped with forward-collision warning systems, especially those with automatic braking, there is still a gap between the safest and least-safe models, with small lower-cost models still considered risky.

“Safety features have been shown to reduce the risk of losses in liability coverages and that will result in a benefit to the insured,” Travelers spokesman Gulbrandsen says. “However, as more technologically-advanced safety features have been added to vehicles, the cost to repair them has generally increased.”

This is where it starts to get tricky for drivers. Insurance is regulated differently from state to state, so what drivers pay in different areas of the country depends of what that state deems important. Meanwhile, autonomous features begin to shift liability for crashes toward auto manufacturers and away from drivers, which may make them take the RAND Institute’s suggestion and push for no-fault insurance.

Finally, there’s a chance that insurance underwriters will stop simply suggesting that drivers use pay-as-you-drive or usage-based programs like Progressive’s Snapshot or Liberty Mutual’s RightTrack. Those programs use small sensors installed in a car’s dashboard or an existing on-board communications system (think OnStar) to track driving habits and reward less risky behavior. While some of these sensors track only the miles you drive, others can use a car’s safety features and telematics systems to determine how often you slam on your brakes, and good drivers can get discounts of 5% to 30% if these devices — or even telematics systems or smartphones — like what they see.

“After analyzing Snapshot driving data, we’ve found hard braking to be one of the most highly predictive variables for predicting future crashes,” says Dave Pratt, general manager of usage-based insurance for Progressive. “We know that one of the main contributors to hard braking is tailgating, so we’re using our data to help drivers be as alert and aware as possible on the road.”

The National Association of Insurance Commissioners (NAIC) predicts that 20% of all U.S. auto insurance companies will incorporate some form of pay-as-you-drive program by 2020. The Insurance Information Institute, meanwhile, says 70% of insurance carriers will be experimenting with that option by that time. Ruiz says that despite the reluctance of older drivers to be monitored, younger drivers who are more comfortable with technology may push the change.

“You can tell if mom is in the car, if dad is in the car, or one of the kids,” Ruiz says. “It can tell if you’re stopping too short or drifting in lanes, and it knows exactly who’s doing it and whose premiums should be affected.”

But does that necessarily mean that auto insurance will be cheaper overall?

Ruiz notes that insurers may place more emphasis on losses that aren’t caused by crashes, but by wind, floods, hail, and other natural elements and by theft. That comprehensive coverage may not be so bad if the potentially higher costs to repair or replace damaged vehicles are more than offset by the lower accident frequency rate.

However, just know that insurers like Accenture see comprehensive coverage and new insurance categories — including cybersecurity insurance (hacking), product liability insurance (faulty sensors and algorithms), and public infrastructure insurance (hi, potholes) — as an “$81 billion opportunity” as soon as 2025. In fact, Accenture and the Stevens Institute estimate that cybersecurity insurance premiums alone could bring in an extra $61 billion during the next six years.

Even that scenario, however, assumes that drivers are in any rush to adopt autonomous vehicles, never mind the safety features available today. InsuranceQuotes’ survey found that just 32% of people trust current self-driving technology. While 47% expect to have more faith 10 years from now, when that technology evolves, only 37% would consider leasing or owning a self-driving car. That ranges from 52% of those 18 to 34 to just 22% of those 65 and older.

That reluctance is why Stevens estimates that by 2035 there will be only 23 million autonomous vehicles on American roads — or less than 10% of the total cars on the road today. It’s also why a white paper released by Travelers suggests that auto insurance shouldn’t look much different when autonomous cars become more prevalent, with drivers simply assuming less risk under traditional auto insurance. Meanwhile, both insurers and drivers will be watching both advancing technology and decreasing premiums closely.

“Through our leadership role in collaborative, multi-industry research, as well as analysis of our own data, we expect to learn more about the potential impact of this technology on costs,” says Sevag A. Sarkissian, a spokesman for State Farm whose region of coverage includes automated vehicle testing grounds in California and Nevada. “If loss experience ultimately improves, rates could reflect that fact.”