What Happens To Car Insurance When Driverless Vehicles Take Over?

June 27--LIMA -- As driverless cars move from drawing board sketches to a reality on this country's roadways, the future is now -- or at least near -- when it comes to changes in the way the insurance industry and motorists will intereact going forward.

And a Lima-based industry veteran who has been on the cutting edge of those potential changes is embracing the future wholeheartedly, even if it means profit margins for his own business could suffer.

"The Jetsons are coming. Driverless cars are definitely on the way," says Larry Webb, president of Webb Insurance Company in Lima.

Webb has been in the business long enough to see his share of changes. His father was one of the founders of Cincinnati Insurance Company -- a Fortune 500 company -- and Larry has served on the firm's board of directors since 1979.

He also serves on Cincinnati Insurance Company's innovation committee, a group that is facing head-on the changes and challenges associated with how motorists will get from point A to point B in the not-too-distant future ... and how their insurance needs will be affected. Webb said the insurance industry has been looking at the future of the automotive industry -- specifically at driverless cars -- for more than a decade.

"There are a couple of ways this could go, but most likely the car makers are going to provide insurance coverage" on their autonomous vehicles, Webb said. Google, Volvo and Mercedes-Benz already accept liability in cases where a vehicle's self-driving system is at fault for a crash. Tesla is taking things a step further by extending an insurance program to buyers of Tesla vehicles.

With automakers taking financial responsibility for their driverless vehicles, the burden subsequently is removed from those who are simply along for the ride. "I mean, there's going to be no brake, no accelerator, no steering wheel (with autonomous cars). How can you, the consumer, be liable?" said Webb. "But then, let's say you don't maintain your vehicle by having the necessary software upgrades installed. Then you may have some legal exposure and you may want to purchase your own liability insurance, but it will cost a lot less than it does now."

PREMIUM COSTS?

There are several schools of thought concerning the effect of autonomous vehicles on insurance pricing. Some within the industry believe premiums will drop as the number of traffic accidents show a predicted decline, according to some online summaries.

A report from Accenture and Stevens Institute of Technology, however, predicts that insurance coverage for autonomous vehicles will bring $81 billion in new premiums to the insurance industry over the next eight years. Additional revenue, according to the report, will come from three new product lines: cybersecurity, product (software and hardware) liability and public infrastructure insurance for autonomous vehicles.

"Autonomous cars drive 100 times safer than the best driver out there," Webb said. "I don't see rate increases happening" when driverless cars become commonplace. "Pricing in the insurance industry is predicated on losses, and losses will be drastically lower (with autonomous vehicles) than they are now," Webb said.

FUTURE IS NOW

Webb fails to believe the death earlier this year of a pedestrian in a crash involving an autonomous vehicle has set back the future of the driverless car industry.

"Oh no, it's going forward and you can't stop it. It's like a tidal wave," said the insurance veteran. "Twenty years from now your grandchildren are going to ask you, 'What did a steering wheel do?' They're not going to know."

Webb recently attended a seminar at which an executive from Google spoke about the future of the automobile industry. "We said that going forward we're going to need only about a third as many cars as we have right now. I mean, where's your car sitting right now? In the parking lot, right? So's mine."

But Webb believes the time will come when car sharing options will become so widespread that not everyone will feel the need to own their own vehicle.

Webb does concede that autonomous automobiles will not been a boon for his industry.

"It's probably not going to be good for the insurance business, but the industry will survive. The biggest question for the future of auto insurance is: Who's going to provide it?"

And while the state of Ohio currently requires all licenses drivers to be insured, Webb said he is uncertain who that issue will be addressed with driverless cars.

"States regulate insurance, and as long as there is liability insurance on a vehicle -- whoever pays for it -- that vehicle is going to be in compliance with state law."

As for driver's licenses? "They may become obsolete," Webb laughed.

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