Insurers can function alongside autonomous tech suggests research

Published: December 20, 2017

Updated: July 24, 2018

Author: Luke Jones



Auto insurance providers do have the ability to adapt to autonomous vehicles despite the disruptive nature of the technology, according to two industry experts.

Accenture and the Stevens Institute of Technology carried out research that predicts 23 million fully autonomous vehicles will be on US highways by 2035. This number will be against 250 million total cars and trucks registered in the country by then.

Autonomous vehicles come in several classes, ranging from basic in-car abilities to full autonomy where the vehicle performs all tasks:

  • SAE Level 0 – human does everything, like current cars
  • SAE Level 1 – some in-car systems can aid the human in the operation of the vehicle
  • SAE Level 2 – the autonomous tech can complete some driving tasks, but human monitoring is needed.
  • SAE Level 3 – the system conducts some driving and monitors some of the environment, but human must be ready as backup
  • SAE Level 4 – the system can conduct driving tasks without any input from humans. However, the system only works under some conditions. This is where the current market is.
  • SAE Level 5 is when the car can perform all tasks without the need for a human driver.

While higher SAE levels are not expected for years (SAE Level 5 is over a decade away), the RAND Corporation report found that at just 10% better (Improve10) than current abilities, autonomous vehicles could save thousands of lives per year in the United States alone. This number could increase to hundreds of thousands over coming decades, even if the technology does not improve more than 10%. The company argues this is better than simply waiting for driverless vehicles to get 75% (Improve75) to 90% (Improve90) better.

However, autonomous vehicles are a major disruptor for the auto insurance industry, and the Accenture/Stephens University study suggests company-owned ride-sharing vehicles will become the norm. An obvious problem for insurers would be if tech companies and automakers started creating their own insurance solutions.

“We believe that most fully autonomous vehicles will not be owned by individuals, but by auto manufacturers such as General Motors, by technology companies such as Google and Apple, and by other service providers such as ride-sharing services,” said Accenture executives John Cusano and Michael Costonis.

By acting now, insurers can prepare for autonomous vehicles and thrive when the technology matures to full autonomoy. The research suggested four key steps that insurers can take now in preparation for the technology:

  • Build expertise in big data and analytics: insurers need to be able to control data generated by automated vehicles and the systems that support them.
  • Develop the needed actuarial framework and models: insurers should be utilizing advanced actuarial and modeling techniques as cars add more autonomous features.
  • Explore the partner ecosystem: insurers should collaborate with automakers, communication and software developers, the government, and so on.
  • Think of new business models: insurers need to be able to transform themselves into large commercial insurers writing policies on a small number of very large risks.

“Change is inevitable for auto insurers, but the change can be positive,” Cusano and Costonis concluded. “Insurers that vigorously pursue the short- and medium-term opportunities presented by cyber insurance, product liability insurance, and infrastructure insurance – while making careful strategic decisions about their partner ecosystems, operating models, and value propositions – are most likely to thrive in a driverless environment.”