Get ready to say goodbye to the GEICO gecko.
German automakers BMW, Audi and Daimler recently announced their purchase of Nokia
Maps for $2.75 billion, a move that places the companies in a more strategic position to develop self-driving cars.
This transaction is causing many analysts to consider the impact that autonomous vehicles could have on the auto insurance industry – including questions of whether it will be needed at all.
“If you look back at the way cars dramatically shaped the 20th century, that’s how autonomous vehicles will shape our lives in the 21st century,” said Barrie Kirk, Executive Director at Canadian Automated Vehicles Centre of Excellence.
Kirk predicts that car ownership will be replaced by a “Mobility as a Service” model, wherein driverless vehicles carry passengers to their destination, drop them off, and then continue again by picking up other customers.
This norm of “Uber 2.0” has the potential to “severely disrupt the entire business model for car insurance.”
“As personal car ownership goes down, the market for personal car insurance goes down as well,” he said.
In addition, since an estimated 93% of all collisions involve human error, there will also be a marked effect on insurance premiums.
“Let’s assume we can eliminate 80% of all collisions – there’s a huge decline in accidents, deaths and injuries, and as a result, payouts will go down and premiums will drop,” he said.
While it may seem dire, there will still be a need for brokers to sell policies – just ones that are adapted to this new reality.
“In the future, driverless taxis will be owned by fleet operators who arrange to rent them out to people who need them by the minute or by the kilometer,” he said. “Therefore there will be a move toward commercial insurance for cars and away from the personal broker and consumer model that we have now.”
