Self-driving Vehicles Could Change The Auto Insurance Industry Forever

A few decades ago, the covers of science fiction novels set in the 2000s displayed flying and driverless vehicles. The auto industry didn't quite make that dream come true. But, it's working on it because self-driving cars are on their way, and with them, a lot of questions.

The first big question is whether you want a car that chauffeurs you around. On one hand, that sounds pretty exciting. On the other, it's terrifying. The next question is whether you'll be able to afford a self-driving car and the third major question, is what will it do to your auto insurance rates? If you decide an autonomous car sounds amazing and you set your heart on purchasing one, you need to know how this new technology is going to affect your budget.

Safety benefits may lower costs

Some people believe self-driving cars will be safer because a majority of auto accidents are caused by human error, Investopedia reported.

"These cars won't get drunk or high, drive too fast, or take unnecessary risks - things people do all the time," said Robin Chase, CEO of peer-to-peer car-sharing service Buzzcar.

The theory is that with safer cars and reduced likelihood of accidents, traditional auto insurance rates should fall. However, it's too soon to tell whether autonomous cars will truly lower the number of accidents on roadways and consequently drop insurance rates.

Insurance companies may not be excited about this prospect. Lower insurance rates means the businesses will make dramatically less profit from premiums.

Potential shifts in coverage

Not only might prices change, but the type of auto insurance an owner needs may evolve with autonomous cars. An owner will still need liability coverage, but this could change if the cause of accidents moves away from drivers and toward manufacturers, suppliers or even local governments, according to the Insurance Information Institute.

The insurance coverage people have for damage by acts of nature and theft probably won't change, because all of these things could still happen. The price of this coverage could eventually decline if it's offset by the reduced number of accidents on the road.

State-by-state decisions

The future of self-driving cars and the auto insurance industry isn't clear. Every state regulates its insurance industry, therefore each jurisdiction can choose how it handles autonomous vehicles, the III explained.