As driverless vehicles become less a futuristic dream and more a reality, our current system – which is obviously based on the idea that humans will operate vehicles – will have to adapt. Infrastructure such as roads and traffic lights will need updating, as will traffic laws. And, perhaps most relevant to our interests: auto insurance will need to undergo a major overhaul once technology is behind the wheel.
Autonomous vehicles will have different insurance needs than human-powered ones and some of the most basic questions remain unanswered. For instance, if the car is driving and causes a crash, who’s liable? The driver, or the vehicle manufacturer? Some states have begun legislating on the issue, but the question remains mostly an open one at this point and no U.S. auto insurance companies yet offer policies for driverless vehicles.
How Does One Insure a Tesla?
Fully driverless vehicles (also called Class 4 autonomous vehicles) aren’t available for the market yet, of course, but there are vehicles on our roads with Autopilot features. So far just Tesla offers driverless features, but with major automakers and major technology companies pouring talent and money into driverless tech development, we can reasonably expect more vehicles with more autonomous features in the near future.
So where does that leave insurance? We’ve speculated that vehicle manufacturers themselves might offer insurance for cars with autonomous features. And, in fact, Tesla has already begun offering insurance to its customers in Asian markets (Australia and Hong Kong specifically). Though its insurance operations are under the radar (for the most part) and not yet available for drivers in the U.S., Tesla VP of Global Investor Relations Jeff Evanson announced recently that the company plans to offer the same insurance coverage to U.S. drivers soon, but did not say exactly when, Teslarati reports.
Tesla Insurance: One of a Kind
Not only has no other carmaker offered direct insurance programs for their products; no other U.S. auto insurance company insures like Tesla, either.
Tesla now offers insurance policies through local insurance partners in the Asia market which are built into the price of its Model S and Model X vehicles, take into account the autopilot safety features, and which include maintenance.
But Tesla’s insurance isn’t completely revolutionary. It’s still relying on established local insurance companies to underwrite the policies – not providing the insurance itself. According to electrek, local insurance companies underwrite the coverage in a program unique to Tesla called InsureMyTesla. The coverage will include items and events specific to Tesla vehicles, like coverage for home charger stations and complete vehicle replacement due to a total loss.
By insuring its own vehicles, Tesla is standing behind its product in a way other carmakers do not. Tesla will continue working with traditional insurance companies to offer special programs to its customers, but creating its own insurance coverage isn’t off the table.
Tesla founder and CEO Elon Musk said, “If we need to we’ll in-source it.”
Traditional auto insurance companies have not yet caught up with the crash-reducing and damage-minimizing abilities of active safety features (of which Tesla’s autopilot is an extension).
In fact, The Zebra’s State of Auto Insurance Report revealed that, despite proven safety and security benefits, new in-car safety and anti-theft technology features have minimal impact on insurance rates — if any at all. Those features save drivers less than 1% annually on insurance premiums.
What Will Autonomous Vehicle Coverage Cost?
Insurance for fully autonomous cars might cost 90% less than insurance for human-driven vehicles for the simple reason that more than 90% of crashes are due to human error, Teslarati reports.
“Cars are not going to crash nearly as frequently, and they’re not going to crash as severely as we’ve seen in the past,” Lawrence Burns, a retired GM executive and professor, said.
And while there is no exact data about how much fully autonomous vehicles reduce crashes which cause loss of life and injury, early incremental steps are promising. According to Teslarati, Tesla crash rates dropped 40% just taking into account its Autosteer feature.
But traditional insurers aren’t keeping pace with Tesla’s crash reduction statistics. Many traditional insurers only offer discounts of between 5% and 10% for Tesla vehicles.
But with the almost-certain advent of driverless cars, insurers will have to maintain a tech-focused approach to innovation in order to adapt to meet the changing needs of consumers with autonomous vehicles.