In October 2014, Elon Musk unveiled Tesla’s Model D, the latest in a rapidly-growing fleet of autonomous and self-driving cars. There are plenty of reasons to be excited by this new technology, and even more commentators prognosticating about the various utopian and dystopian futures it will bring.
It’s obvious that autonomous vehicles are a game-changer, or more accurately a games-changer. From automotives and energy to infrastructure and tech, there will be few industries left untouched. The consequences are largely positive — for instance, trillions of dollars in unprecedented market opportunities — but for insurance companies and personal injury lawyers, autonomous vehicles could spell a very particular doom.
Here are five reasons why personal-injury attorneys and insurers should be very afraid of autonomous cars.
As Chunka Mui noted in a recent Forbes series about driverless cars, human error is responsible for 77-90 percent of motor vehicle accidents (MVAs). In 2009, moreover, the US was home to 5.5 million MVAs, killing 33,808 people and injuring more than 2.2 million.
Google, whose self-driving cars have been in development for years, intends to reduce accidents by 90% annually. But a car doesn’t need to drive itself to avoid accidents. Many automakers already corporate intelligent accident-avoidance and crash-monitoring technology in their luxury vehicles. Volvo in particular predicts its cars will be crash-proof by 2020. As this incremental technology gains consumer confidence, it will surely also gain wider use.
Fewer accidents, of course, means fewer hospitalizations. Mui estimates that “emergency rooms will lose millions of patients a year, and hospitals would have hundreds of thousands fewer people who needed to stay overnight.” Studies indicate that MVAs cost at least $450 billion annual; Google predicts it will reduce these expenses by at least $400 billion.
Crash-monitoring technology of the sort used by Volvo means much greater accountability in MVAs. Cameras and sensors simplify the process of pinpointing blame, and could mean the end of insurance fraud — as well as the end of low-ball insurance settlements. For personal-injury lawyers, Mui notes, there will fewer “gray areas” that require their involvement. This in turn will lead to…
Mui predicts that the proliferation of autonomous vehicles means “personal-injury attorneys would see car-related cases all but disappear.” This might not be so frightening for attorneys, who handle many different types of cases, but for insurers it could be devastating. Here’s Mui again:
“Auto insurers, which collect more than $200 billion in personal auto premiums each year in the US, would initially see profits rise as accidents declined and payments to customers dropped. They would, however, eventually see something like 90% of premiums disappear. In fact, the US model of mandatory personal auto insurance might become archaic.”
Again, the hit will come long before driverless cars dominate the roads. Mui cites insurance veteran Guy Fraker’s argument that since the majority of MVAs occur in congested traffic, “even a 25% adoption of incremental driverless technology such as smart cruise control and crash avoidance” would mean a notable reduction in congestion, and thus accidents as well.
Fred Cripe, another insurance industry veteran, clarified the situation in starker terms. Eventually, he predicts, “car insurance goes away.”
As Mui notes, “for decades, insurers have invested heavily in their abilities to assess individual risk and price accordingly.” Intelligent driving technology will diminish the importance of underwriting by removing human error from MVAs. Insurance companies will have to change their business models to remain competitive, or else cede the way to startups who aim to disrupt the industry.
And it’s not just auto insurance that stands to suffer; health insurers will see billions in lost revenue as well. The decrease in hospitalizations, meanwhile, means that personal injury attorneys who do take accident-related cases will see the value of those cases decrease as well.
The future might look dark for insurance companies and personal injury attorneys, but consumers have much to look forward to. Autonomous vehicles don’t just mean fewer accidents: they mean jobs, infrastructural improvement, technological arms-races, a needed disruption of the long-stagnating auto industry, and other advancements it’s far too soon to predict. As Mui says, there’s disruption on the horizon — we must adapt to survive.
Photo credit: Steve Jurvetson
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