Smart Cars and Insurance

Autonomous car technology continues to proliferate in current models and make headlines in terms of what we can expect in the future, but how will this affect car insurance? Last year was the first year that premiums went up after what was a several-year streak of declines, but drivers may not have to deal with the disappointment long term.

Insurer Swiss Re and technology group Here have claimed that car insurance premiums will likely undergo major decreases due to automatic crash-avoidance systems being built into cars and reducing the likelihood of impacts. According to the two companies, premiums in the 14 largest car markets in the world can be expected to drop by margins around $20 billion by 2020.

aeb2And the effects of autonomous driving technology on insurance are already becoming apparent. For example there are two different versions of a currently available model of the Ford Focus. One has an automatic braking system that can sense if there is risk of an impact, and the other does not. The difference in insurance quotes between the two cars can span as much as a third according to a survey conducted by The Observer. 

This difference is only becoming more apparent. Just in 2015 alone, 1.5 million new cars came with self-activating safety systems like collision warning and technology that ensures that drivers stay in the right lane. This is a significant number of vehicles; here were only 2.63 million new cars registered in 2015 all together. The new technologies are meant to make driving both easier and safer, reducing the risk of accidents that comes with driving and hopefully eventually reducing insurance premiums along with the risk.

One of the most crucial safety features to be commonly found in new cars is autonomous emergency braking or AEB. AEB uses laser, radar and camera to stop a car automatically if there is risk of a collision. The basic systems work at speeds up to 20 miles per hour. According to Thatcham Research, motor insurers’ automotive research center, three out of every four accidents happens at speeds under 25 miles per hour.

While many different auto makers have created such systems for their newer models, they tend to go by different names. Volvo calls its AEB “City Safety,” Honda calls it the “City Brake Active System,” Ford calls it “Active City Stop” and Volkswagen calls it “City Emergency Braking.” Regardless of the name, the technology tends to be basically the same.

aeb3According to a study conducted in 2015 by Euro NCAP and Australasian NCAP, both of which are international bodies that assess car safety, AEB has brought down collision rates by somewhere around 38 percent. Insurance claims have consequently been reduced on vehicles outfitted with AEB, and insurers are starting to offer discounts to drivers with said vehicles.

Thatcham Research has released an estimate that a car’s insurance might be lowered up to 10 percent due to being equipped with AEB and other autonomous safety technology. It remains to be seen whether this makes up for the cost of implementing the technology, but it’s impossible to put a price on increased safety.

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