Car manufacturer Tesla has begun to bundle insurance and maintenance costs alongside the final price of driverless cars in Asia, giving customers a holistic service that could help pave the way for how insurers approach cover for driverless vehicles.
Driverless cars are expected to be on UK roads by 2020. At present the technology is still being developed and tested, but it will be quick to advance. The Modern Transport Bill, announced in the Queen’s Speech in May 2016, aims to ensure the UK is at the forefront of technology for new forms of transport, including autonomous and electric vehicles. The bill is intended to reduce the barriers to their development and adapt the legal system to take into account issues such as insurance liability when a human is not in control.
The shift in accident liability from drivers to vehicle manufacturers with the introduction of driverless cars will lead to reform in how the motor insurance industry operates. In the UK, the government recently announced that motorists with driverless cars will be required to have dual, two-in-one insurance policies. Outlined in the Vehicle Technology and Aviation Bill, insurance must offer protection both for times when the driver is in control and when the vehicle is in control. This will ensure it is easy for accident victims to make a claim regardless of who was driving.
Tesla, a manufacturer of electric cars that is at the forefront of driverless car technology, has provided food for thought when it comes to how the insurance industry will develop a proposition for driverless cars. In Asia, it has begun to bundle insurance and maintenance costs in the final price of its driverless vehicles.
This is interesting considering that liability of claims that occur while a vehicle is in driverless mode rests with manufacturers, and Tesla offering insurance demonstrates its acknowledgement of this. Driverless car manufacturers offering insurance seems logical, as it would help cut out the middle man of insurance providers having to recover costs from them.
Bundling the cost of insurance and maintenance alongside the final price of a car will allow the manufacturer to ensure the car is in peak condition to reduce the risk of accidents while mitigating its own risk and claims liability. The UK bill states that if a vehicle’s owner has made unauthorized changes to the car’s software or fails to install an update that their policy requires them to then they become liable. The manufacturer being in charge of maintenance therefore helps avoid this, in addition to offering a more holistic way to manage the risks of using driverless vehicles.
Buying insurance in conjunction with a vehicle also introduces the opportunity of longer-term policies. Cover can be customized to the car’s specific features and can be held for the entire duration of car ownership. This introduces customer loyalty to the manufacturer for their insurance – which could be a source of disruption for the motor insurance market.