Car insurance premiums to plummet as self-driving cars cut accidents 80%

Volvo XC90 Drive Me test vehicleVolvo is warning the car insurance industry of “seismic challenges” as self-driving cars’ ability to eliminate car crashes is expected to see premium prices plummet.

An 80% reduction in car crashes is expected by 2035 – but even by 2020, $20 billion (£13.5 billion) could be wiped off car insurance premiums, says research by Swiss Re and HERE.

As car insurance premiums generate more than 40% of all non-life insurance premiums – the biggest single slice – Volvo is thus warning the insurance industry of significant challenges to its current business model.

“The medium-to-long-term impact on the insurance industry is likely to be significant,” Volvo Cars president and chief executive Håkan Samuelsson will say at a seminar in London today. “Autonomous drive technology is the single most important advance in automotive safety to be seen in recent years.”

Peter Shaw, chief executive at Thatcham Research, adds: “Without doubt, crash frequency will… dramatically reduce. We’ve already seen this with the adoption of Autonomous Emergency Braking (AEB) on many new cars.

“Research in the US by NHTSA predicts that by 2035, as a result of autonomous and connected cars, crashes will be reduced by 80 per cent. Additionally, if a crash unfortunately can’t be avoided, then the impact speed will also drop as a result of the system’s performance – reducing the severity of the crash.”

The question is, how will the car insurance industry respond to protect its business model?

Self-driving Volvos in London from 2017

Volvo XC90 Drive Me test vehicle

Volvo will next year begin an Autonomous Drive (AD) trial in London: the Drive Me London project will see up to 100 AD self-driving cars on the UK capital’s roads.

There remain legal and regulatory challenges for the roll-out of autonomous cars though, added Samuelsson. “The automotive industry cannot do this on its own. We need the government’s help.

“It is essential that car makers work with the government to put in place laws and regulations that allow us to get these cars on the road as soon as possible and start saving lives.”

Volvo appears to have the ear of the UK government here. Sajid Javid, UK Secretary of State for Business, Innovation and Skills, said: “Driverless cars will see our journeys become faster, cleaner and safer. The UK is leading the way in developing the technology needed to make this a reality thanks to our world-class research base, and these types of trials will become increasingly common.

“Such advances in technology prove the fourth industrial revolution is just around the corner, and our determination to be at the forefront is why we are attracting top names from across the globe for real-world testing.”

Samuelsson will today officially state that he looks forward to working with the UK government to ensure that this technology can be introduced as soon as possible.

“Volvo has a vision that no one will be killed or seriously injured in a new Volvo by 2020,” he will add. “Autonomous drive technology is a key tool in helping us achieve this aim.”

Video: how does a self-driving Volvo work?

Managing Director at @editorial_mr. Runs a bit. Loves the motor industry.

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