How KPMG sees driverless evolving and affecting the insurance industry
You may have heard all sorts of wild and wonderful predictions about driverless cars over the last year or so: we’ll never need to drive again or have to buy car insurance. There’ll be no more road accidents. They can be hacked with a £10 laser pointer. They can’t see in the mist or handle a wet road. We’ll be able to fall asleep at the wheel and wake up when we get wherever we’re heading. In fact, there won’t even be a wheel!
These kinds of predictions are to be expected. When any new technology is emerging, it always invites people to imagine what the pros and cons will be, how life will change – or not – and when we can expect any changes to happen. Will any of these predictions come true? Who knows. We’re still at the early stages. Much could happen in the coming years that might not even be imaginable now. Then again, maybe all these predictions will come true. We can only know and predict so much.
So rather than speculate, we thought we’d see what KPMG – one of the world’s leading accountancy and management consultancies – thinks will happen. They advise businesses and governments all over the world and their research and conclusions are taken seriously. Rather than ask you to wade through their research, we thought we’d summarise it here for you instead:
KPMG thinks the development and adoption of driverless cars will go through four phases:
- Training wheels – this is where the technology is being developed, tested and introduced for the first time to the public and on public roads.
- First gear – we’ll begin to see more and more functions being controlled by the car and not the driver. Some driverless cars might be bought by the public but not in large numbers yet.
- Acceleration – five years from now, fully autonomous vehicles become more common. Vehicle to vehicle (V2V) communication systems will be installed in new vehicles as standard, allowing them to communicate with each other, and more consumers become more comfortable with the concept of driverless technology.
- Full speed – ten years ahead, there’ll be large scale deployment of driverless tech and V2V technology and systems being integrated and networked across the world, some retro-fitting of older vehicles may be possible. By 2040, driverless could be the “norm”.
And here are the eight elements KPMG thinks these four phases are dependent on, or which need to be in place before driverless cars can truly take flight:
- Integrity of technology – existing technologies will continue to develop and need to be combined with newer driverless technologies to enable widespread adoption.
- Capability accessibility – existing vehicle manufacturers will develop driverless cars and roll them out gradually, taking advantage of their brand power. Whereas non-traditional brands will leapfrog straight to fully autonomous cars e.g. Google, Apple, Tesla.
- Infrastructure availability – very few, if any, changes to existing road infrastructure are expected but roads may become smarter with new technology being embedded into them along the way, further enabling driverless cars to be more widely adopted.
- Regulatory permission – existing laws will need to be changed and new ones created to enable the testing and rolling out of driverless technology by the public and private corporations.
- Legal responsibility – with control passing between driver and car – at first – and then the car being the driver, the question of who will be liable needs answering. Insurance companies will need to revise or devise policies for people and companies. The insurance market is predicted to shrink to 40% its current size, largely due to a decrease in premiums as a direct result of fewer collisions and individual policyholders.
- Mobility services – new ways of using and sharing cars will continue to emerge e.g. Uber has declared it wants to create a fleet of Uber-taxis available on demand. This means car stocks could plummet and existing players invested in the status quo e.g. taxi drivers will need to identify new ways for people to access their service or consider switching their field of employment entirely.
- Data management – the amount of data generated by driverless technology will grow exponentially. It will need to be captured, processed, protected, shared and owned between many different parties e.g. manufacturers, insurers, and governments, so that the driverless system can work as a system, and thus achieve widespread adoption.
- Consumer adoption – consumer buy-in will be critical. Most consumers like the potential benefits when they are explained e.g. time saved, ability to work or be entertained while being driven, or sleep on route.
In some respects, it is very much a Catch 22 scenario. If insurers don’t try to address the issue of liability sooner rather than later, they may miss out on an opportunity to adapt to the changes and stay active in the market in the years ahead.
Right now though, from a customer perspective, people who want to buy a car in the next few years with new driverless features, will still need a personal policy. Even if companies like Volvo have answered the question already by saying they’ll take on liability for what happens when their car is in driverless mode, this doesn’t mean people won’t need an insurance policy. They will. Policy sales aren’t going to dip yet, that’s for sure.
However, in spite of Volvo’s confidence, there is the issue of data capture and management. If they are going to take on that liability, then it will need data from its in-car systems to prove what did and did not happen while its car was in driverless mode. No data, no evidence. If the technology can be hacked or disrupted or corrupted in some way then the data might be unreliable or inadmissible. Proving liability could become even harder, especially when this technology is so young.
These types of dilemmas aren’t unique to driverless. When Henry Ford invented the Model T, horse owners didn’t suddenly quit the transport game. It took a few years for the number of cars to reach critical mass, not to mention the right supporting infrastructure needed to be in place.
As much as we might want to predict the future and be more certain of how things will turn out, the rules are still very much yet to be defined. This is the time for us to define them. What are your thoughts?