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Driverless cars: Increasing opportunity or risk for the insurance industry?

  • Publish Date: Posted over 4 years ago
  • Author:by Matthew Eames

With technology advancing at a rapid speed, autonomous cars are a hot topic on the agenda of the major UK insurers. Back in June this year, the CEO of Lloyd’s of London, John Neal, was reported to say that the shift towards driverless cars is “inevitable” as car companies, including Tesla Inc., Audi, Uber and Volkswagen, begin to discuss the insurance options available.

Where do insurers and manufacturers currently stand on autonomous vehicles?


Whilst a third of UK adults have claimed they will never switch to driverless cars, it is thought that a rise in autonomous vehicle (AV) technology has the potential to eventually increase the insurance premiums of those who don’t make the switch. There is likely to be a disparity between insurance costs of driverless cars and those that require a driver, largely because the likelihood of human error is drastically reduced. To provide evidence for this statement, Bloomberg recently wrote that, “Without humans to cause accidents, 90% of risk is removed”.

If this speculation becomes reality, it is likely that individuals will eventually choose the most cost-effective option in the future. But, the question on everyone’s mind is, will this innovative technology disrupt the automotive insurance industry, or provide new opportunities that benefit both the insurer and the driver?

UK insurers are beginning to engage with the idea that AV technologies have the ability to increase vehicle safety, and consequently reduce the number of accident-related claims. It is predicted that premium rates will be weighted more to the risk profile of the vehicle, as opposed to the risk profile of the driver, which is currently the opposite of what occurs today.

Volvo and Mercedes, among other car manufacturers, have already boldly stated that they would accept liability in cases where a vehicle’s self-driving system is at fault for a crash. Additionally, as Nick Beecroft (Ex-Manager of Emerging Risks and Research at Lloyd’s of London) explained, “Autonomous vehicles should mean that insurers will be able to get a more comprehensive and detailed picture of risk”, consequently reducing the likelihood of fraudulent claims and “crash-for-cash” scams.

Why are there rising concerns surrounding AV technology?


Inevitably, although claims are predicted to be fewer and far between, as there is a shift away from personal lines motor insurance to product liability insurance, AV technology is likely to introduce huge risks which may affect multiple vehicles simultaneously due to the possibility of faults or software malfunction.

Another area of concern for insurers relates to the potential increase in hacking autonomous vehicles, with possible catastrophic effects occurring, consequently resulting in an additional risk that insurers may also have to provide cover for.

Additionally, whilst it is expected that the number of accidents will reduce as the number of driverless cars increase, the cost of purchasing one of these vehicles is estimated to be on average £170,000, and therefore, replacing or repairing damaged parts is likely to cost the insurer more.

Due to the issues mentioned above, the product recall and cyber markets will be affected to a great extent. Undoubtedly, the insurance industry must stay ahead of the curve by hiring talented and experienced individuals to deal with these issues sufficiently.

What is the next step?


With driverless cars appearing to become mainstream in the future, the insurance industry must ensure that it’s prepared for the future of AV technologies by staying on top of these market developments and ensuring they have obtained the suitable talent to deal with any complications autonomous vehicles may bring.

Significantly, as the liability shifts from the driver to the manufacturer, brokers must carefully match insurance protection proportionate to the perceived risk of the vehicle, proving the vitality of securing the top talent for the future. Nevertheless, significant opportunities will become available for insurance firms ready and willing to create innovative solutions and quickly adapt to the introduction of driverless vehicles. In particular,  expert support and professional tech-orientated talent will need to be secured within insurance companies in order to stay ahead of new technologies, including driverless vehicles

For discussions surrounding new technology in the insurance industry and how Eames Partnership can support your journey, please get in touch.



Bloomberg, ‘Lloyd’s of London CEO Gears Up for the Driverless-Car Revolution’, 2019

Open Access Government, ‘Third of UK Adults Say We Will Never Switch to Driverless Cars’, 2019

Bloomberg, ‘Self-Driving Cars Might Kill Auto Insurance as We Know It’, 2019

Lloyd’s, ‘Autonomous Vehicles – Handing Over Control’, 2014

Insurance Post, ‘Driverless Cars: Crash of the Motor Insurance Industry’, 2014