Really a win-win for drivers?

Automotive manufacturers are on the brink of a major breakthrough that could make robot automated driverless cars (RADC) a reality in the near future.

Automated cars driven by software could make human drivers redundant. That?s right, your car could be run on autopilot very soon, with 9 automotive manufacturers already testing this technology to perfect it. Google also plans to release driverless luxury brands as will BMW and Mercedes by 2018-20.

Further, the automated cars market is going to reach $87 billion by 2030, according to Lux Research.

Since this technology completely eliminates human errors, it is likely to reduce accidents caused by drunk driving, texting while driving, and drivers who cannot focus due to eyesight problems.

Once accidents caused by human errors are eliminated, Forbes estimates that 90 percent accidents would be reduced, which in terms of numbers is: 4.95 million fewer accidents, 30,000 fewer deaths, 2 million fewer injuries, and $400 billion in accident-related cost savings.

This seems like a win-win situation for drivers as well as the automobile industry, but where do insurance companies fit into this equation?

Automobile insurance companies make their profits from premiums. Premiums vary from state to state, as well as from driver to driver. For example, drivers in Louisiana and Michigan pay considerably higher premiums than drivers in Maine.

Teenage drivers, whichever state they drive in, pay higher premiums than experienced drivers with unblemished driving records. Insurance premiums depend on a variety of factors: your location, age, sex, the type of car you drive, your past driving history. Mostly, insurance companies charge you higher premiums if they consider you a greater risk as compared to the average driver.

But if your car is going to be driven by a robot, that is ? for all intents and purposes ? the safest driver on the road, would all drivers get the benefit of an unblemished driving record of an adult male? This could flatten and almost universalize insurance premium rates, which would drastically cut down the profits made by insurance companies.

This would, on one hand significantly reduce their profits, but with 90 percent fewer accidents, they wouldn?t be settling too many insurance claims.

Uautoinsurance.com analyzed some of the possibilities of insurance savings for drivers of the much awaited driverless cars.

In the brave new world of RADC, insurance companies will have to adapt to develop customized products for automated driving. With estimated losses of up to $200 billion in the personal and commercial insurance premiums market, RADC portend a major challenge to the insurance companies of the future, while simplifying life for drivers.

However, insurers say they would need to see lower costs reflected in real-world experiences before making coverage decisions. “We don’t use our intuition,” says Dick Luedke, a spokesman for State Farm Mutual Automobile Insurance Co., the No. 1 U.S. auto insurer. “We use the data.”

Auto makers, reports the Wall Street Journal, “are emboldened by the rate of innovation taking place in self-driving technology, a trend that could cut costs and boost availability. For instance, Audi of America Director of Product Management Filip Brabec said the electronic hardware needed to allow hands-free operation of the A7 shrunk in one year from a trunkload of gear to a module the size of a laptop.”

Software will be the competitive differentiator, reports Lux Research. “The software opportunity in autonomous cars will grow rapidly from $0.5 billion today to $10 billion in 2020 and $25 billion in 2030, offering software powerhouses such as Google and IBM a lucrative opportunity. For automakers, varying software will be a key competitive differentiator as well as a crucial safety tool.”

“Why buy an autonomous vehicle if you have to maintain control?” asks Adrian Lund, president of the Insurance Institute for Highway Safety, who predicts hands-free driving systems won’t be offered soon because of legal and insurance barriers. While some states allow professional drivers to experiment with autonomous controls, not one has issued a plan that allows everyday road warriors take their hands off the wheel for significant periods.