Category: Blog

The world of transportation is on the verge of a historic shift as self-driving cars move from concept to reality. A recent report by consulting firm KPMG and the Center for Automotive Research (CAR) in Michigan highlights just how close we are to widespread autonomous vehicle use. They predict that the first self-driving cars will be in showrooms by 2024, with a more developed infrastructure in place by 2025.

The potential impact of these driverless cars goes far beyond just getting us from point A to point B. Here’s how autonomous cars could reshape our lives, industries, and even the insurance landscape.

1. Revolutionizing Car Design for Efficiency and Cost

• Traditional car designs prioritize passenger safety with reinforced steel frames and airbags to withstand crashes. With crash-free autonomous cars, automakers could eliminate some of these safety reinforcements, leading to lighter vehicles that are cheaper to produce, faster to develop, and more fuel-efficient. This shift could mean lower costs for consumers and automakers alike.

2. Smaller Roads, Lower Infrastructure Costs

• Autonomous cars can travel closely in sync, reducing the need for wide roads, shoulders, and guardrails. This streamlined driving could drastically reduce the $75 billion the U.S. spends annually on road infrastructure, freeing up those funds for other public projects.

3. Fuel Efficiency and Less Congestion

• With computer-controlled driving, traffic will move more smoothly, reducing bottlenecks and congestion. This means lower fuel consumption overall, which would benefit both drivers and the environment. Just-in-time delivery companies, which depend on timely transportation, could also reduce inventories thanks to the increased reliability of automated transportation.

4. Energy Savings Without Traffic Lights

• As autonomous vehicles communicate directly with one another, intersections could potentially operate without the need for traffic lights or stop signs. This would save significant energy costs related to the power and maintenance of road lights.

5. A Shift in Insurance Needs

• Perhaps one of the biggest transformations will occur in the insurance industry. The idea of driverless cars that don’t crash may lead to new ways of assessing risk or even eliminate the need for individual car insurance altogether. Instead, manufacturers or network providers might become the insured party, protecting against system failures rather than human error.

 

 

 

 

6. Healthcare and Auto Repair: Industry Impacts

• Fewer car accidents would mean a significant reduction in emergency room visits, which currently number over two million annually in the U.S. for crash-related injuries. Auto repair shops might also see a decline in demand, prompting many to shift their focus to aftermarket needs for cars that lack autonomous driving capabilities.

7. Supply Chain Adjustments for Steel and Government Revenue

• With less steel needed for lighter, crashless cars, steelmakers would have to pivot to meet changing demand. Local governments could also see a decline in revenue from traffic fines, leading to adjustments in police force needs and potential new revenue sources, such as infrastructure usage fees.

8. Expanding Vehicle Ownership and Car-Sharing Models

• Driverless cars could make vehicle ownership accessible to broader groups, including young people and the visually impaired. However, a move toward vehicle sharing—where cars are summoned on-demand and shared among users—could lower individual car ownership and potentially decrease global vehicle sales. Cities could see reduced parking demands, freeing up valuable real estate for other purposes.

9. Alternatives to High-Speed Trains

• Autonomous vehicles could reduce the need for high-speed trains, offering a cost-effective, flexible transportation option that doesn’t require as much infrastructure investment. Additionally, the “always on” nature of vehicle sharing could keep cars in use longer, changing the way we think about car ownership and mobility.

10. Emerging Auto Industry Rivals and Privacy Concerns

• The development of lighter, easier-to-build vehicles could open the door for tech companies to enter the auto market, much like Apple’s model of design and outsourcing production. At the same time, a connected driverless car network raises new concerns around data privacy and security, as autonomous vehicles would require strong protections against hacking.

What Does This Mean for the Insurance Industry?

As the landscape of transportation changes, the insurance industry will need to adapt. Traditional auto insurance may be redefined or diminished as vehicles become safer and more autonomous. Instead, insurance products could shift towards covering new liabilities, like cybersecurity risks or infrastructure usage, while manufacturers may take on the liability for system failures in autonomous networks.

The shift to autonomous vehicles presents exciting possibilities, but it also calls for preparation, adjustment, and innovation. The journey ahead is an opportunity for the insurance industry to evolve and address the new needs of an automated world.