Insurers suggest that self-driving cars could disrupt the insurance market in the future
Driverless vehicles have reached a major milestone. Three auto insurance suppliers and an auto parts manufacturer have included driverless cars in their annual reports concerning securities. In these reports, the companies noted that self-driving vehicles are a risk, which could eventually disrupt their business. The reports highlighted the technology behind these vehicles, which could become a major force in the auto insurance space. Companies are noting that driverless vehicles represent a significant risk in the future, but they do not pose an immediate threat to business.
New technology could eventually decrease the demand for auto insurance coverage
According to Cincinnati Financial Corp., an auto insurance provider based in Ohio, driverless vehicles could cause the disruption of the auto insurance market because of the technology these vehicles use. This technology is designed to allow vehicles to drive themselves and avoid accidents with other vehicles. Because this technology is designed with safety in mind, the demand for auto insurance coverage could decrease among consumers in the future.
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Usage-based insurance could change the way insurers do business
Mercury General, a prominent auto insurance company in California, also believes that driverless cars could disrupt the insurance market. The company notes, however, that usage-based insurance could have a more immediate impact on the market. Drivers with usage-based policies only pay for their coverage when they are actually driving their vehicles. The operation of these vehicles is monitored by on-board technology and this information is used to determine how much drivers have to pay for their coverage. Mercury suggests that this technology could change the way that the auto insurance sector markets, prices, and underwrites policies.
Insurers may have to find ways to adapt to a new business environment
In terms of risk, driverless vehicles do not necessarily pose a threat to consumers. Risks associated with these vehicles are primarily concerned with the insurance market, which could experience a shift as self-driving cars become more common. Disruption of the market generally means that insurers must find new ways to conduct business with consumers and adapt to a changing market environment.