MSG Team's other articles

9404 Functioning of the Long-Term Memory

Long term memories last for a longer period of time as it has the capacity to store information for a relatively longer period of time and retrieve the same whenever required. Some of the important facts related to long term memory which should be known are provided below: Long term memories usually remain out of […]

12966 Creating Sustainable Change – How to create and sustain change?

Who doesn’t like change and who doesn’t want to change? These are certainly truisms in the 21st century landscape where businesses proclaim their commitment to change and exhort their employees to “Be the change you want to see”. However, having a vision and mission statement that commits to change is different from actualizing the change. […]

11620 Models of Transformational Change

An extensive review of the literature details would reveal that both practitioners and academics have explained transformational models with varied perspectives and focus on different points of views. Practitioner Models The Practitioner Models focus on senior management in an organization (Kanter, 1983 and Kotter, 1995). These models rely on opinions and also on illustrative anecdotes […]

8972 Disadvantages of Securitization as an Alternative to Reinsurance

In the previous article, we have already seen what securitization is in the context of reinsurance. We have also seen how securitization can be used as an alternative to reinsurance and the reasons behind the sudden increase in the volume of insurance-related securitizations around the world. It is true that catastrophe-related securities have started proliferating […]

10456 Netting, Close Out, and Acceleration

Netting is a procedure that is commonly used by organizations all over the world to reduce their counterparty credit default risk. However, in order for the netting procedure to be carried out, companies should have contracts in place prior to the default event taking place. There is another procedure called close-out which is closely related […]

Search with tags

  • No tags available.

Almost all of the tech giants in the world today are trying to launch their version of self-driving cars.

Diverse companies like Google, Uber and even Apple are all queuing up, trying to create the first driverless car which will be used by consumers. Up until now, these companies have made some progress. However, neither of them has been able to launch a completely automated self-driven car for the consumers.

It is only a matter of time before one of these companies is finally able to offer the car to consumers. Self-driving cars are expected to become the norm in the not so distant future.

There are obvious benefits to self-driving cars. For instance, there will be considerably less traffic on the roads. The number of accidents will also come down. Pollution will be reduced drastically and also worker productivity will increase since the time spent behind the wheel will go down.

However, the rise of self-driving cars will create a lot of challenges for the insurance industry.

Up until now, insurance is given to drivers. Hence, they are held responsible in case of an accident. However, as self-driving cars become the norm, drivers will no longer be held accountable.

Motor insurance will be about protecting the consumer from a totally different set of risks. This will create formidable challenges for the insurance industry, many of which have been listed below.

Product Liability Claims

The biggest change in the insurance industry will be that lawsuits will no longer be filed against individuals. Since the cars will be driven by software, it will be assumed that an accident was a result of software failure.

Hence, instead of negligence claims against individuals, insurance companies will have to protect car manufacturing companies against product liability claims. The dollar value of the lawsuits will also rise incredibly given the fact that the case will be filed against the car manufacturer.

Also, car manufacturers typically assemble components which have been produced by third party vendors. In this case, it is likely that a component that has led to the crash may have been manufactured by a third party which operates in a different country. These new changes are likely to baffle the insurance industry as a whole.

Theft from Hacking

At the present moment, motor insurance companies insure people against physical theft of their vehicles. They take premium from customers based on probabilities which are worked out based on historical data. The problem with self-driving cars is that they will expose motor vehicles to a different form of theft.

Remotely stealing a car with the help of hacking will become a very real possibility. Insurance companies do not have the data which will help them charge the right premium to insure this kind of risk.

Also, if a hacker figures out a way to break the software for a particular make and model, they might steal hundreds of cars thereby incurring massive losses to insurance companies.

Crime and Terrorism

Remotely accessing a car may not only make it possible to steal a car but it will also open the doors to many different types of crimes.

For instance, kidnapping a person will become very easy if the hacker is able to access their car remotely. The kidnapper may not even be in the same country. They can simply remotely drive the car and the person to a dangerous location and threaten to harm them unless a ransom is paid off.

These ransoms or any other possible damage will ultimately have to be paid by the insurance companies. This is because it can be argued that any damage has only occurred because of the inability of the car company to stop external parties from forcibly taking control of the car.

Also, self-driving cars will make it possible for terrorists to execute their malicious propaganda remotely. Once again, it is likely that many lives may be lost and car companies may find them at the receiving end of a lawsuit.

Privacy Claims

With the advent of self-driving cars, individuals will end up exposing a lot more data about themselves.

For instance, the car will know about the routes commonly traveled by the owner, the travel timings as well as the owner’s travel companions.

Over a period of time, the size of the data will become humungous. This is when it will no longer be possible to store the data within the car itself. It will become necessary to store this data on the cloud. The problem is that once again, this data will become vulnerable to hacking.

It is likely that certain private and confidential information about individuals may be leaked by their self-driving cars. Once again, this will lead to product liability lawsuits which the motor insurance companies will not be equipped to deal with.

Shared Ownership

In the beginning, self-driving cars will be prohibitively expensive. Hence, it is likely that individuals will have to pool in their resources in order to buy a single car which they can use at different times.

The problem is that the insurance companies may have to compensate multiple people if the car as damaged. This is because even though the company may repair the car, they will also have to pay co-owners to arrange for alternative means of transportation while the car is being repaired.

To sum it up, the motor insurance industry is likely to witness a sea of change thanks to self-driving cars. It will be interesting to see how these companies will adapt to the change.

Article Written by

MSG Team

An insightful writer passionate about sharing expertise, trends, and tips, dedicated to inspiring and informing readers through engaging and thoughtful content.

Leave a reply

Your email address will not be published. Required fields are marked *

Related Articles

The COSO Framework for Internal Control

MSG Team

The Cost Structure in the Insurance Industry

MSG Team

Credit Derivatives: An Introduction

MSG Team