Japan’s top insurers are studying new products to brace themselves for the age of self-driving vehicles that could redefine insurance premium burdens for carmakers as well as car parts makers and technology companies.
Industry studies have forecasted a steep decline in car insurance premiums as the number and severity of accidents fall with the emergence of autonomous vehicles.
But Japanese insurers MS&AD and Tokio Marine say the transition to driverless technology also brings opportunities with the increasing costs to repair cars, the emergence of new risks and changes in the way insurance will be bought.
“With the mix of self-driving vehicles and traditional cars, there is a possibility that unforeseeable accidents will occur. We expect the weight of new types of insurance products for new risks such as cyber attacks will increase significantly,” said Hideyuki Sakashita, manager at Mitsui Sumitomo Insurance.
Motor is one of the most important markets for the global insurance industry that accounts for $700bn of premiums every year, or 42 per cent of total property and casualty insurance. At MS&AD and Tokio Marine, automobile accounted for 49 per cent and 42 per cent, respectively of non-life insurance net premiums written in the 2015-16 fiscal year.
With the mainstay business potentially under threat, Japanese insurers are aggressively competing to stay ahead of the race by setting up new teams — dubbed “epoch-makers section” at MS&AD and “future technology team” at Tokio Marine — to collect research data on autonomous vehicle technology to plan new insurance products.
The emergence of self-driving vehicles means car insurance will be bought less by consumers and more by carmakers and producers of other technologies packed inside the car. One of the biggest challenges for the industry, officials say, is determining who is responsible in the case of a car accident or malfunction.
“The cause of an accident — whether it is the carmaker, the suppliers, the internet provider, the electronic maps, software or artificial intelligence — could be countless (for self-driving vehicles),” said Kazuaki Kutsuzawa, manager at Tokio Marine & Nichido Fire Insurance.
“It may be unrealistic to check each of the 30,000 parts installed in a car to find the cause, but our mission is to provide a safety net for the victims with the creation of new insurance products,” Mr Kutsuzawa said.
The debate over responsibility among carmakers and their suppliers has already intensified in recent years even with existing vehicles. In the case of the massive recall of Takata-made airbags, the world’s top carmakers and the airbag manufacturer are debating about how to split the costs to repair the faulty airbags.
In the case of a cyber attack, insurance officials say it would be difficult to determine who was to blame, making it difficult for consumers to claim. The longer it takes to settle the issue, the bigger the financial burden for car owners, especially with components inside connected cars becoming more expensive.
For carmakers building the self-driving vehicles, the creation of insurance products to address the new risks and responsibilities is critical to ensuring that consumers embrace the new technology.
“Even if the technology is developed, it would be meaningless if consumers feel too uncertain to use the self-driving vehicles. Autonomous driving will only be accepted when there is assurance that there is insurance to provide a safety net,” Mr Kutsuzawa said.