Three companies note driverless vehicles as a possible financial threat, while a parts manufacturer fears a decline in ‘the number and severity of accidents’

A world of robot cars may still be a long way off but that hasn’t stopped some big insurance companies from worrying about them. And not for the reasons you might think.

That three insurance companies and an auto parts manufacturer mentioned driverless cars in their annual reports to the Securities and Exchange Commission (SEC) over the last week signifies a certain coming of age for autonomous vehicle technology.



Under the “risk factors” headings of their filings, the three companies – Cincinnati Financial, Mercury General and the Travelers Companies – noted that vehicle autonomy could affect business, and not for the better. The companiessounded an ominous note – for themselves, at least – saying that driverless cars could change the way they do business.

Cincinnati, for example, predicted “disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products”.

It’s not just insurers who are worried about fewer collisions. LKQ Corp, a parts company, has warned in its regulatory filings that with improved technology, “the number and severity of accidents could decrease, which could have a material adverse effect on our business”.

But auto and insurance industry experts say it’s too early to for drivers to celebrate – and for the insurance industry to start worrying. While Google, Uber and Detroit’s car giants are all working on self-driving vehicles, the rise of the robots is still a long way off.

“It takes a long time for new safety features to penetrate the fleet that’s on the road because people hang on to their vehicles for a long time,” Russ Rader, a spokesman for the Insurance Institute for Highway Safety, said. “Even when a feature is mandated by federal regulations, it takes 3o years for it to penetrate 95% of the vehicles on the road.”

By that line of reasoning, he said that even if the federal government passed legislation by 2030 that all new vehicles be autonomous, the last major batch of human-piloted cars and trucks wouldn’t disappear until about 2060.

Robert Hartwig, president of the Insurance Information Institute, said that it was impossible to tell where the industry would be in 10 years and ventured that we’re unlikely to see autonomous cars on the road at all before the 2020s. “That’s somewhat beyond the investment horizon,” he said.

Michelle Krebs, Autotrader Group’s director of automotive relations, said that with road-going autonomous vehicles still appearing as specks on the horizon, there was plenty of time to discuss and refine the regulatory and insurance implications of the technology. “There’s a bit of hysteria over something that will take years to roll out in any big numbers, in my view,” she said.

That said, the sort of technology that will go into the driverless car of the future is already making an impact, so to speak. Crash avoidance systems like automatic braking and electronic stability control are the building blocks of autonomous driving. They have made vehicles safer and reduced the number of crashes, said Rader. Hartwig echoed that assessment, adding that as the number of crashes and traffic fatalities have declined, insurance companies have adapted to the change.

Rader said the one feature that’s already affecting the insurance industry is automatic braking. He noted that crash-related injury claims – the ones paid to injured occupants in the vehicle that was hit in an accident – are significantly lower in vehicles with automatic braking systems, because even if a crash is not avoided, impact speed is lower. He said it was too early to determine the effectiveness of lane departure and blind spot warning systems and other safety technologies.

When, and if, the robot car becomes the norm, it won’t all be good news for drivers, Hartwig warned. With vehicles becoming ever more technologically sophisticated, he said, they have also become more expensive to repair. Even with the number of crashes reduced, accidents will continue to occur, and repairs will be necessary.

“We have to inject some reality into this because full autonomy is far in the future,” he said. “The building blocks are on the road now. We need to encourage automakers to make those features widely available, but we can’t get too pie-in-the-sky about driverless cars.”

