Beverly Hills is Getting Driverless Cars: Here’s What it Means for the Insurance Business Model

If you want to get around Beverly Hills, pull out your smartphone. By 2026, a fleet of driverless cars will be zooming around the 5.7 square mile city, shuttling residents from point A to point B on demand. That’s how the City Council voted, at least: The “resolution to develop driverless vehicles that will provide public transportation throughout the city” was unanimous, according to Michael Walker at the Hollywood Reporter. If all goes according to plan, in about 10 years, the cars will be rolling.

Why autonomous cars, and why now?

The city’s plan may still be 10 years out, but driverless cars aren’t. According to Nick Jaynes at Mashable, we can look for fully-autonomous vehicles on the road in just two to five years. Beverly Hills Mayor John Mirisch wants to prepare for that.

As for the vehicles themselves, the benefits are many: They “will take private cars off the road, reduce demand for parking, increase safety and mobility for everyone, including the disabled, and solve the ‘first/lastmile’ challenge for residents using the future Purple Line,” Mayor Mirisch said.

What challenges does the project face?

In controlled settings, semi-autonomous cars do well – but not when confronted with the chaos of regular car and foot traffic. It boils down to the sheer quantity of data that onboard computers must process in real time to avoid collisions.

Today, semi-autonomous cars use a myriad of sensors to collect this data, but their methods will probably shift to support faster results. To that end, the “auto industry is investing heavily in new technologies,” said Horia Ungureanu at Tech Times.

In Beverly Hills for example, the self-driving fleet is going to connect to the fiber optic cable that delivers the city’s Internet, using it to communicate with the grid and each other.

What are the implications for insurers?

There are many questions. For example, will insurance separate insurance policies be needed to cover the car, drivers and the various technologies at work? When autonomous driving results in fewer severe accidents, how long will it take for insurance rates to drop?

The anticipated plummet in revenue presents a major industry riddle. Driver error causes 90 percent of today’s accidents, said Charlie Sorrel at Fast Company. According a report from KPMG, we may see an 80 percent reduction in accident frequency by 2040. What then?

With profound disruption on the horizon, auto insurers may be wise to rethink their business models. There are opportunities to explore: For example, insurers could begin selling coverage to car manufacturers and companies that manufacture develop automated features. “When the technology fails, manufacturers could get stuck with big liabilities that they will want to cover by buying more insurance,” Bloomberg said.

There’s another liability: connected cars can also get hacked. “Fiat Chrysler recalled 1.4 million vehicles in July after security researchers demonstrated to Wired magazine that they could remotely take control of a Jeep driving down the highway,” Bloomberg said. Two words: cyber coverage.

The way forward

The conclusion for the insurance industry isn’t so different from what Mayor Mirisch said about Beverly Hills: “We can’t solve future or even today’s problems using technology of the past.”

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