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How Google Hopes to Use Driverless Cars To Shift Personal Liability to Product Liability

Posted on April 26, 2016 by Guy Weismantel

Google driverless cars

Drivers will one day be able to nap, browse social media, or watch their favorite shows on their daily commute. 

The car of the future will allow users to enter a location into the vehicle’s interface and be whisked off to their destination. We already have front crash prevention systems, technology that allows cars to self-park, and if you're lucky enough to have a high-end model, you already enjoy a hands-free technology experience on the highway.

Now Google Inc. is planning to roll out the first fully autonomous car in 2017.

Interestingly, Google recently killed off its car insurance comparison tools, which the company introduced only last year. According to Google, this was a result of the tools that weren't as successful as the company had hoped. But could there be another plan in the works? You bet there is! And I have an idea...

Google asked the United States Congress to create special provisions that would authorize the company to bring to market a vehicle with no pedals or steering wheel (Associated Press). If this bid is successful, it would mean that standard insurance coverage might be incentivized to shift from personal liability to product liability.

Let that sink in for a moment.

Google isn't interested in consumers personal auto lines. Why? Well, they’re betting they can make more money removing humans from the driving equation than they would selling ads for insurance. And to be completely honest, that’s not a bad bet. Google is famous for “moonshots,” but with all of the other driverless car technology hitting the market, this is no longer farfetched. Google is already testing their driverless cars in Austin, Silicon Valley, and Seattle. They want to introduce this car next year.

Simply put, Google is sun-setting their comparison tools because they see it as a waste of time. Presumably, they don't want to spend developer time and effort to build and maintain an auto insurance comparison tool they anticipate will be antiquated in the near future. The fully-autonomous car could disrupt the insurance industry so massively that personal auto insurance may be a shell of itself in the not so distant future.

While Business Insider predicts that driverless cars are still a ways off, user-operated vehicles with self-driving capabilities will be common in the market within the next five years. Business Insider described the main benefits of autonomous vehicles are their ability to make people’s lives easier, and the roads safer. The online magazine cites KPMG, the UK audit firm, which forecasts that autonomous cars will result in 2500 fewer auto fatalities over the next fifteen years or so.

Of course, auto insurers should have seen this coming. As I wrote earlier this year about digital disruption and the modern insurer, technology tends to infiltrate new markets slowly. However, it provides new, more efficient means to do business, until all of a sudden, everything seemingly changes. This will lead to an unavoidable shift in customer expectations at which point the insurance industry will have no choice but to adapt.

KPMG Predicts Shrinkage in Auto Insurance Industry

KPMG models suggest that within 25 years the personal vehicle insurance sector can shrink to 40 percent of its current size. According to the International Organization for Road Accident Prevention, more than 90 percent of road accidents each year are caused by driver error. Google’s self-driving vehicles will, theoretically, remove the human element. This should have a profound effect on auto insurers over time. 

It's in Google's best interest that the personal auto insurance sector decrease far beyond even the 40 percent reduction KPMG is predicting. To further incentivize early adoption of self-driving cars, Google likely hopes to see personal auto insurance go away entirely, cutting costs from the consumer and increasing the quick adoption of automobiles running their software. Imagine the extra revenues Google can garner if consumers can commute to work hands free, in an automated vehicle. Maybe driverless cars can be directed, through ad spend, to take routes past certain restaurants willing to pay a premium. The revenue-generating opportunities are certainly out there. In the US, the average commute time is 50.8 minutes a day. Imagine consumers had their hands on their cell phones or tablets for 50 additional minutes a day? (Google posted 20 Billion in revenue this past quarter, most of which was from mobile advertising). 

Google driverless car in Kirkland, WA

From Personal to Product Liability

If Google's bid to have special provisions created by Congress is successful, cars without steering wheels and pedals could become a reality, and in turn, a shift from personal liability to product liability would become advantageous.

The Insurance Information Institute predicts that as cars become increasingly automated, the onus will shift from the driver to the manufacturer to prove it wasn't liable for what happened in the event of a crash. Meanwhile, the California Department of Motor Vehicles has reported that Google’s driverless cars have been involved in eight crashes already. The insurance outcome of the nine crashes, particularly the one caught on video where the test vehicle ran into the side of a bus, is unclear.

It’s reasonable to assume that if a driverless car crashes because of its computer, then the manufacturer is to blame. However, insurance costs being passed on to the manufacturer isn't necessarily good news for the consumer, since theoretically, the manufacturer will just increase the price of the vehicle to compensate. 

If the driverless cars are insured by the person rather than the manufacturer, insurers will likely concentrate on the make and model of the driverless car instead of focusing on drivers’ accident history or how long they have been driving. Forecasters are predicting that manufacturers of driverless vehicles will be required to install “black boxes”, similar to flight data recorders, to help underwriters as they try to decipher what happened in the moments preceding a crash. Some auto insurers are adopting a wait-and-see approach, perhaps due to the fact that fully driverless cars are still not here quite yet. This is a dangerous approach though, as regulatory issues may be resolved more quickly than expected. 

Commuting is one of mankind's largest wastes of productivity. I'd love to get the time I spend in the car driving each day back. I could knock out emails, write my blog, or heck, watch Netflix. Driverless cars present an opportunity for radical new technology to impacting our lives and the way we interact with the world. It's happening slowly and gradually, but one day we're going to wake up and wonder how we ever lived without them. Can you imagine life without your smartphone?

Tim Bzowey, head of home and auto at RBC Insurance in Canada made a good point in his presentation at the Insurance Institute of Ontario’s annual At the forefront event saying, “The personal computer was going to eliminate paper,” Bzowey said during the presentation, titled When Things Don’t Go Bump in the Night: Our Future With(out) Auto Insurance. “It didn’t do a very good job of that. You have example after example of innovation and it creates new opportunities. So while one door closes, another one opens, and for me, it’s our willingness to grasp those new opportunities that come forward.”

The moral of the story is: The companies that fail to come up with innovative policies to cover the new technologies may soon find themselves struggling to keep pace.

Don't be one of those companies.

Guy Weismantel

(Image credit: Justin Ellis

Mr. Weismantel is the Vice President of Marketing at Vertafore. With 20 years of marketing and financial leadership in companies such as Microsoft, Business Objects, Baxter HealthCare, Caremark International, and Expedia, Guy’s career has focused on bringing differentiated products to market and providing the “compelling reason to purchase” for customers and prospects alike.

Guy has a Bachelors Degree in Accounting from the University of Notre Dame, and a Masters Degree in Business Administration from the Kellogg School of Management at Northwestern University.




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