Lyft, GM to create fleet of driverless cars – is insurance ready?

The ridesharing company announced a new partnership with General Motors to create an autonomous fleet, but insurance is still not sure how to handle the new technology

Insurance News

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Ridesharing company Lyft is breaking new ground through a formal partnership with General Motors to create a fleet of autonomous, self-driving vehicles.

The driverless cars will transport passengers to their desired destinations and have options like Wi-Fi or TV. Lyft hasn’t released a specific timeline on when the fleet will go into operation, but the $500 million partnership is a clear attempt to take the lead with the new technology in an already innovative industry.

What is less certain is whether insurance companies will be prepared with the proper insurance products to cover these vehicles.

A recent report from KPMG reveals that US insurance carriers are skeptical about the potential transformation that self-driving cars will trigger on the auto insurance industry, and few hve taken action.

Nearly 85% of executives don’t expect autonomous vehicles to have a significant impact on their businesses until 2025 while 42% expect a significant impact in six to 10 years.

Many executives also believed the government would slow the introduction of autonomous vehicles, which KPMG says may explain why the insurance executives see a more distant effect on their business.

However, the views were not in line with KPMG’s own stance, with the report’s authors stating that change would happen faster than most in the insurance industry think.

“No one has a crystal ball that can predict the future, but we are convinced that a period of unprecedented change has begun,” Jerry Albright, principal in KPMG’s Actuarial and Insurance Risk practice said.

“The disruption of autonomous vehicles to the entire automotive ecosystem will be profound.”
The report outlined three key potential effects:
  • Technology enablement, consumer adoption and regulatory permission aligning to enable mass change within a decade
  • A continual decline in the frequency of accidents will drive a drop in industry loss costs and subsequently premium; the mix of insurance will change; with the personal automobile insurance sector shrinking to less than 40% of its current size within 25 years
  • The elimination of excess underwriting capacity could bring severe market issues, with changing business models and new competitors only adding to the turbulence and speed of change.
“To remain relevant in the future, insurers must evaluate their exposure and make necessary adjustments to their business models, corporate strategy and operations,” Albright said.
Along with the driverless car initiative, Lyft and GM will work together on a series of national rental hubs where drivers can rent short-term vehicles.

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