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FORWARD LOOKING: Driverless vehicles and insurance industry
1 January, 2020 by Ts.Budmaa in Ulaanbaatar

The driverless car subject may seem as one of the most recent topics in our lifetime, the impact of this impending change to our lives is substantial.

Lately the number of projects which aim to manufacture driverless vehicles are increasing and sectors that are exposed under this challenge such as traditional vehicle makers, insurance industry and regulatory authorities are discussing and preparing to adjust before driverless vehicles become reality on the road at mass level.

History tells us that in 1886, after the first car was on western countries’ road, we had to get off our horses and make a way for auto vehicles and keep pace with the world development. Only 35 years after since the very first car was on the road, the first traffic accident took place in capital city of Mongolia in 1921.



Likewise to above historic example, a time will come when we will have to invest to infrastructure and get advanced technology used in our country. This is only matter of time and unless we make this change, gradually we will be short of current technology vehicles (old models) to import.



Whilst it is possible to build our own facilities to manufacture current technology vehicles, is it really necessary to stay behind?



We have been using following types of vehicles.

1. Gas, diesel engine vehicles
2. Hybrid engine vehicles
3. Pure electric vehicles

By the end of 2018, pure electric cars comprise 0.02% of total vehicles in Mongolia, and with Government support (tax discount, no traffic restricted day, right to drive on 1st lane) the number tends to rise.

Along with modern technology advancement, we begun using more pure (environmentally friendly) and high technology vehicles and it leads us to the question: “Will driverless vehicles will be 4th on above list?”

WHAT TECHNOLOGY DO DRIVERLESS CARS USE?

Comprehensive computer system combining radar, various sensors, ultrasonic sensor, lidar, GPS etc.

With above systems, driverless vehicles would be able to connecting to infrastructure facilities (road, bridges, buildings) not only connecting to each other and exchange information so that it can determine traffic load, choose free roads and shortest routes, calculate time to reach destination and measure distance to outside objects.

CHALLENGES AND OPPORTUNTIES TO INSURERS

When driverless vehicles become reality on the road, what challenges would insurance industry face?

Insurance premium decrease

According to Kennedy’s law firm, one British insurance company anticipated its motor premium is to be decreased by 60%. By eliminating human error and using technical calculation, traffic accident frequency will be greatly decreased and it would lay foundation for lower insurance premium.

Big data

Driverless vehicle usage will enable insurers to accumulate substantial amount of data (such as vehicle usage level, in which city, on road and what time it is mostly used, number of accidents etc) which is sufficient to set insurance premium with high accuracy.

Product liability

When adopted at the full scale, driver’s third party liability insurance becomes obsolete as drivers would no longer be sitting behind steering wheels and instead product liability issues become concern. How will it be like for a country in which most of its vehicles do not directly purchased from manufacturers?

HOW FAST WE IMPORT VEHICLE TECHNOLOGY?

Hybrid vehicle might seem like a distant subject in 1990 but starting from 1997 Toyota started mass manufacturing of Prius model and it was imported to Mongolia within 10 years.

How fast may driverless vehicles become reality?

To look back, we import new technology vehicles within 10 years. In case of driverless vehicles, it is likely that it may take up to 20 years delay mostly due to infrastructure problems. However it will bring obvious challenge to insurance industry when driverless vehicles are on our road.

Now the question is, how impending technology change is reflected to your company’s future plan?