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Liberty Specialty Markets

Gear change: driverless cars spark new directions for insurance

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Demand for “on-the-go” motor cover is set to rise as driverless cars become mainstream, according to a global law firm which commissioned a study into how autonomous vehicles could change the transport landscape, including in Australia.

This shift away from annual renewals is just one of many challenges confronting the insurance industry, UK-based Kennedys says in the report.

On-the-go insurance refers to policies that allow motorists to buy short-term cover as and when they need it. Such products offer cover from as little as one hour to 30 days.

The issues of liability and data sharing are other key areas that need sorting out.

The report questioned more than 6000 motorists and market practitioners in Australia, China, Hong Kong, Singapore, the UK and the US.

Kennedys UK-based Head of Liability and Innovation Richard West expects a “profound impact” on the industry, one that will require insurers to rethink everything from the development of motor products to data handling to building relationships with car makers.

“Insurers will be faced with strategic challenges in continuing to support the classic insurance model towards new risk models in which the liability moves towards product manufacturers,” Mr West said.

“Insurers will need to develop autonomous vehicle insurance propositions as they see changes in consumer appetite for insurance products.”

“We are likely to witness a move away from annual renewals towards on-the-go insurance and the growth of more transactional relationships where less is understood about the risk profiles of individual drivers.”

About 48% of Australian respondents interviewed for the report agree most drivers will take out short-term motor cover in the future, but only 26% see themselves as likely to buy it.

Only 30% are comfortable when asked about sharing car data with law enforcement bodies and police officers.

And fewer than 20% say they are less likely to own a car if autonomous vehicles are introduced, while 59% support the concept of partially automated cars.

Slightly over half are not in favour of fully autonomous vehicles as they enjoy driving and don’t want computers to have control.