Driverless cars are set to put a big dent in the profits of insurance companies as motor manufacturers free the roads of accidents caused by human error.
Car companies and insurers expect the number of crashes to drop by between 50% and 80% with the advent of autonomous vehicles.
Developers and insurers explain that even if an accident is unavoidable, the consequences of a car crash will be less severe as impact speeds will be cut by automatic sensors.
According to motor insurance industry projections compiled by financial giant Swiss Re, motorists will reap a £20 billion drop in the cost of car insurance across the 14 largest markets by 2020, mainly in Europe and North America.
The company also predicts two out of three cars will have some kind of satellite connection to the internet and other vehicles by then.
Number of crashes set to tumble
“Drivers will not be in control of their vehicles for parts of their journeys and some cars will self-park and carry out other manoeuvres more efficiently and safely than human drivers,” said Peter Shaw, CEO of vehicle security and safety device firm Thatcham.
“Crash frequency will drop dramatically and the cost of motor insurance will tumble with it. The insurance industry will have to radically change or die.”
In Britain, the first driverless car insurance has just launched.
The policy covers driverless cars for a range of risks from automated parking to fully autonomous vehicles.
However, the insurer insists the driver will have to be able to take control of the car whenever necessary.
No drinking or sleeping at the wheel
That cuts out taking a robot car down the pub as a nominated driver or taking a snooze during a long journey.
Pilot tests for autonomous cars and lorries are expected to start on Britain ‘s roads soon. Technology giant Google has already had cars on public roads for extensive tests in California for at least two years.
Google’s expected business model may do away with car ownership by having fleets of driverless cars available in towns and cities to hail like cabs. Travellers will pay a fare or hire fee for the time they are using the vehicle rather than owning their own car.