Korea Expecting Massive Drop in Insurance Payouts from Autonomous Vehicles

“Autonomous driving technologies will significantly reduce the rate of accidents, and consequently the need for car insurance and other insurance products.” (image: KobizMedia/ Korea Bizwire)

SEOUL, Sept. 26 (Korea Bizwire) – Amid rapid automotive innovation that has promoted enhanced driving safety, car insurance may gradually become nonessential.

According to a KIDI report released Monday, if 50 percent of domestic vehicles are equipped with level 1 function-specific automation (NHTSA), including autonomous emergency and autonomous reverse braking technologies, annual insurance payouts will be cut by 884.5 billion won ($798.5 million). 

The NHTSA currently defines vehicle automation from level 0 (no automation) to level 4 (full self-driving automation), and the global automotive industry is just seeing the commercialization of level 1 vehicles, the institute said, with Korea expecting commercialization of fully autonomous vehicles by 2050. 

The KIDI estimate was reached through experiments with level 1 autonomous vehicles, in which six of eight tested models successfully evaded car-to-car collisions at speeds of up to 40 – 45km/h, while all three tested models avoided car-to-pedestrian collisions at speeds up to 30 – 35km/h. 

The decreasing danger from vehicle operation will also affect other insurance products, such as health insurance, that are often closely associated with traffic accidents.

In 2015, 25.3 percent of the victims receiving compensation under car insurance policies were also subject to other insurance payouts, with aggregate payouts amounting to 1.6 trillion won.

“Autonomous driving technologies will significantly reduce the rate of accidents, and consequently the need for car insurance and other insurance products,” said an institute official. “We must induce a decrease in social costs by having future insurance products reflect the declining risks of traffic accidents.” 

Monday’s announcement came during the 2016 Seoul RCAR (Research Council for Automobile Repairs) Annual Seminar, which was attended this year by 20 institutions from 15 countries.

By Kevin Lee (kevinlee@koreabizwire.com)