Driverless vehicles are on their way. Commercial fleet owners should start thinking now about how autonomous transport will change the way they run their businesses.
The transition to autonomous vehicles has already begun, and is set to drastically alter the business models of companies that rely on commercial fleets over the next two decades.
Many consumer vehicles already include automated crash prevention systems as standard, and the Institute of Electrical and Electronics Engineers estimates that by 2040, 75% of vehicle traffic on the road will be autonomous vehicles.
Nissan hopes to deliver its first publicly available autonomous vehicle as early as 2020, while Volvo began testing 100 driverless cars in Sweden, on Gothenburg’s public roads this year.
“People in cities and towns of the future won’t bother owning a vehicle. They will just dial up when they want one; it will arrive and take them wherever they want to go,” says John Hoey, Motor Broker at JLT Specialty.
Ironing out the various complex social and legal hurdles to allow driverless cars onto the roads will take years, but commercial fleet owners can already start planning how their workforces, practices and procedures may need to evolve in the years to come.
Trucking companies are likely to be among the first to adopt driverless vehicles as the sector is currently suffering from a driver shortage and an ageing driver workforce, and trials on driverless HGVs are already under way. However, many other sectors, from delivery firms to taxis, also face reinvention.
The adoption of driverless vehicles should, in theory, reduce the number of cars on the road, improve road safety and improve efficiency for fleet owners.
“In the future, you could have a commercial vehicle running 24/7 without the need to employ three shifts of drivers,” says Hoey.
“Manufacturers firmly believe that, by around 2025, we will see driverless commercial vehicles on our roads. Logically they will be allocated their own lane on the motorway (probably the current outside overtaking lane), allowing them to travel in close proximity at higher speeds than today.”
The transition to driverless cars
As human drivers become increasingly redundant, job losses are inevitable.
However, Steve Vachre, Motor Specialist at JLT Specialty, notes that “when technology replaces jobs, it also creates new jobs elsewhere”.
Owners and staff will have to adapt to new systems, manuals and procedures during the transition, with fleet workforces requiring entirely different skill sets to those employed today.
Rather than employing a team of drivers, for example, fleet-based firms will instead need a control room of operators monitoring and controlling the fleet, ensuring they are on route and performing.
Employers should therefore start planning how to manage a transition to a totally new working environment. Companies may also have to consider the brand representation issues around replacing drivers who face the public.
“They will effectively be removing the personal face of the business, which may be the only face the customer sees if they order goods online. Some customers may want to see a person, particularly the older generation, so businesses may have to find new ways to connect with them,” says Vachre.
Cyber risks for autonomous vehicles
However, the biggest concern around driverless fleets is arguably cyber risk.
“If a hacker was able to take control of a vehicle or make numerous vehicles talk to one another simultaneously, this could lead to a catastrophic road incident,” says Vachre, adding: “Insurance is therefore going to be as relevant as ever.”
Given that human drivers will no longer be in control of vehicles, the onus of insurance coverage will shift from the fleet owner to the vehicle manufacturer in the years ahead.
“Traditional motor insurance will eventually be replaced by product liability. The insurance savings for fleet owners could be huge,” says Hoey.
However, Vachre notes that assessing where liability lies during the period when there is a combination of fully-automated, semi-automated and driver-controlled vehicles on the road could be challenging.
With full automation still several years away, Vachre suggests fleet owners, in the meantime, take advantage of the array of ‘midway technologies’ that bridge the gap between manual and automated driving, such as adaptive cruise control, lane departure aides, autonomous emergency braking, telematics and park assist.
All contribute to safer driving, fewer accidents and reduced claim costs.
Fleet owners will also have to manage the transition from fossil fuel-powered cars to electric vehicles over the next decade.
In the UK, all cars must be electric by 2040, but many manufacturers plan to have moved away from traditional fuel engines well before then.
This transition may call for additional training and safety procedures for drivers, particularly when it comes to handling high-voltage batteries.
“Adapting to the availability of charging points is probably the biggest challenge in the transition from fuel to electric cars,” adds Hoey.
Fleet owners need to organize their routes and schedules carefully to avoid unnecessary interruptions to their service.
However, this should become less of an issue as roads become more populated with charging points and battery recharging times continue to improve.
The rise of product recalls
With such rapid increases in technology and the shift from human to product error, it would be a safe bet to assume that this upwards trend in both cost and frequency will only increase in the automotive industry.
Sophisticated and interconnected component parts, sourced from numerous different suppliers, coupled with greater complexity in supply chain, clearly makes product risk a huge challenge.
Vehicle complexity, regulatory scrutiny, technology and integration will have dramatic consequences on the number and costs of recall losses within the automotive sector.
As the industry changes, the risk is rapidly shifting from human error to product risk, leading to enhanced exposures for insureds.
As automotive technology takes over, can the insurance market respond with solutions that are equally integrated?
For more information on autonomous vehicles and related risks, please contact ClientFirst@jltcanada.com.