Driverless cars are becoming a reality—and their impact on insurance may be even greater than the Affordable Care Act, says Valerie Raburn, vice president and chief innovation officer for the insurance division of Xerox.

Looking roughly 15 years into the future—when experts say driverless vehicles will be sold for commercial use—Raburn sees a world in which elderly baby boomers and driving-averse millennials rely on driverless vehicles for transportation.

As production costs come down, more people will embrace these vehicles, either purchasing them or booking them on a per-use basis. Raburn envisions busy families who need to get to various schools and workplaces booking multiple driverless vehicles to take each of them to their destinations, with the vehicles then returning themselves to a “staging area.”

With the responsibility (and liability) of driving out of our hands, auto and parts manufacturers and suppliers will bear the brunt of potential liability—and the cost of risk mitigation, whether it's through product liability insurance or self-insurance mechanisms.

Assuming that 25% of an auto premium is for comprehensive coverage and 75% for liability and collision, eliminating that 75% will deal the auto insurance industry a crippling blow, Raburn says.

Among her predictions: Insurers' primary revenue streams will shift from personal lines to commercial lines, as carriers retool their offerings to sell product liability insurance to vehicle manufacturers. The concept of “distracted driver” will cease to exist, which means fewer accidents and consequently lower insurance rates. Vehicle owners will no longer buy collision insurance as manufacturers will be solely responsible for damage.

The technological underpinnings of usage-based insurance will transition away from consumers and personal auto insurers and become a valuable tool for both automakers and their product liability carriers. And finally, no-fault regulations will be replaced by tort-based product liability laws.

But self-described “futurist” Keith Savino, COO of Warwick Resource Group LLC and an active member of many industry technology groups, thinks there's more to the story—starting with the definition of “driverless.”

Such vehicles could range from 100% driverless, in which the vehicle is essentially a chauffeur, to systems in which the driver can relinquish control at will, when he's tired, needs to multitask, or wants to avoid driving drunk.

Driverless vehicle technology will come about gradually. In fact, pieces are already present in higher-end vehicles in the form of lane avoidance, backup warning and other sensor systems. “It's an evolutionary path, and we have to consider what the insurance industry will do at each point alone that path,” Savino says.

And we've been down this path before. Airbags, anti-lock brakes and seat belts have improved safety, but until every vehicle on the road is truly driverless, negligence will always be an issue.

And Savino doesn't think people will ever give up driving altogether. He recalls the joy of driving captured by “Red Barchetta,” a 1981 Rush song depicting a dystopian future where a young lad breaks the “Motor Law” and evades the authorities by roaring across the countryside in his uncle's illicit red Barchetta, “from a better, vanished time.”

Even if the future shakes out as grimly as Rush depicted it, Savino expects one thing to remain the same: “If agents and brokers can explain things to their clients, they will still be an important part of the personal lines landscape.”

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Insuring the &lsquo;Red Barchetta&rsquo;

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