New cars have steadily increased the high-tech crash-prevention gear, and now they are having a perverse effect on car-insurance costs: They are soaring.
Safety features such as autonomous braking and systems to prevent drivers from drifting out of their lanes are increasingly available on vehicles rolling off assembly lines. Auto companies and third-party researchers say these features help prevent crashes and are building blocks to self-driving cars.
But progress comes with a price.
Enabling the safety tech are cameras, sensors, microprocessors and other hardware whose repair costs can be more than five times that of conventional parts. And the equipment is often located in bumpers, fenders and external mirrors – the very spots that tend to get hit in a crash. Insurance companies, unwilling to shoulder all the pain, are passing some of the cost off to buyers.
Insurance sticker shock is a blow to auto makers looking to increase adoption of high-tech safety packages, which can add thousands of dollars to the price of a new car and deliver significantly higher margins than other options.
At present, though, only a fraction of buyers opt for the technology, often known as “advanced driver assistance systems,” or ADAS. As a result, replacement parts are disproportionately expensive.
An industry alliance representing a dozen auto manufacturers declined to comment on repair costs. Several automakers said safety is a top priority, and while new parts are expensive at first, they tend to fall over time.
Owners of ADAS-equipped cars aren’t the only ones footing the bill. Liability insurance is on the rise, too: A driver of a more-basic car may be liable for damages in a collision with a vehicle loaded with safety gear.
State Farm in October raised Illinois insurance rates 5.9%, the largest such jump since 2003. In addition to the need to fund costly repairs of safety tech, the company is also factoring in trends such as more miles driven and distracted driving, a company spokeswoman said.
Car-crash fatalities are increasing as people spend more time on the road and attempt to multitask with smartphones while at the wheel. Miles driven by Americans rose 2.8% to a record 3.2 trillion in 2016, according to the Federal Highway Administration. That increase was far outpaced by a 6% surge in motor-vehicle deaths in the same period.
Industry wide, the average annual car-insurance premium increased 14% since 2014 to $990, according to an estimate by the Insurance Information Institute.