Car insurance costs will halve by 2020 as driverless vehicles become the norm on British roads, according to figures obtained by Telegraph Money.
Self-piloted cars could cut annual premiums by £265 on average within five years because the vehicles are expected to "eliminate bad driving", which is the cause of 90pc of road accidents.
According to industry experts, the new technology is developing at such a pace that road accidents caused by human error will be almost eliminated in the next half-decade. Nearly all new cars will park and drive on the motorway automatically, and communicate with vehicles to avoid collisions.
John Leech, head of auto at consultancy KPMG, said: "Insurance premiums could halve once vehicles which communicate with each other and an 'autopilot mode' when driving on the motorway are developed – this is likely to happen by approximately 2020."
Car insurance premiums have fallen 5.8pc in the previous 12 months, according to the AA.
It now costs £530, on average, for fully comprehensive cover.
Historically costs have been kept high by "avoidable accidents", which account for the majority of insurance payouts, said Matthew Avery, safety researcher at Thatcham, a vehicle rating firm.
Whiplash claims and car parking disputes, for example, cost more than £3 billion a year and account for 94pc of all insurance claims.
Manufacturers claim hi-tech driverless cars can eliminate these types of accidents. The vehicles are already being tested on the roads in America.
The first autonomous vehicles will be on British roads as early as 2018 to 2020, say manufacturers Volvo, Tesla and Mercedes. The companies are developing cars that drive and park without your feet or hands touching the controls.
The main reason that car cover will be cheaper is that the responsibility for injury or damage to themselves or others will be passed from motorists to manufacturers, as car crashes become a matter of product liability rather than car insurance.
Auto-braking cars earn 10pc discount
However, premiums could start falling dramatically before then. Already one in three of all new cars uses driverless technology, such as automatic emergency braking systems, which can prevent collisions.
According to predictions by the British Insurance Brokers' Association (Biba), nine in 10 cars owned in Britain will be fitted with some sort of "smart" technology within five years, with accident numbers falling sharply as a result.
Mr Avery said: "Because of these technologies a lot of commentators are predicting an 80 per cent reduction in killed and seriously injured on our roads within 15 to 20 years which is great news."
By 2030, newer automatic vehicles should prevent 90pc of cases of people being killed or seriously injured on the road, according to separate predictions made by KPMG.
In a report it published in March, commissioned by the Society of Motor Manufacturers, the consultancy forecast "disruption" in the insurance industry, which will have to adapt to the changes on the road.
The automatic emergency breaking feature that is being placed in many new cars can reduce accidents by as much as 45pc in the best systems. Insurers are already offering a 10pc discount on premiums for cars fitted this technology.
While most crashes are currently the result of drivers being tired, under the influence of drink or drugs, or human error, these accidents will be eliminated. That will leave only "catastrophic" accidents, which are expected to occur when driverless systems fails.
Mr Avery said: "The fender benders we see now will be completely eradicated by there will be crashes, and they are likely to be catastrophic crashes.
“We need to understand who is liable – whether the driver or the vehicle is driving at the time.”
Google's driverless car is expected to be seen on UK roads by 2025
Instead drivers could be expected to pay for car cover against theft and damage which currently comprises less than half of the overall premium cost.
Graeme Trudgill, of Biba, said that said the implications for car insurance were “unpredictable” but that “if 90pc of accidents are caused by human error this should lead to much cheaper [insurance] rates."
He insisted that there will be a place for car insurance on driverless roads. “You, the driver, will always be responsible in some way, so traditional motor insurance will be required.
"We would need legislative change before the responsibility for crashes fully passes to manufacturers, so we will have to see how things develop," he said.
It is currently a legislative requirement for all cars to have at least third-party car insurance under the Road Traffic Act unless the vehicle has a Statutory Off-Road Notification.
It takes around 15 years for the entire fleet of British cars to change, according to Thatcham, but traditional cars are expected to stay in British roads. Classic cars, for example, cannot be retrofitted with driverless technology and are expected to remain popular.
“It’s possible that premiums for these cars will be even higher, especially if drivers of the future – used to driving semi-controlled cars – lose the skills we have today,” Mr Trudgill said.
– kate.palmer@telegraph.co.uk
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