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Auto insurers prepare for self-driving cars and frayed nerves

The self-driving car is already in motion, offering motorists the chance to sit back, relax and let a computer take the wheel. But insurance companies say that it won't put an end to auto insurance.

"There's a good chance autonomous cars will be on the road in the next five to 10 years," says Kishore Ponnavolu, the head of MetLife's auto and home subsidiary. "But they will not eliminate the risk of automobile ownership."

In fact, quite the opposite.

While the frequency of accidents may decline, the cost of crackups will be more severe, predicts Carol Csanda, who leads the "innovation project" for State Farm, the nation's largest auto insurer.

The rationale: Cars loaded with the high-tech parts needed for self-driving will cost more, so the dollar amount to replace this new technology, if damaged, will be far greater.

"The higher costs associated with driverless cars will also be reflected in other forms of insurance that will still be unavoidable," says spokesperson Loretta Worters of the Insurance Information Institute, which represents the insurance industry. In other words, you'll probably still want comprehensive coverage, which pays for theft, flood, fire and other damage occurs when the car isn't in motion.

And it gets worse. Not only do you need to keep all your regular coverage, you may need new forms of coverage.

"In fact, new kinds of driverless-car insurance, such as cyber coverage to protect vital computer parts and software, may become part of the yearly insurance contract," says Csanda, adding that car "recalls may no longer involve going to the dealership. Instead they'll be downloads to your car's computer."

Ford goes to bat

As cars get smarter, insurance will have to become smarter too, which is why State Farm has teamed up with Ford and the University of Michigan to get "a window inside the driverless car," Csanda says.

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