Not so long ago, the idea of having autonomous vehicles on our roads was confined to the realms of science fiction films and yet, in 2018, it is thought that completely driverless cars will be a reality in the not too distant future.
Many of the large car manufacturers are working towards this reality, but what does this mean for the insurance sector? Autonomous vehicles present a number of issues and questions as far as the insurance industry is concerned.
There has been some discussion around whether these vehicles will eventually eliminate accidents altogether rendering certain types of motor insurance redundant. This is because the majority of vehicle accidents are caused by driver error and the theory then is that autonomous technology will at least significantly reduce collisions and accidents through advanced safety features.
If autonomous vehicles are too safe there will be no liability and if there is no unknown then there may be no insurable interest at all, but how can we ever we fully understand how safe these vehicles will be or what the associated risks are without the experience and historical data to predict this accurately? It is almost impossible to test vehicles in every imaginable condition and so surely there must always be an element of risk? It seems eminently implausible for risk to be completely eliminated in such an unpredictable world and when relying on such innovative technology and this is exactly what insurance is there to do; provide protection for the unexpected and the industry must therefore evolve with the technology.
What’s more, as the technology develops, so too does the knowledge outside of the specific field of technology; every computer device or system is vulnerable to hacking and cyber attacks. It is not beyond the realms of reality to imagine that hackers might access the navigation systems or similar or that a systems failure of some description could create problems either for a single vehicle or for a network of vehicles where they are connected to one another. There is also a risk that the technology could be used to carry out terrorist attacks using vehicles as we have seen more recently in a number of vehicle related attacks across the world. This in turn, would have an impact on non-motor lines of business such as cyber and terrorism.
Automated driving is already here, but as technology develops, it is likely that cars will be able to travel without the driver being involved at all and this raises further issues concerning the apportioning of liability and the related insurance cover in the event of an accident.
There are different levels of autonomous vehicles, which are graded from 0 to 4 with 0 being no automation to 4 which is no human intervention. Most vehicles are at level 1 with some automation such as anti-lock brakes. Many vehicles are level 2 with technology such as lane centering, auto braking, and blind spot warnings and most car manufactures are developing some sort of level of automation for their vehicles.
The level of automation will affect the requirement for insurance since level 1 vehicles will still have a certain amount of driver intervention. It will also have an impact on liability should an accident occur. What happens, for example, if a level 2 or 3 autonomous car swerves to miss a pedestrian and injures the occupant of the vehicle instead? What if the driver had the ability to do something such as apply the brakes? With fully autonomous vehicles, this is a lot more straightforward. The liability question is rather more complicated, however, when considering level 2 or 3 autonomy where the car can handle certain tasks on its own but a driver may still be ultimately in charge.
As far as the insurance position is concerned the question which arises is which policy responds; would it be the manufacturer’s product policy or the driver’s motor policy. This will depend on the facts and circumstances of the accident and the analysis will not differ hugely from any other product liability claim, for example, where there is always a process to establish liability and sometimes that liability will be shared.
To determine liability for collisions involving automated cars, black boxes will be required to establish whether the driver or the vehicle was in control at the time of the accident. It will then be up to the courts in the usual way to decide on liability and it is almost certain that there will be a number of disputes through which legal liability is determined over time.
While there is still driver involvement, it seems unlikely that motor insurance will become completely redundant. In addition, a comprehensive motor insurance policy would also usually cover loss due to theft and fire, which will presumably still be required.
Although autonomous and driverless cars are likely to lead to a reduction in premiums, it is also fair to assume, however, that there will be a corresponding reduction in the number of claims. Proposed black box technology should also reduce the number of fraudulent claims so insurers may also save money because there is less need to investigate fraudulent claims and less fraudulent claims which are paid. The outlook is not, therefore, entirely bleak for the motor insurance industry particularly when you look at the possible increased premiums for less traditional lines of business resulting from this new technology such as cyber and terrorism.
It is difficult to predict what the impact of driverless cars will be for the insurance sector due to the level of uncertainty in the future. What is certain is that we are living in a world in which the risk landscape is constantly evolving. It is important for the industry to continue to keep pace with these changes (as it is doing with initiatives like the Automated Driving Insurance Group) and there is the need to adapt to meet the development of non-traditional risks and exposures since these present not only as challenges but also as opportunities for the industry and autonomous vehicle technology is no exception to this.