Cars are becoming increasingly autonomous, with manufacturers moving ever closer towards fully driverless vehicles. For the insurance industry, the potential ramifications are transformational.
In view of this change, insurers clearly need to address some questions. First, who will be accountable in the case of accidents involving driverless vehicles? And will anyone need car insurance when they are not actually drivers of their vehicles?
According to the Association of British Insurers (ABI), “drivers” of autonomously operated cars in the United Kingdom will not be held responsible by their insurers for accidents when their cars are piloting themselves.
“Insurers will recover any costs involved in settling the claim from the responsible manufacturer,” the ABI has said. The exception to this is when an individual has been irresponsible, such as by switching on self-driving at a dangerous time.
In many markets, this shift to making the technology liable represents a radical change for the motor insurance industry, which is used to writing policies based on human profiles and driving history. It also represents a big change for car makers, whose driving technology will be to blame if a coding or artificial intelligence fault is found. Indeed, Google, Volvo and Mercedes-Benz have already said they will accept liability when a vehicle’s self-driving system has caused a crash. As a result, some insurers will choose to build entire businesses writing policies to protect car manufacturers and system developers instead of drivers.
Car makers that become at least a little nervous about the liability shift may take heart in the powerful incentives to create truly driverless vehicles that are trusted and have widespread appeal. Being behind the vehicle that breaks through and becomes the first truly mass-market driverless car has the potential to set a brand apart from its rivals and put it at the heart of a historic social transformation.
By the 2040s, expectations are that driverless cars will become the norm in many parts of the world. As it stands now, insurance premiums for driverless cars remain high, but that is because they are in the minority and their capacity to avoid accidents remains somewhat flawed. This is evidenced by high-profile accidents such as the one involving a self-driving car operated by Uber several years ago, in which a pedestrian in Arizona was killed, and the autonomous Tesla vehicle that killed its driver after crashing into a tractor trailer in 2016.
It could be argued that insurers of “drivers” will also become nervous about these changes — particularly the challenge of extracting money from car makers when they consider a system is at fault, as well as consumers demanding lower premiums for safer vehicles. But insurers can also see the bigger picture, which is that once driverless cars become the norm, accident rates will almost certainly decline. Figures compiled by the U.S. National Highway Traffic Safety Administration suggest that 94 per cent of serious car crashes are the result of dangerous choices or human errors. Autonomous vehicles will also cut rates of drunk driving, falling asleep at the wheel, and texting while driving.
There is much more to come in the short term from autonomous technology as a means of bringing down accident rates on roads around the world. The insurance industry has already witnessed huge benefits from advanced driver-assistance systems (ADAS), including cruise control and lane departure warning systems. According to the European and Australasian safety bodies Euro NCAP and ANCAP, autonomous emergency braking systems have reduced rear end vehicle collisions by 38 per cent.
In addition, the rich data supplied by autonomous cars will hand insurers a smart new business: with analytics, insurers will be able to reward customers by cutting premiums on the fly, when those customers use safe self-driving a higher proportion of the time.
For insurers, the key to really making the future work will be harnessing the great swathes of data that will become available to them, so they can build new businesses. They can also capture new revenues by insuring the car and technology makers. But as they do this, they must keep an eye on the shifts in accountability as legal frameworks are shaped around the world.