The Business of Insuring Autonomous Vehicles

Growing new technologies will disrupt other industries

We might not be reclining in self-driving cars just yet, but the widespread sale of autonomous vehicles (AVs) has been forecasted any time from now to 2021. The majority of automakers plan to reveal their own ride ready roadsters within the next few years, aiming for mass adoption in the consumer market. In fact, just last month, Google’s independent self-driving car division Waymo opened a new ‘early rider programme’ in Phoenix. Instead of company affiliated employees and contractors, AVs (500 Chrysler Pacifica minivans, to be exact) will be available to members of the general public via a free app. In other words, Waymo is moving out of their 10 year testing period and towards consumer ready products. The programme is all about collecting valuable data to understand how consumers interact with self-driving cars. According to Waymo CEO John Krafcik, it’s important to find out how ‘real people’ will use the technology. Whilst it’s all well and good putting AVs into public hands, there’s a looming issue that automakers seem to have overlooked. . . Insurance.

How do you insure an autonomous vehicle?
It’s hardly glamourous, but insurance is incredibly important. Standard auto insurance claims are fairly simple – the parties involved in an accident send their contact details to a claims adjustor who decides who is at fault and who requires compensation. The question is, how do you make a claim against a vehicle with no driver? How do you assign blame when there’s no human antagonist involved? According to the Highway Code, the upkeep and condition of a vehicle is down to the owner themselves. Actual driving practise and other safety protocols, on the other hand, are the responsibility of the driver. However, as autonomous cars are not reliant on their owners and passengers, it seems unfair to blame a human for a machine’s error. The problem is, you can’t make a claim against a piece of software itself. So, who do you blame – the person/company using the software, or the creator of the software itself?

In the case of Tesla, responsibility for the 2016 test driver fatality fell on the company, despite the automaker’s insistence that the driver was at fault. In the case of semi-autonomy, it seems more acceptable to blame the driver. When it comes to service vehicles and public transport, the answer also seems more straightforward. A passenger rides buses, trains and planes at their own risk, and can purchase individual travel insurance. Users of autonomous vehicles could potentially insure themselves and their vehicles in this way. Nonetheless, the issue of responsibility remains largely a grey area which could delay the adoption of driverless vehicles as a whole.

How will insuring AVs disrupt industry?
The unsolved issue of insurance presents a barrier to AV adoption, because people simply won’t want to be in a vehicle if not insured. An individual travel insurance programme could provide an answer, but working out exactly how to address the issue won’t be easy. A potential reason as to why auto companies have avoided discussions about insurance is because they want to appear entirely confident in the ability of their product. It’s even suggested that autonomous vehicles could kill auto insurance by removing human error. In 90% of accidents, the driver is the main factor. Even so, this notion is perhaps naively positive and frankly impossible until all AVs are entirely safe. The likelihood of this is slim, because autonomous software is as much at risk of cybersecurity breaches as physical crashes. In short, whilst the technology might not kill the insurance industry, it will definitely complicate it.

Earlier this year, a conference was held in London to discuss the impact of AV insurance on insurers, demonstrating that financial companies are really beginning to think about how to respond to disruption. Law firms should look to do the same, as the law will have to change to accommodate new considerations.

Automakers and software developers may be on the verge of releasing consumer-ready, fully autonomous vehicles, but this is pointless until the problem of insurance is solved. Regulatory bodies and companies need to work together to come up with a viable framework for insuring autonomous cars and other vehicles so that users feel safe. In terms of responsibility, it seems like the automaker themselves is most likely to take the blame. Perhaps innovative InsurTech businesses can help to find a solution to autonomous vehicle insurance before it has a chance to hinder adoption.

Who should be held responsible in the event of an AV crash? How else can insurers prepare for fully autonomous vehicles? Could self-driving cars kill the automotive insurance industry? Share your thoughts and opinions.