The insurance industry and driverless cars: challenges and opportunities

Scott Pendry

22 May 2014

Scott_ Pendry_blogThe development of the technology that will enable cars to become fully autonomous and truly ‘driverless’ is only a decade or so away. This will bring both challenges and opportunities for insurers.

But contrary to what many commentators are saying, there will be no defining moment when driverless cars appear in show rooms and the switchover is made. In fact, the pace of technological change has been relatively steady with small steps paving the way to the development of fully autonomous cars.

Indeed, the journey from driver only input to full vehicle autonomy is already well underway. Take for instance technology that is almost taken for granted; anti-lock brakes, parking sensors and cruise control – all features that give a car a degree of autonomy. And already on some new cars – or just around the corner – are further technologies that will change the face of driving: adaptive cruise control combined with lane control systems will make large parts of journeys autonomous with the driver monitoring, as opposed to constantly operating, the steering and pedals.

A positive for road safety

With human error accounting for around 90% of road accidents, the potential safety implications of autonomous technology are huge. Industry observers will already know how much emphasis insurers have placed on technology that is proven to reduce the number and severity of accidents. Autonomous Emergency Braking (AEB) is a prime example.

If vehicles are fitted with autonomous braking systems, they enter a lower group rating, which can significantly lower the cost for customers to insure them.

This technology – which automatically applies the brakes if the driver does not respond in time – has been proven to lower the rate of collisions that result in personal injury claims by around 20%. While the principal concern is, of course, road safety, in anticipation of the benefits it will bring to the frequency of claims, insurers have incorporated it as a component into the Group Rating process. Put simply, if vehicles are fitted with autonomous braking systems, they enter a lower group rating, which can significantly lower the cost for customers to insure them.

Essentially, where insurers can recognise and reward technologies that will make vehicles safer for customers, they will do so, which is why the onset of autonomous technology is a positive step, not only insurers but for consumers too.

Embracing uncertainty

But with less reliance on a driver’s input and more on sophisticated car technology, what happens when the car’s computer systems fail? And in the event of an accident, does liability rest with the driver or the hardware and software found in the car itself?

The situation at present is clear: liability rests with the driver. And, in line with the development of increased automation within aviation, it is likely that the driver will continue to be held liable in the event of a crash if they are able to step in and intervene, overriding the technology by making control inputs themselves. As with pilots, effective system monitoring for drivers will become a skill and a key safety net in the prevention of accidents, requiring modifications to the way people learn to drive.

Autonomous_Nissan_vehicle620x272The key change – and the potential shift to product liability – comes when cars not only become driverless but when they become ‘connected’ and the driver is not expected to oversee or monitor the vehicle, relying instead on the car to make its own decisions such as planning a route using its internet enabled on-board computer that is also connected to other vehicles.

So as vehicles become increasingly connected with other vehicles – and as the control input transfers from human to computer – it is possible that liability will follow that transfer of risk.

In the coming years insurers will be watching the development of this technology very closely, with a particular eye on system reliability, ensuring that the reasons for system failures are fully understood and the technology is tried and tested.

One thing is certain; driverless cars have huge potential to significantly reduce the number of accidents on our roads and the insurance industry is keen to work with vehicle manufacturers, regulators and the legal community to facilitate the wide-scale adoption of this potentially life-changing and life-saving technology.

Scott Pendry is Policy Adviser, Motor, Association of British Insurers.

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