How the Rise of Autonomous Vehicles May Affect Transportation and Insurance

December 4, 2018

Long a part of science-fiction novels describing a technologically-advanced future, self-driving cars have become reality. Numerous companies have developed the autonomous vehicle technologies needed to safely navigate America’s highways and byways. With the rise of these self-driving vehicles, new considerations of risk and of insurance have become apparent. These vehicles have the potential to change the insurance landscape dramatically, leading to questions about liability and the solutions insurance companies like U.S. Risk Underwriters will need to implement to protect drivers, their vehicles, and the companies manufacturing and selling autonomous trucks and cars.

Autonomous Vehicles: The Basics

Developed in part to help combat traffic fatalities on American roadways, autonomous vehicle technology has made significant advances in the past decade. Industry analysts project that these vehicles, sometimes referred to as “self-driving” or “driverless” vehicles, will account for more than 80% of all new vehicle sales in urban centers by the year 2040.

Autonomous vehicles use a range of sensors – including radar, sonar, and camera equipment — and computerized systems to navigate roads. Current technologies, such as that produced by innovative automakers like Tesla and Mercedes, supplement the actions of a human driver; in many vehicles, an “autopilot” feature takes over when the driver wishes. Eventually, the technology will mature to the point that these vehicles operate entirely without human interaction, delivering people and cargo to their destinations in the safest ways possible.

Insurance Considerations for Self-Driving Vehicle Technology

Driverless vehicle technology has created a significant challenge for government regulators and for insurance companies. At the core of this challenge is one simple consideration: if a vehicle is driving itself, who is ultimately responsible if that vehicle were to become involved in a crash resulting in property damage, injury, or death? Is it the owner of the vehicle, the manufacturer, or a combination of the two? One thing is certain: ideas about liability and risk are sure to change substantially.

A pedestrian death in March, 2018 brought the issue to a head. An autonomous vehicle being tested in Tempe, Arizona, struck a woman as she was crossing the road on foot. A safety driver in the vehicle was unable to respond to the pedestrian in time, leading to her death. The company testing the vehicle settled with the victim’s family members, but pointed to glaring problems with insurance coverage and liability concerns regarding this new technology.

Most states require some form of liability insurance for the owners and operators of vehicles on American streets. Autonomous vehicles, unfortunately, push the envelope of available coverage, especially when it comes to product liability claims. In some cases, the vehicle manufacturer’s liability insurance may cover claims resulting from collisions, while in other cases, the manufacturer may seek to sue driverless technology and component companies used in the vehicle’s assembly. Driver control, or the amount a human driver interacts with automated systems, gives rise to other liability concerns; a human driver may or may not be adequately covered by current insurance plans.

Finally, the insurance structure itself may have to be adapted to meet changing risks. It is important to note that driverless vehicle technology was developed to help reduce traffic-related fatalities; if claims were to drop significantly due to this technology, insurers may have to revisit the structure of policies, coverages, and limits.

Takeaways from Autononous Vehicle Technology and Insurance

U.S. Risk Underwriters and the insurance industry at large face significant challenges any time new technology is introduced into society. Self-driving vehicles are no exception. The three major takeaways from autonomous vehicles and how they will influence the insurance industry are:

• Automakers and driverless vehicle technology manufacturers will assume more liability, particularly if vehicles and their systems are involved in a crash that leads to personal injury or property damage.
• Over time, insurance premiums will decrease – especially as driverless vehicle technology matures and accident rates fall.
• Insurers may change their structure and their offerings dramatically, potentially even dropping personal accident insurance altogether. Many years of research and risk analysis are to come, but for now, it is clear that the insurance industry will have to adapt to meet changing risk factors. ◼