Autonomous vehicles present a unique opportunity for the insurance industry. While the technology for such vehicles is already under development, several obstacles stand in the way before our streets are full of autonomous cars. Adequate regulation, dependable safety standards and hesitation from the public to hand over responsibility to a machine are just a few. Insurers can play an important role in enabling the safe adoption of this technology by setting safety and risk management standards when creating new insurance solutions.
The idea of transferring risk from an automobile driver to a machine is fraught with complexities. Just as human error can cause a motor vehicle accident, a vehicle can also fail. Even with sophisticated technology, it is still likely that something will go wrong. It will be critical for insurers to determine where the liability rests in the event of an accident caused by this unique type of vehicle.
Insurers will have to consider the same key principles that make up any liability policy. For example, they must establish whether the accident resulted from a faulty or defective product, third-party involvement, or owner misuse or manipulation, and whether the accident could have realistically been foreseen or prevented.
New and complex risks will eventually come into play as the responsibility transfers from the driver to the machine, and insurers will need to be ready with solutions to protect against these new automotive threats.
Autonomous vehicles have a heightened level of vulnerability to cyberattacks because they are connected to a digital network. High standards of system resilience will need to be in place and, as these vehicles will be highly digitized and connected to a network, terrorism coverage should also be considered.
Reputational risk is another emerging concern. If an autonomous vehicle fails, it could have serious implications for human safety and, in turn, the reputation of the vehicle manufacturers and operators. This is not fundamentally different than when a car model has a mechanical fault today. With several different parties involved in the manufacture and operation, however, the liability environment becomes more complex.
For more about this topic, check out Robots Take the Wheel, also from the March 2015 issue of Risk Management.
As autonomous vehicles become more commercially available, appropriate insurance policies may vary from country to country or state to state. The factors that will be of greatest importance to insurers are clarity and consistency around the laws and regulations applied to these vehicles.
While we cannot expect autonomous vehicles to become the adopted mode of transportation overnight, there have been incremental steps toward vehicle automation over the years, laying the groundwork for this technology to become a reality. Assisted driving functions such as satellite navigation and cruise control have been available for some time. In fact, IHS Automotive estimates that by 2025, there will be 230,000 self-driving cars out of the 115 million sold worldwide.
As these vehicles become more common, the ability to transfer and manage the risks will be vital. The arrival of this technology—and the corresponding risks—presents new challenges for insurers, but also vast opportunities. And, by creating products that drive safety and risk management standards, insurers can help ensure this emerging technology is brought to market in a way that minimizes the potential risks.