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Insurance Article

When Cars Drive Themselves, How Car Insurance Gets Impacted?

March 29 2017
Self-Driving Cars

Self-driving cars and its likely impact on insurance

A significant and unfortunate page in the history of self-driving cars was written on May 7, 2016, in Florida. Electric carmaker Tesla’s partially autonomous car, the Model S, crashed into a tractor-trailer while in ‘autopilot’ mode. The person behind the wheel was Joshua Brown, who became the first person to die in a self-driving car. As the crash happened, neither the human (Brown) nor the computer hit the brakes.

The National Highway Traffic Safety Administration of the U.S. investigated the crash and arrived at a conclusion that there was no safety related defect in the car’s computer.

How Far Away Are Autonomous Cars?

The technology for self-driving or completely autonomous cars is still under development, and requires human oversight. But, already, there are suggestions that the world could see completely autonomous cars on the roads by 2030. Mercedes, Toyota, Audi, and Volvo are among the automakers testing self-driving cars. It is still to be tested how these cars’ computers will perform in real world situations at high speeds.

Autonomous cars have implications for many industries. The more serious consequence will be for the insurance industry. The exact impact on insurance is still not clear. Insurance rules will evolve as there could be product liability claims. Car owners could blame the manufacturers for a crash. Automakers too could become liable for third-party claims and might also have to buy third-party liability insurance. The burden would be on the automakers to prove the technology installed in the car was not responsible every time there is a crash.

Implications Of Autonomous Cars On Insurance Industry

Fully autonomous driving will make insurance companies to rely on telematics devices -- which would be akin to black boxes in an aircraft -- to examine driver activity and investigate the cause of a crash. While accident risks are unlikely to be totally eliminated in autonomous cars as events are unpredictable, there will also be two major technology risks in autonomous cars – software reliability and cyber-security.

The challenges for insurers will be:

  • Autonomous vehicles will most probably include both manual and computer control. Underwriting norms will have to take into account two different risks – one for manual driving and the other for autonomous driving. This will involve transferring risk from the human driver to the automaker.

  • Claim settlement process will involve the additional task of determining who was driving. Was it the human behind the steering or the computer behind the dashboard?

  • Insurers will have to collaborate with automakers for sharing of driving data through in-built telematics devices. Insurers could face direct competition as manufacturers themselves could become insurers, similar to financing arms of some automakers.

  • Autonomous cars could lead to automakers themselves insuring cars manufactured by them rather than individual car owners having to do it. The form of insurance could change to product liability insurance as there would be risks connected with failures of computer systems.

Related Article:

The Future of Car Insurance: Tracking Devices and Telematics
All You Need to Know About Telematics

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