As autonomous vehicles’ adoption accelerates, insurance carriers will be at the forefront — yet, unanswered questions persist regarding product safety and liability.
The Inevitable Advent of Autonomous Vehicles
The dawn of self-driving cars has lingered tantalizingly on the edge of reality for a while. However, this scenario is swiftly transforming. Autonomous taxis are already in service in cities like Phoenix and San Francisco, with Los Angeles next in line. Furthermore, a significant number of Teslas on the roads feature the company’s Full Self-Driving package (albeit a driver-assistance feature rather than full autonomy). Autonomous vehicles aren’t science fiction anymore — they’re just yet to be universally available.
The potential impact of these vehicles as they transition from a novelty to a standard facet of everyday life is a prevalent topic of discussion, as showcased by the multitude of seminars dedicated to it at RISKWORLD 2023.
It’s Not a Matter of If, But When
Joe Mclean, VP, Senior Technical Underwriting Manager at Zurich North America, pointed out at a RISKWORLD 2023 session that the current US laws don’t alter the liability from the negligent ‘operator’ of the vehicle in case of an accident. However, as autonomous vehicles become a regular sight on our roads, legal alterations are expected — it’s just about timing.
According to David Klein, a partner at Pillsbury Winthrop Shaw Pittman and a presenter at a RISKWORLD session, we’ve been slowly progressing towards autonomous vehicles since the introduction of cruise control in 1958. Klein mentions that with Tesla’s Autopilot, we’ve achieved Level 2 autonomy, but fully autonomous taxis and trucks are already here. The McKinsey report projects revenues from autonomous driving could reach up to $400 billion by 2035.
The question of liability becomes complex when the task of driving is shared between the driver and the vehicle. Klein explains that it essentially depends on the level of automation. In cars requiring driver supervision, the driver bears the liability if an accident results from their inattention. However, as vehicles achieve higher levels of autonomy, this could shift towards product liability.
Measuring the risk and adapting to new liability rules will continually evolve, according to Klein. He also notes insurers will have to address new issues such as the role of cyber insurance in mitigating the risk of vehicle hijacking or interference, or how to deal with deliberate programming choices that favor the safety of pedestrians over passengers.
Bridging the Gap
While the idea of venturing into unexplored technological and legal realms may appear risky, it comes with its own set of potential benefits. In the short term, as courts determine the liability shift from drivers to manufacturers, some unpredictability will persist. However, as legal precedents are gradually established and data piles up, the benefits of autonomous vehicles will become more apparent.
According to Daryanani, AV manufacturers need a reliable and adaptable insurance partner. He stresses the importance of open lines of communication to better understand the autonomous vehicle company’s growth and risk mitigation strategy. He further advises brokers to seek out insurers that are already insuring autonomous vehicles today, like Mobilitas Insurance.
The Journey Ahead for Autonomous Vehicle Insurance
Autonomous vehicle manufacturers and insurance companies are stepping into unknown territory, with a range of uncertainties surrounding product liability, safety protocols, and evolving laws. As Joe Mclean from Zurich North America suggests, the issue of liability will continue to be pivotal, and the individual in the driver’s seat may still need insurance coverage in the event of an accident, unless there are legal changes.
With the increasing presence of autonomous vehicles, legislative changes are anticipated, though the timeframe remains uncertain. These changes will require a substantial shift in the legal and regulatory framework, transitioning from an ‘owner/driver-reliant’ model to a ‘technology-reliant’ model, as explained by Pranav Patel, president of ResiliAnt. Patel further notes that ensuring the safety of autonomous vehicle technology is a multifaceted challenge, encompassing mechanical components, autonomous system components, and the broader ecosystem within which the vehicles operate.
Liability: A Thorny Issue
The question of liability in the event of an accident involving an autonomous vehicle is one of the critical concerns in the industry. As Klein elaborates, the driver is usually liable in vehicles that require driver supervision. However, as vehicles gain higher autonomy levels, the focus may shift towards product liability.
Insurance models will likely need to shift from individual coverage to technical failure coverage, Patel agrees. “In this emerging industry, there are many ‘unknowns’ that could lead to incidents, making it difficult to estimate cost/impact exposure for coverage,” Patel says. He also suggests that a significant degree of technical knowledge is required to establish initial cost/impact levels.
Embracing the New Horizon
Navigating the unfamiliar terrain of technology and law around autonomous vehicles carries inherent risks. However, it’s also teeming with opportunities. Joey Daryanani of CSAA Insurance Group notes that carriers will need to keep a close eye on loss trends and be ready to respond rapidly. With potential benefits outweighing the drawbacks, the adoption of autonomous vehicles will likely pick up pace. As autonomous vehicles prove to be safer than human drivers, we might reach a turning point at which the adoption of autonomous vehicles surges — and insurance companies could play a significant role in propelling this trend.
In the face of rising auto insurance and fleet insurance premiums, customers are likely to embrace technology that offers some relief. However, Klein advises risk managers to familiarize themselves with the technology and insurance options before making decisions. As he puts it, “The actuarial picture will not be the same from one year to the next, and it will likely take decades to sort out.”