The following is an opinion piece written by Simon Walker, chief executive, First Central Group. The views expressed within the article are not necessarily reflective of those of Insurance Business.
There is a lot of excitement about driverless cars at present, but marketing terms such as “autonomous” and “self-driving” provide consumers with a false sense of security in the capabilities of these cars, leading them to believe they have a level of autonomy not yet available. While manufacturers are looking ahead to continue the development of driverless vehicles, they must ensure they balance what is technologically possible with what is socially acceptable.
Unfortunately, there have been a spate of accidents recently involving autonomous vehicles and consumers. For instance, an accident with an Uber vehicle earlier this year resulted in a fatal collision with a pedestrian, while in another incident a Tesla driver died in an accident when the autopilot function was in use in the self-driving test vehicle. Clearly, there is a need for detailed guidance on the consideration and legalities of the development and use of self-driving vehicles on the roads.
Following the Uber incident in Arizona, the company has made the decision to shut down its self-driving operations. However, it would be naïve to think this will entirely halt the development of driverless vehicles. The competition between manufacturers and countries to be first in the driverless car race will only make this a temporary pause, as opposed to a complete cessation of efforts in this regard.
Without a doubt, innovation and technological advances are edging us ever-closer to more sophisticated modes of transport. As autonomous vehicles are becoming a reality, we must ask ourselves how prepared the insurance industry is for this development, and if there will be a need for insurance as we currently know it.
In 2017, The House of Commons in the UK introduced the Automated and Electric Vehicle Bill, which aims to extend compulsory motor insurance to include the use of autonomous vehicles. As such, a single insurer model is maintained, where the insurer in the first instance covers liability, whether an incident happens when the vehicle is under the control of the human driver or in full autonomous mode.
However, in the future, it is possible that we will see the emergence of instances where compensation is sought from the insurer in the first stage, but also where the insurer in turn seeks recovery from the vehicle manufacturer, if the vehicle was in autonomous mode at the time of the incident. Taking that a step further, we could then see the manufacturer seek compensation from whichever software provider wrote the code that was the root cause of the incident.
The recent Uber and Telsa events are likely to result in greater and more frequent system-driven reversion of control of the vehicle back to the human driver, with the consequent further deferment of “full Level 5” autonomy. As such, insurance will continue to be required for the “human” part of the journey. It is therefore more effective to continue to have a single point of insurance management, the private motor insurance policy.
As autonomous cars continue to be developed, the insurance market will see a fundamental change, both in terms of the way premiums are set and in the way in which liability is established. In relation to premiums, it is likely that rates will be weighted more to the risk profile of the vehicle than the risk of the driver, which is the reverse of what we see today. Motor insurance will need to move to a position whereby the profile used for pricing moves from the manufacturer and model, to the individual vehicle, given the likely range of options and version of software present in the car.
It will take time for society to come to terms with the technology of autonomous vehicles when using them on public roads. However, the insurance industry will need to continue to prepare for the future. If we fail to prepare, we should prepare to fail, as the old saying goes.