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What Does the Dawn of Autonomous Vehicles Mean for the Insurance Industry?

“The impact of vehicle automation on the insurance industry has begun and will build over the next few decades. Some challenges for the insurance industry include determination of fault, appropriate pricing for new vehicles, and recovery costs that are a result of product liability.”

 

– Insurance Institute of Canada.

On today’s roads, the vast majority of accidents can be attributed to driver error. However, in the next 50 years many if not all of the cars on the road will be replaced with fully autonomous vehicles. This has many benefits for Canada’s road system such as a significant reduction in traffic congestion as well as a decrease in serious injuries and fatalities resulting from collisions, but leaves many questions as to how these autonomous vehicles can be insured.

Tesla has been spearheading the autonomous car movement with autonomous driving systems in its Model S and Model X, and out of the claimed 200 million miles driven by autonomous Tesla’s there have only been a handful of accidents. Even though there have been fatalities that resulted from flaws in the car’s software, Tesla has been able to avoid legal trouble almost entirely. This has largely resulted from its policy requiring drivers to keep their hands on the steering wheel at all times so they can take control of the vehicle if necessary, leaving the driver ultimately responsible for accidents.

As this shift towards semi autonomous or even fully autonomous vehicles happens, the responsibility for collisions will be more so on the vehicles and their manufacturer’s rather than on the driver. But how can this be reflected in an insurance policy? For semi autonomous vehicles, how can the liability be shared between the driver and the vehicle? If a car is fully autonomous, should the liability be placed entirely on the vehicle and its software? Or should the driver still be responsible for ensuring their vehicle operates safely? These are all questions that have to be answered by insurers and automotive manufacturers in the next few years.

The introduction of autonomous cars is also expected to change the claims resolution process. Typically, for collisions involving more than one vehicle, the main goal of this process is to determine how responsibility for the collision should be shared between the parties involved. However, with the introduction of autonomous vehicles, the process will also have to determine how much the vehicle and its software is at fault which could be time consuming and costly for insurers.

Despite the apparent shortcomings of this technology, it is only in its infancy, and the future potential is enormous. Namely the potential to decrease congestion and help prevent collisions. The reduction in traffic can be attributed to the various systems that connect vehicles to other autonomous vehicles, as well as infrastructure such as traffic lights. These technologies make it possible for interconnected vehicles to travel very quickly and safely with very little space between cars. This not only improves fuel economy but can almost entirely eliminate congestion. In the future, technologies such as these may entirely negate the need for traffic lights and speed limits.

The future for autonomous vehicle insurance is uncertain, however, Canada’s no fault insurance will likely ease the transition to policies that are fit for fully autonomous vehicles.