THE BLOG

Driverless Cars And The Insurance Long Parallel

03/11/2016 11:33

Automotive technology has developed rapidly in recent years, with new levels of autonomy from lane departure warning systems and autonomous emergency braking (AEB) to active cruise control and automated parking increasingly appearing as standard in vehicles on the forecourt.

Given the proliferation of connected services and market growth projections, it is highly likely that there will be driverless vehicles on UK roads by the mid-2020s. This advancement towards autonomous vehicles could have huge implications on road safety - especially since a massive 90% of road traffic accidents are caused by human error.

However, the concept of a 'crashless' future occupied solely by driverless cars rendering auto insurance obsolete is either unrealistic or too distant to gauge as autonomous, semi-autonomous and driver-operated cars will all share our roads for the foreseeable future. While autonomous vehicles may be an appealing and convenient idea to many, there will remain significant group of drivers who simply enjoy driving. The idea that the owner of a sports car will stop wanting to take it out for a spin is, to them, unthinkable.

In this situation human error will remain a key consideration in the dynamics of the road. At the same time, although autonomous cars will help to significantly reduce the number of accidents that occur, any incidents that do will require more sophisticated assessment to determine whether man or machine is at fault.

Far from a cause for contraction in the insurance industry, the proliferation of autonomous and semi-autonomous vehicles presents a significant opportunity for auto insurance, and one that will see the industry evolve significantly to adapt to the technology and driving habits of the generations to come. A 'long parallel' is emerging, which means there will be a mix of policies for individuals as drivers and for manufacturers, but in which insurance must still underpin driving.

With the proliferation of autonomous cars, it is expected that OEMs will need insurance policies of their own. A crash will always entail a claim and liability must always rest with a party. When autonomous driving technology causes an accident, there is no human error at play except the error involved in that car's design or interpretation of data. As such OEMs will need data and analytics to underpin insurance cover to defend these claims and to pay out in the event of successful action. This is one of the most significant ways in which we see auto-insurance evolving.

Modern society is litigious in its nature and is becoming more so with each passing year, individuals and companies will seek to protect themselves through insurance. Car manufacturers will increasingly have to take brand reputation into account as the risks associated with actions against the makers of autonomous vehicles increase and as highlighted by the UK government, will be a separately insured party in any incident. Equally, car sharing and the uberisation of journeys will add a fresh nuance to this, as the number of parties involved in crash and claims events amplify.

It's clear that throughout the autonomous journey, the insurance industry will play an important role, supporting this evolution by providing data driven insurance at every stage and enabling the insurance industry to become more efficient in the pricing of risk and handling of claims.

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