Autonomous vehicles and insurance: 5 challenges, 3 opportunities and 1 certainty
As insurance coverage will be profoundly different when (all) cars on the road are autonomous, a lot of strategic and legal insight is required to overcome the challenges and grasp the opportunities.
Here are five challenges, three opportunities and one certainty.
- Safer traffic means decreasing premiums
The majority of current traffic damage and injuries result from human failures and inattentiveness. Car automation will (or should) make driving safer. This is good news for people on the road; less so for insurers. If the overall number of accidents decreases, so will the insurers’ income through auto policy premiums.
- Possible shift towards strict liability
Hardware and software are not flawless and will trigger their manufacturer’s liability for placing defective products on the market. As cars become autonomous, they will move on the basis of sensors and algorithms rather than human activity. It is likely that the driver’s fault liability will gradually be replaced by strict liability. However, to the extent that a human driver remains in control of the vehicle and depending upon the circumstances in which the car is used, the human driver’s fault liability will continue to have its place.
- New liability regime for software
The existing product liability regime will probably face some challenges. It is not a given that software qualifies as a product under the existing product liability regime. Other questions will rise also, such as: how do we assess learning systems inside autonomous vehicles in light of the requirement that the defect should exist at the time the product was put on the market?
- Who is the custodian of the software?
Apart from product liability, the Belgian Civil Code provides for a strict liability regime for the custodian of a defective good. Autonomous cars will also raise issues in this context, such as: who is the custodian of a licensed software system (in the cloud)?
- Tailor-made insurance will be required
New risks resulting from technological developments will have to be covered by tailor-made solutions. The insurance’s ‘centre of gravity’ in the sector will move towards product liability and recall insurance policies as well as cybersecurity policies. Complex legal questions will arise when these liability regimes collide.
Technological developments will create opportunities for insurers too.
- Business models must be data-driven
Technological developments will affect automobile-related insurance and the related revenue model, but will not make the market’s need for insurers disappear. Risks and uncertainty regarding liability will remain even if event data recorders will allow courts to analyse the circumstances and underlying causes of accidents. By collecting data, insurers will be able to precisely assess risks and adapt premiums to the actual risk that a driver might cause. Bearing in mind privacy legislation, the advanced analysis of data will allow insurers to become more cost-efficient and safeguard margins.
- New insurance products can be developed
Drivers, who are currently excluded from coverage, are likely to become mere passengers in their own car and should probably be compensated for damage caused by any failing hardware and/or software system(s). Claims against (the operators of) public infrastructure, such as traffic management systems, road networks and external sensors and signals, should also be covered in the future.
- Insurers become part of mobility ecosystems
Finally, as the focal point will move to mobility in the broad sense from just car ownership and use, insurers should also consider new services to reply to this new mobility chain and social reality. Insurers should become part of a mobility ecosystem in view of answering the customers’ needs. That is how insurers might end up competing with enterprises offering general mobility solutions, such as car sharing platforms (who will also offer insurance-like products – see 2018 World Insurance Report).
There is one certainty: even though it might take longer than expected, autonomous cars are coming.
Belgium was not included in KPMG’s Autonomous Vehicles Readiness Index but is slowly preparing its roads for autonomous vehicles. As discussed in another contribution to this blog, Belgium has allowed experiments with automated vehicles on its roads
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