Insuring Driverless Vehicles
Not the same as insuring vehicles with drivers
In this brief note, we discuss some of the issues that insurance firms will face in the coming years as more and more vehicles adopt driverless features. Such features are being deployed at an increasing rate in regular vehicles to assist drivers in situations like parallel parking, getting out of a tight parking spot, etc. and some of the higher-end vehicles have options to use “driverless’’ mode. As the features evolve and get more widely distributed, there will be increased usage and instances where an insurance claim is linked to such features. The types of incidents can be relatively minor such as damage to the vehicle and/or property [1] or something horrific like a fatal crash while on “autopilot’’ mode [2].
The evolution of the current technologies of driver-assist features to a fully autonomous vehicle can be seen in Figure 1. We will use this conceptual framework for the rest of the discussion.
Options for Insurance Firms
We believe that insurance firms should not wait too long to develop their strategy to address the likely future scenario of fully autonomous vehicles becoming commonplace. There are existing driver-assist features that make it imperative that insurance firms have a clear position on covering incidents that happen when a human driver is not controlling the vehicle.
Federal, State and local insurance laws and regulations will obviously have to be taken into account, though typically the updating of existing laws or passing new legislation to address the new reality is a slow process and will likely take a long time. In the meantime, the insurance firms will be left with a scenario where the laws are not clear, and they have to provide insurance and explain to their customers what is covered and what is not.
In the short-mid term scenario where the laws/regulations have yet to catch up with the advances in vehicle technologies, the insurance firms will need to make some decisions. They can take a position ranging from “the incident is always the driver’s responsibility and therefore it is covered’’ to “the incident is the responsibility of the vehicle manufacturer so it is not covered.’’
One can think of a three-tier classification system that the insurance firms can use for their product offerings. For each of these tiers, the insurance firms will need to make a decision on the responsible party in case of an incident and whether or not they will cover the incident; it could be the driver, the owner, the vehicle manufacturer, or the firm that developed the key software powering the vehicle. Each firm will make this decision based on its internal policies, market conditions and legal requirements.
- Vehicles with drivers using some driver-assist features. These will be the most common instances in the near future, and most (if not all) new cars will have some level of such features. Insurance firms will most likely have to cover these features though they should do some analysis of the effect of such features on the level and severity of incidents.
- Vehicles with drivers using autopilot. These vehicles have started appearing in the market with the most notable example being Tesla’s autopilot features on some of their models [3]. Over the next few years, more vehicle manufacturers will provide autopilot features and insurance firms need to decide how they will address incidents that happen when the vehicle is being driven effectively by software code.
- Vehicles without drivers. These are the fully autonomous vehicles that will not have drivers. Current examples of such vehicles include drone aircraft, automated people mover systems (like the ones at several airports) and some trains; these current vehicles are either operated in the air or on access-controlled corridors. However, once these technologies are adapted to cars and trucks, there will be interactions between vehicles with drivers and vehicles without drivers. Insurance firms will need to start thinking about such situations and their product offering for such vehicles.
Opportunities for Lawmakers
So far we have discussed the scenarios from the insurance firm’s perspectives. We cannot disregard the role of laws and legal framework in the decisions that the insurance firms will need to make. Currently, there are a few states that have enacted some laws in this space; the National Conference of State Legislatures provides an excellent summary of the state-level legislation on autonomous vehicles on their website [4].
At both the Federal and State level, there is an opportunity for thoughtful congresspersons and senators to make their mark by introducing legislation that will govern the design, manufacture and use of not only the features that assist the drivers to do routine tasks but also the fully autonomous vehicles.
There are several areas that the legislature could consider including: insurance requirements for software developers, legal framework for prosecuting malicious hackers who gain un-authorized control of the vehicle, disclosure requirements, software update cycle requirements, penalties for software failure or bugs, etc.
Closure
This article has raised some issues that insurance firms need to consider when they think of their product offerings for vehicles with the new technologies that assist the drivers with routine tasks as well as allow for the vehicle to be operated in an autonomous mode. There are opportunities for the members of the legislative branch to make their mark by designing well thought out laws and regulations to govern the design, manufacture and use of such technologies and vehicles.
References
- PIX11.com. Tesla on autopilot runs off New Jersey road, hits curb and signs: police. https://www.pix11.com/2019/02/11/tesla-on-autopilot-runs-off-new-jersey-road-hits-curb-and-signs-police/.
- BBC News. Tesla Model 3: Autopilot engaged during fatal crash. https://www.bbc.com/news/technology-48308852.
- Tesla, Inc. Future of Driving. https://www.tesla.com/autopilot.
- National Conference of State Legislatures. Autonomous Vehicles — Self-Driving Vehicles Enacted Legislation. https://www.ncsl.org/research/transportation/autonomous-vehicles-self-driving-vehicles-enacted-legislation.aspx.
