Autonomous driving will change motor insurance landscape

A shift away from traditional auto insurance will be an inevitable consequence of the rise of driver assistance systems and, ultimately, autonomous driving, Hazel Yang Lee, lead, personal auto product development at ISO Solutions, a Verisk Analytics business, told PCI Today.

She added that, in the short term, insurers could have to grapple with greater uncertainty and complexities around claims that involved these types vehicles.

“As these driver assistance systems gradually bring about more autonomous driving, many consider a shift away from traditional auto insurance to be inevitable. Specifically, this shift is expected to reflect a transition from private vehicle ownership to shared fleets of commercially or publicly owned vehicles,” she said.

“When autonomous vehicles are involved in accidents, insurers may be affected in a number of ways while still evaluating traditional considerations such as liability and the circumstances of each accident.

“Currently, some major automakers have asserted that they will assume responsibility for accidents caused by their vehicles’ defects. And before full autonomy is achieved, insurers may face additional complexities in claims handling while determining whether the accident was the result of software failure or due to negligence by the human operator of the semi-autonomous vehicle.”

She stressed that in theory advanced driver assistance technologies will lead to safer driving experiences—a trend that would reduce premiums due to a reduction in the frequency and, potentially, the severity of the claims.

The National Highway Traffic Safety Administration (NHTSA) and other safety authorities have reported that approximately 94 percent of accidents are caused by human factors—a finding that supports this theory.

There are other consequences and potential business opportunities for insurers, Lee said. She said some also expect an increase in product liability insurance because defects or technical failures in automated vehicles may be attributed to the carmakers.

She added that insurers may also need to adjust their underwriting to take into account which cars have what technology, by using telematics data to understand driving behaviour, consider differences between traditional versus automated vehicles when resolving claims, and, finally, how they rate a policy.

She points out that traditional rating criteria used to assess a driver such as age, gender, marital status, and driving record would likely become less predictive, while telematics data or vehicle characteristics such as the version of the crash avoidance software on the vehicle, will have more relevance.

Lee stressed that it is difficult to foresee how the insurance landscape will adjust when driverless vehicles are ubiquitous, but notes that many industry insiders have speculated on how the insurance market and its participants can survive and thrive in the changing insurance landscape.

“Until current financial responsibility and compulsory insurance laws and regulations that require liability insurance are changed to address such fully autonomous vehicles, operators/owners will still need coverage to meet minimum driving requirements depending on the laws of a particular jurisdiction,” she said.