The introduction of self-driving cars looks set to change the way people commute in the very near future. Although some motorists might be feeling trepidation about the prospect of handing over control to a fully automated machine, many around the world are excited about the idea.
We’re almost there – car manufacturers are continually cranking up driver assist features with new vehicles entering the market. “In the near future, we expect to see manufacturers eventually release cars that will drive themselves,” says Vera Nagtegaal, Executive Head of Hippo.co.za.
However, this poses an interesting question for the vehicle insurance industry and how it assesses client risk, points out Nagtegaal. “Where previously insurers priced their premiums according to a driver’s history – what happens when there is no driver?”
Questions around risk and liability will shift, she adds. “If your car hits another car – are you liable for the damage caused?”
A report by EY titled ‘The evolution in self-driving vehicles’ points out that insurers will have to think carefully about five major challenges:
- What risks will remain – and will new ones arise?
- Who is the customer and how will insurers do business with them?
- How will insurance products have to change?
- How will insurers price their models so they’re still profitable?
- The impact of regulation and legislation around road use and insurance.
As recently as December last year, Google’s self-driving technology company, Waymo, announced that it was partnering with on-demand insurance company Trov to cover driverless cars. With the company’s vehicles currently being tested in Arizona and three other cities in the United States, Waymo plans to launch a driverless ride-hailing service to rival Uber and will need to ensure that its cars are adequately protected against any risk.
Nagtegaal says a shared manufacturer and owner model may be what insurers could look at when assessing the risk implications of self-driving cars. “With this model, the manufacturer would assume all the risk related to software malfunctions that may cause accidents. The consumer would be responsible for other things such as the areas in which the car is driven or parked, what the car is used for, weather-related damage, and vandalism.”
Self-driving cars also present a cybersecurity problem for manufacturers because, like any other computerized system connected to the outside world, they are susceptible to hackers,” Nagtegaal points out. “To mitigate this risk, manufacturers will have to take steps to insure their vehicles against hackers.”
“Theft would be an interesting risk to assess, especially during the claim assessment process, as a manufacturer would have to prove that the car’s system was not compromised in a way that made it easy for hackers to take control of a vehicle,” she says.
The World Economic Forum anticipates that assisted driving will improve the economic benefits of consumers by over $1-trillion over the next decade due to fewer accidents and lower insurance premiums.
Features such as advanced driver assistance could reduce collisions by 9%. This would result in consumers racking up monthly savings in the future thanks to lowered insurance premiums resulting from the overall reduction of accidents.
Apart from the economic benefits of enhanced driving features, the report states that around 900 000 lives could be saved through these technological advancements. In addition, autonomous vehicles could mean people spend less time stuck in traffic – thus reducing the risk of being involved in an accident.
“The biggest challenge for manufacturers and insurance regulators will be to convince current drivers that self-driving cars will allow for safer and more controlled driving on the roads,” Nagtegaal adds.