Modern corporate risk and liability exposures can arise from many sources, including third parties, supply chains, products, IT security, new technology and the environment. Global Risk Dialogue examines current and emerging risk management and insurance issues across a number of trends.
Widespread use of driverless car technology will reshape the mobility risk landscape. Less frequent but more expensive claims, the increasing importance of data storage systems and cyber-security issues are just some of the potential outcomes.
At some point in the future, you won’t drive – you will be driven by a bot. And it is anticipated that autonomous driving has huge potential to reduce the frequency of accidents and severe bodily injuries. There are other benefits as well, such as – time reduction, fuel efficiency, reduced costs, crash savings – all of which are significant. But, although it promises to improve travel safety and economy, even fully automated cars will be exposed to perils like hail, glass breakage, technical failure, hacking risks, theft and emergency situations, so loss activity will never be entirely eliminated.
Nor will the changeover from non- to fully-autonomous cars take place overnight. Traffic will likely be made-up of a mix of autonomous and human-driven vehicles for the next 25 years, so there will still be accidents between both car types for many years. Therefore, collision risk and compulsory third-party liability insurance will not fade.
Further, the introduction of driverless cars will require changes to existing laws, as well as debate regarding to whom the responsibility in the event of an incident belongs: driver, car manufacturer, software supplier or fleet operator, for example.
Looking further ahead, the technological shift in the automotive industry towards autonomous mobility will create further product recall risks. which could even be larger and more complex than those seen today. If a series of accidents raises safety concerns for the AI technology behind driverless cars, it could trigger a massive recall across different manufacturers and countries.
“Our automotive clients are working on developing driverless and driver-assistance technology and are looking for the support of insurers. Allianz is working with vehicle manufacturers and suppliers, discussing the potential risks and developing future insurance coverages, including coverages which adjust between the driver and the manufacturer or supplier depending on whether the vehicle is in auto- or manual-mode; or personal on-demand insurance which covers trip cancellation or delays and protects personal items if they are lost or stolen; or even cyber protection for the passenger’s personal data and identity protection.”, said Carsten Krieglstein, Head of Liability, Central & Eastern Europe, AGCS
Today, it is estimated more than 90% of road accidents are caused by human error. Autonomous driving offers the potential to reduce accident frequencies – and by as much as 80% by 2040, according to some predictions.
Additionally, CO2 emissions are forecast to decline by 60% and monetary benefits in terms of crash savings, travel time reduction, fuel efficiency and parking benefits are estimated to be between $2,000 to $4,000 per year per vehicle. The penetration rate of autonomous vehicles is expected to reach 5% by 2030 with a compounded annual sales growth of about 40% projected between 2025 and 2035.
Risk Management and Insurance Impact
Autonomous driving will have a significant impact on the insurance industry. Overall, the volume of automotive insurance claims is expected to decrease as responsibility will increasingly shift from the human driver to automated systems. As a consequence, the premium volume of traditional car insurance will gradually decline. However, product liability insurance of original equipment manufacturers (OEMs), automobile suppliers and mobility service providers will become more important.
New and existing liability schemes, including expanded product liability covers, will be needed to protect manufacturers against traffic or driving decisions that impact either passengers, pedestrians or goods. In addition, as more advanced technology is incorporated into vehicles, such as new sensors, the average cost of damage claims is expected to rise.
In an accident scenario, insurers will have to determine who is at fault and this is where data storage systems could play a major role. Questions around product versus driver liability will continue to arise. In order to clarify the causes of damage in a neutral manner, a standardized data recording system in highly automated vehicles will be key to perform such analysis.
Claims investigation will greatly benefit from the adoption of mandatory identification levels for autonomous cars in order to easily identify claims data for risk assessment and monitoring – i.e. is the car fully non-autonomous, fully autonomous or something in-between.
In case of a product fault, a standard procedure between insurers and OEMs will need to be agreed upon to handle incidents in a transparent and standardized manner.
From an information security point of view the potential for cyber incidents increases alongside increasing connectivity of cars. The main challenges are secure communication (encryption) and secure identification and authentication, especially in the vehicle itself and machine-to-machine. Therefore cybersecurity should be a top priority to avoid fraud by manipulating data, attacks on a scaled level (for example, terrorist attacks) and vehicle theft.