Driverless cars could make the roads safer for all, but insurance companies have a long and winding road to figuring out how to deal with autonomous automobiles.
Fully autonomous vehicles are still a long way from the mass market, of course. A study from the analysis firm HIS estimated that fully driverless cars wouldn’t hit the market until at least 2025, and even then, they’re more likely to achieve critical mass in Europe before the United States, with its patchwork of state-to-state regulations.
But driverless cars are still getting a lot of attention. You may recall the fatal accident that made headlines this summer when a Tesla Model S collided with a tractor trailer after the car’s sensors failed to detect the truck turning ahead of it. And the World Economic Forum chose the city of Boston, for some strange reason, to pilot driverless cars by the end of this year.
Besides the implications for infrastructure, auto manufacturers and public safety officials, autonomous vehicles also have huge implications for the insurance industry.
Chris Goetcheus, a spokesman for the state’s division of insurance, said that could mean a shift toward product liability, which is more time consuming and costly to litigate than highway accidents. The no-fault insurance system isn’t perfect, he said, but it does cut down on cost to the system at large.
“Product liability claims are very expensive to litigate because anyone who had any contact with the product could be responsible and they take years to work their way through the courts,” said Frank Bailey, a lawyer with the Connecticut-based firm Tremont Sheldon Robinson Mahoney. “If you have your typical motor vehicle accident, where somebody has non-life threatening injuries, say a broken arm, it might be cost prohibitive pursuing a claim under product liability, and that is a concern because that would leave a significant gap in liability coverage.”
The shift toward autonomous vehicles is likely to happen along a gradual continuum, Goetcheus said. Auto manufacturers aren’t going to start rolling out driverless cars tomorrow, but some are already incorporating semi-autonomous safety features into vehicles, such as dynamic cruise control, smartphone integration and collision avoidance systems. As cars become smarter, so to speak, that’s going to raise questions about who is held liable when a car’s safety system fails. Was the driver in control at the time of the accident, or is the manufacturer at fault in this instance?
Either way, Goetcheus said, “Insurance will ultimately be a huge factor.”
Telematics And Smartphones And UBI – Oh My!
Some suggest the increased use of telematics could help guide the insurance industry toward better underwriting policies and claims for autonomous vehicles. Telematics refers to the use of a piece of hardware that transmits information back to the insurance company, including speed, mileage driven and how fast the driver brakes.
Previously, that might have meant information stored on the car’s black box or on a dongle provided by the insurer that would plug into the car’s computer, but smartphones are changing that, said Gwenn Bézard, research director at the Boston-based Aite Group and leader of the group’s insurance practice.
As autonomous and semi-autonomous features in cars begin to permeate the market, telematics could help insurers to better determine when autonomous features are on and when they’re off – or in other words, it could help insurance companies know when the driver is driving and when the car is driving.
“One of the challenges then for insurance companies to figure out is how to estimate the risk of all of those cars that are going to be in this transition stage,” Bézard said.
Telematics could be part of that solution, though the insurance industry has moved toward the use of telematics anyway as usage-based insurance has gained in popularity.
“The idea of usage based insurance, I think that’s going to take off a lot more quickly over the new few years as it becomes so much easier to do,” said Jean-Marie Lovett, president of the auto insurance agency MassDrive.
Some insurance companies already offer usage-based insurance, like Progressive with its Snapshot device. The insurer gives you a device to plug into your car and that devices feeds information back to the company for evaluation. Lovett expects the ubiquity of smartphones will accelerate the move toward usage-based insurance.
“In years past, there was a feeling of, ‘Is that Big Brother watching me?’ But now we’re use to carrying these devices around in our pockets tracking everything. We’re perfectly OK with our devices tracking how many steps we take and how many miles we run,” she said. “That’s something I think people are becoming more accepting of, these devices tracking things that have benefits to us.”
