The proliferation of autonomous and semi-autonomous vehicles will change the nature of car ownership and challenge the motor insurance market to develop new business models, the LMA said at Lloyd’s this on Tuesday.
There will be fewer accidents, dramatically lower private ownership levels, more tailored insurance buying, and new cyber risk posed by the new cars, according to the LMA, holding a briefing on the technology and insurance implications of driverless cars.
“Autonomous and semi-autonomous cars will fundamentally alter the nature of driving and the insurance industry’s business model,” said David Powell, the LMA’s non-marine manager.
“These vehicles mean fewer collisions, which will take place at lower speeds. Removing the driver removes eight-out-of-ten of the most common causes of vehicle accidents,” he said.
New trends in car ownership arrangements will affect the way vehicles are insured, with savings and greater efficiency possible from the new cars.
“Two-car households could become one-car households,” said Powell. “It’s easy to imagine a scenario in which, after having dropped one partner at the train station, the car returns home on its own to be used by the other partner before returning to the station that evening to pick up the commuter.
Consequences for liability business involve a relatively simple shift from person to product liability, he noted.
“The insurance issues are fairly straightforward. The law says if you are in control, you are liable for any injuries or property damage you cause. So, if a vehicle cannot be driven by its occupant – for example, it has no steering wheel or controls – then it becomes a product liability issue. The occupant has no need for motor insurance, rather like a passenger in a taxi,” he said.
“If the car can be driven, the driver will require insurance protection. Even if, at the moment of the crash, the occupant did not have his or her hands on the steering wheel, it would be very hard to argue that that person was not in control of the vehicle in the eyes of the law,” added Powell.
Powell said that the threat of malicious attacks should be a recognised cyber risk for insurers, requiring solutions involving improved encryption and underwriters applying contractual terms to minimise their exposures.
Older vehicles will pose little risk as they are unlikely to be networked, he suggested.
While the hardware already exists for driverless cars, Peter Shaw, CEO of Thatcham Research, the UK insurance industry’s automotive testing centre, told underwriters that the next steps involve rigorous testing as well as addressing the “legal, political and cultural” facets of change.
Shaw noted that manufacturers’ use of combined radar, camera and lidar – laser sensing technology – has resulted in major improvements in the vehicles’ abilities to accurately identify pedestrians, cyclists and other potential risks. Many of the systems have their origins in military technology but are now available in affordable everyday cars.
By 2023 Shaw said autonomous emergency breaking (AEB) would be required of all new vehicles and by 2030, the majority of the ‘UK car parc’ – all vehicles on UK roads – would have this fitted.
He thought it would take up to thirty years for fully autonomous cars to become the norm, while three manufacturers have pledged to launch highly autonomous cars by 2018.
Reactions also wrote about the drive towards driverless cars in its most recent July/August issue of the magazine, story available here.