How will Autonomous Vehicles change Auto Insurance?
The popularity of autonomous vehicles or self-driving cars using navigational technology in smart automobiles has caused many questions about their safety, liability, and what it could mean for the future of auto insurance.
A recent fatal accident in Harris County, Texas killed two passengers in a Tesla Model S that crashed at high speed without anyone behind the wheel. Preliminary data shows the car failed to detect a turn in the road and collided with a tree.
The deceased had reportedly gone to test the “Autopilot” feature on the vehicle. CEO of Tesla, Elon Musk, confirmed that the vehicle was not part of Tesla’s “Full Self-Driving” (FSD) system. A growing number of cases like the crash in Harris County are causing problems for vehicle safety officials. As of now, there are no formal regulations for vehicles with autopilot or fully autonomous vehicles (AVs). The only regulation currently in place is vehicles must have steering wheels and the ability for humans to take control.
Tesla states clearly in the owner’s manuals and on their website that the Autopilot and FSD features are not fully autonomous and drivers must stay alert behind the wheel. A victim of a collision of a Tesla Model 3 and an overturned semi in California, had posted videos of the car operating in Autopilot just before the accident. The vehicle was confirmed to be operating in Autopilot before the crash, but there is no confirmation that Autopilot was on at the time of the accident.
The push to use camera-based Autopilot appears to be fueled by regulatory issues by National Highway Traffic Safety Administration after recent deadly accidents. Tesla recently announced they are phasing out the use of radar and instead focusing on developing “Tesla Vision,” a camera-based Autopilot system developed by the company.
Although Tesla does not claim that their vehicles are fully autonomous people are looking into data showing the vehicles are having a hard time detecting stationary objects. Because of recent accidents, the NTSB has recommended that Tesla limits its driver-assist features to highways, but Tesla has resisted.
What this means in terms of Insurance
The US Department of Transportation indicated that more than 90% of car accidents result from human error. And these personal traits and behaviors of customers are currently critical factors when insurers set premiums.
To translate this into autonomous cars, the organization rates a vehicle’s ability to self-drive from Level 0 (none) to Level 5 (fully autonomous).
- Level 0 (No Driving Automation): The human provides the “dynamic driving task” although there may be systems in place to help the driver.
- Level 1 (Driver Assistance): The vehicle features a single automated system for driver assistance, such as steering or accelerating (cruise control).
- Level 2 (Partial Driving Automation): The vehicle can control both steering and accelerating/decelerating. Here the automation falls short of self-driving because a human sits in the driver’s seat and can take control of the car at any time.
- Level 3 (Conditional Driving Automation): Vehicles have “environmental detection” capabilities and can make informed decisions for themselves, such as accelerating past a slow-moving vehicle.
- Level 4 (High Driving Automation): Vehicles can intervene without human interaction in most circumstances.
- Level 5 (Full Driving Automation): Do not require human attention – the “dynamic driving task” is eliminated. Level 5 cars do not even have steering wheels or acceleration/braking pedals.
In terms of insurance and safety, the goal of autonomous and semi-autonomous vehicles is to increase safety. As this technology matures and more people adopt it, there will be a decrease in the number of accidents on the road. In fact, Partners for Automated Vehicle Education claim “autonomous vehicles could avoid some 72% of crashes.” Because of this, people with autonomous or semi-autonomous vehicles will see decreases in their auto insurance premiums while those who choose to stay with human-operated vehicles will see a premium increase.
A current problem that is arising with semi-autonomous vehicles is that it can be difficult to tell who is in control, the driver, or the vehicle. This will bring up problems as more accidents arise and laws are put into place. The National Highway Traffic Safety Administration (NHTSA) oversees road and vehicle safety while the state Department of Motor vehicles (DMVs) oversees drivers. The confusion over whether the computer or the person oversees the vehicle will cause issues when it comes to determining who is at fault for accidents when making laws.
We will also see a shift in car insurance claims when looking at who is at fault. With autonomous vehicles, there is no driver at fault, so insurers will start looking to automakers for claims. If this is the case, the federal government will get more involved as cases cross state lines and laws need to be unified.
Underwriting will also change replacing general aspects like miles traveled and driving records becoming less important when determining insurance premiums. Instead, underwriters will rely on data from apps and tracking services like Geolocalization, where the car is driven, manufacture of the car, and model characteristics.
While autonomous vehicles are still years away from dominating roads, lawmakers are linking into the regulatory and insurance issues that will come with these new vehicles. We are going to start to see changes in how insurance premiums are decided and how claims are resolved as autonomous and semi-autonomous vehicles begin to enter the mainstream.
From now on insurers will need to understand the risk posed by two drivers: one human and one robotic. Understanding technology will always be the first step in securing autonomous vehicles in a debate that is coming closer every day.
For more news and analysis sign up to receive our monthly Risk Management newsletter!