The advent of self-driving cars is raising questions in the insurance sector about who should pay when the vehicles crash and how insurers will set equitable rates.
When cars can operate themselves, the central question will be whether accidents are the manufacturer’s responsibility and therefore covered by product liability insurance or whether the fault would lie with the driver and be covered by personal auto insurance.
While even today’s most advanced cars aren’t fully autonomous, experts say such cars are coming and the insurance question will only become more urgent. When a Tesla crashed near Houston last month, killing the two occupants, the initial focus was on Tesla’s self-driving technology, prompting CEO Elon Musk to deny that the car in question had those capabilities.
Musk said data logs showed the car didn’t have a full self-driving computer installation and the automaker’s separate “Autopilot” feature wasn’t enabled. Tesla says Autopilot requires active driver supervision and that no Tesla cars are completely autonomous. Police said no one was in the driver’s seat when the car crashed into a tree.
But there are other examples of autonomous vehicles gone wrong. The National Highway Traffic Safety Administration said it launched investigations into 34 crashes related to advanced driver-assistance systems, mostly involving Tesla vehicles but some involving models from Cadillac, Volvo, Lexus and Navya, a French firm that is developing self-driving shuttles.
Robert Passmore, vice president of auto and claims policy at the American Property Casualty Insurance Association, a trade group, said if there isn’t a human driver to ask, insurers will need to collect information from vehicles such as speed and when systems became aware of the person, vehicle or object with which they collided. Most cars already keep information about crashes in an event data recorder.
The association is lobbying Congress to give insurers access to vehicle data, which it says will support increasing automation of cars.
Passmore said the coverage might vary by circumstance. For cars with advanced driver-assistance features, the driver is still “responsible for the overall operation,” so liability would fall under personal auto. If the vehicle malfunctioned, the manufacturer’s product liability could be invoked — as already happens with standard cars. But even with a fully autonomous vehicle, individuals could have liability exposure if they didn’t do maintenance such as installing software updates, he added.
Thomas B. Considine, CEO of the National Council of Insurance Legislators, said there aren’t yet special legal or regulatory requirements related to personal insurance for autonomous vehicles. The Uniform Law Commission — a national organization of legislators and their staffs, judges, lawyers and professors that drafts model laws when states are seeking uniformity — considered creating one. But it ultimately decided insurance issues were complex and outside its scope, said Bryant Walker Smith, who worked on the idea.
One reason is that the question isn’t yet ripe. There aren’t vehicles available yet with fully automated driving features, notes Smith, a law professor at the University of South Carolina and expert on automated driving. Still, lawmakers and others are preparing for the day they arrive.
Smith said Sens. John Thune, R-S.D., and Gary Peters, D-Mich., are among many working on autonomous vehicle legislation in Congress. Both are members of the Commerce, Science and Transportation Committee.
A Senate aide, who spoke anonymously to discuss planned legislation, said negotiations about self-driving cars and insurance “are currently ongoing in the Senate with stakeholders on the best path forward.”
Although there aren’t fully autonomous vehicles ready for purchase, there are many being tested and even a few taking passengers on roads in Arizona.
Waymo LLC, Google’s self-driving car project that became a separate part of parent company Alphabet Inc., offers a ride-hailing service near Phoenix with fully autonomous vehicles, meaning there’s no one in the driver’s seat. The company is also testing the technology for trucking and local delivery.
Volvo Car Corp. preemptively announced in 2015 that it would accept full liability for cars in autonomous mode and still expresses that commitment.
“When the future autonomous driving feature has been rolled out and is in use after activation by its user, Volvo Cars will take full responsibility, and assume liability, for it,” spokesperson Russell Datz said in an email.
Ford Autonomous Vehicles LLC, created in 2018, plans to launch self-driving services next year. The service will transport people and goods, but the company won’t disclose more details yet for competitive reasons, spokesperson Dan Pierce said in an email.
Daimler AG and other companies, both traditional auto manufacturers and startups, are also working on testing and development.
Self-driving technology could make cars safer and reduce manufacturers’ liability, which are motivating factors for research, although it’s unclear exactly how much safer.
Insurers have billions of miles of data on human drivers but far less for autonomous fleets, said Max Libman, a lead underwriting consultant at Liberty Mutual Insurance Co., during an online event organized by Partners for Automated Vehicle Education, a coalition of auto manufacturers and nonprofit groups focused on issues such as safety and sustainability.
The first goal is to reduce fatalities, and “along with that is a reduction in frequency and severity of losses, which should [lead] to less expensive auto insurance,” Steve Miller, risk management consultant at the Insurance Office of America, which employs independent agents, said during the webinar.
SAE International, founded as the Society of Automobile Engineers in 1905, defines five levels of self-driving. Levels 1 and 2 involve driver support features widely available today, such as automatic emergency braking, lane departure warnings, lane centering or adaptive cruise control. Level 3 means a person must drive some of the time, depending on the situation. Level 4 means a car operates on its own under limited conditions, and Level 5 means it can operate everywhere in all conditions.
Other than Waymo, which says it has a Level 4 system, cars with Level 4 and Level 5 features might not be available until 2040 to 2050, according to James Lynch, chief actuary at the Insurance Information Institute, whose board is made up of industry executives. That horizon is much further away than some had previously expected.
Meanwhile, the life insurance industry is studying effects that autonomous vehicles could have on claims, said Catherine Theroux, a spokesperson for financial services consulting firm LIMRA.
There were 1.10 traffic deaths per 100 million miles driven in 2019, according to NHTSA, down from a rate of 1.14 the previous year. Preliminary data from last year, when people stayed home more than usual because of the pandemic, shows fewer deaths but far fewer miles driven, so the fatality rate actually rose to 1.25 for the first half of the year.
Most auto accidents result from driver error, so using more autonomous vehicles would likely reduce traffic deaths, Theroux added. Still, it’s too early to determine how the technology might affect life insurance premium rates.
“The current view is that there may be an initial increase in accidental deaths as the degree of vehicular autonomy increases and design changes are tested and refined,” Theroux said in an email. “However, longer term, the expectation is that autonomous vehicles will reduce driver error significantly.”