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Who pays for autonomous driving fatalities?

Who's at fault when a self-driving car crashes? Insurance hasn't figured it out

Image used with permission by copyright holder

The advent of autonomous cars has the potential to fundamentally change the massive automobile liability insurance industry. It boils down to this: how can you be considered at fault in a traffic accident when there’s no steering wheel? Second, the insurance industry is likely to change along with the car ownership landscape as more urban and suburban dwellers choose ridesharing services, and those services move to autonomous cars.

Recent autonomous driving fatalities such as the Uber incident that killed a pedestrian in Arizona and the fatal Tesla Model X crash in Mountain View, California have shaken consumer faith in autonomous driving and the belief that autonomous cars will inevitably change the requirement to carry liability insurance for transportation. These events caused Toyota to suspend autonomous tests on public roads, among other industry responses.

To unpack all these issues, we sat down with industry expert Tom Super, Director of the Property and Casualty Insurance Practice at J.D. Power, to explore the issues as the insurance industry develops its policies for autonomous and near-autonomous vehicles. With companies like Waymo driving millions of miles in autonomous test vehicles, Uber buying thousands of cars for autonomous conversion, and many car companies getting into the game, this is not a remote future issue any longer.

Tom Super, Director of the Property and Casualty Insurance Practice at J.D. Power Image used with permission by copyright holder

What is the insurance industry response to the rapid deployment of autonomous test vehicles this year?

The fatality in Arizona really put this issue at the forefront again, and we got some calls from our insurance partners. One of the major things we’ve been looking at is skepticism from many consumers as these technologies become available. We have found about 48% of consumers are willing to use autonomous vehicles if given the opportunity, but there are still emotional factors in play. When they see the events like what happened in Arizona, it reinforces that skepticism.

But there are benefits to autonomous that will eventually outweigh the fear of new technology, right?

These accidents also underlined the primary value proposition of the autonomous vehicle. Speaking with consumers, there are three major benefits they’ve highlighted that autonomous vehicles will bring to them, from their perspective. Those are fewer accidents, the ability to do other things while the car is driving, and the impact on insurance premiums. As the frequency of accidents goes down, their expectation is lower premiums or discounts as these different capabilities become available in their vehicles. But when you see this accident, or hear about these things, it undermines the primary value proposition, which is fewer accidents.

We have found about 48% of consumers are willing to use autonomous vehicles if given the opportunity, but there are still emotional factors in play.

Will these fatalities have a serious impact on autonomous adoption?

There’s no doubt that this technology is coming. I think there’s going to be some disruption as companies are highly competitive to be the first mover in this space. You know you have the car rental companies, you’ve got rideshare companies like Uber, which was involved with this incident in Arizona, and you have the OEMs. All of those companies are placing big bets and moving in this area. One of the other things that we want to highlight, which I think gets lost in the discussion a great deal and even with a lot of the senior executives that we speak with, is that this will be an incremental process towards automation as these technologies become more standard in vehicles.

Waymo fake city test
Image used with permission by copyright holder

Autonomous driving is really an extension of features we have now, like lane keeping assistance and adaptive cruise control. Drivers get insurance discounts for having those safety features. How will the insurance market respond to more of these features?

It goes all the way to partial automation, where cars are starting to parallel park themselves. Many of these technologies such as driver assist have been out for several years. Insurance companies need to start thinking on how to partner with these technology companies and to think about how they want to position product offerings and discounts as these technologies become more mainstream and reduce the frequency of accidents. Most insurers are taking a wait-and-see approach, but it’s in their interest to get more proactive in this phase. We see some carriers starting to make moves. Liberty Mutual partnered with Tesla, but by and large we feel like the insurance industry is in more of a reactive versus proactive mode at the moment.

So, what’s going to happen? Will we eventually do away with auto insurance?

I think we will still have auto insurance. Here’s the reason why: there are two factors as these technologies become adopted. One is the frequency of claims and all indications show that the frequency is going to drop significantly. The other side is severity. When accidents do occur, the cost of repairs will be higher. The complexities of these technologies are going to keep repair costs pretty high. If you think about today, replacing a bumper may not cost that much but in the future a bumper with sensors and other types of technology could be pretty costly. I think that there definitely will be an impact, but does anyone have a crystal ball on exactly where and how consumers will land? We don’t know.

uber autonomous crash volvo

There’s virtually no case law about this yet. Will the courts start to sort out autonomous liability soon?

It is going to take several years because of factors including human interaction. By all indications, talking with leaders in the space, it will be resolved through the courts. Are you talking about a simple collision? Are you talking about bodily injury where they hit a pedestrian? Is it property damage? Was there human intervention into the autonomous vehicle? Then where does the liability lie? Do you insure individuals? Do you insure through rideshare companies? There are a lot of unknowns and what we see in the industry is that insurance is slow to respond as technologies become available.

What can the insurance companies do about that?

Down the road as consumers adapt to these technologies, you will see, and you’re starting to see insurers start to diversify themselves to mitigate the risk into other product offerings. You’re already starting to see Geico getting into home insurance and offering their cost savings message for home-based purchasers. The other approach that some companies in the insurance space are taking is venture capital loans. American Family has a division called American Family Ventures where they are investing directly into firms that offer autonomous technologies. They are hoping to share in the growth and profitability that comes with the forward march on these capabilities.

To stay current on autonomous liability issues, you can keep tabs on J.D. Power’s reports, like this one on consumer attitudes about liability. J.D. Power’s report suggests interested consumers should “educate themselves on liability issues connected with [autonomous] technology, and how those issues might differ from the liability issues that attend on owning and driving a conventional vehicle.”

Jeff Zurschmeide
Jeff Zurschmeide is a freelance writer from Portland, Oregon. Jeff covers new cars, motor sports, and technical topics for a…
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