Did your car come equipped with stability control, forward or rear sensors or cameras, or parking assistance? This technology is just the beginning and is paving the way for fully autonomous vehicles.
Google began developing a self-driven car in 2009. In December 2014, it delivered the first real build of its prototype vehicle. Many states currently allow for testing of autonomous vehicles on public roads, including Texas, Michigan, California, Florida, Nevada and the District of Columbia. In February 2014, federal agencies approved vehicle-to-vehicle (V2V) communications systems that allow cars to “talk” to each other. With this technology, cars will know where other vehicles are and can help avoid collisions caused by blind spots or fast moving vehicles. V2V communication uses a short range radio network that essentially provides a 360-degree view of other vehicles in close proximity. The Department of Transportation estimates thatV2V communications can prevent up to 76 percent of crashes on the roadway.
Eventually, technology will evolve beyond warning systems and cruise control into fully autonomous vehicles. According to a study done by Navigant Research, industry consensus is that more comprehensive self-driving features will be brought to the auto market by 2020, and 85 million autonomous-capable vehicles will be sold annually around the world by 2035. Similarly, a study done by IHS, a global information company, forecasts that self-driving cars that include driver control will be on highways around the globe before 2025 and self-driving “only” cars by 2030.
Driverless car technology has huge potential benefits. Google’s lead developer for its driverless car, Sebastian Thrun, claims the car can: (1) reduce traffic accidents by 90%; (2) reduce wasted commute time and energy by 90%; and (3) reduce the number of cars by 90%.
The driverless car may reduce the need for owning cars by enabling efficient sharing of vehicles. A driverless vehicle could potentially be shared by multiple people, delivering itself when and where it is needed, and parking itself whenever it’s not in use. A study by the University of Texas at Austin considered the impactof autonomous cars on vehicle ownership and found that if 5 percent of trips were made by shared autonomous vehicles (SAVs), each single SAV could replace about 11 conventional vehicles.
Industry experts have varying opinions on the impact autonomous vehicle will have. For example, The CEO of a technology company with a platform for insurance shopping believes that auto insurance will become more like homeowner’s insurance, where claims are rare but very high. His view is auto premiums will go down but claims and other operating costs will as well. According to a former director of enterprise innovation at State Farm Insurance most accidents happen in congested traffic, which, in turn, causes more congestion and more accidents. He argues that even a 25% adoption of incremental driverless technology such as smart cruise control and crash avoidance would significantly relieve congestion and reduce the number of congestion-related accidents. Conversely, a former head of product operations at Allstate Insurance argues that human drivers will become more erratic in the short term as they adjust to the technologies, sending accident rates up.
CHALLENGES TO INSURERS
As new technologies emerge, so do new risks. For example, airbags reduce certain injuries but create others, and create internal vehicle property damage that wouldn’t otherwise occur in a collision.
With driverless cars, even if the frequency of accidents goes down, the cost to repair the cars is likely to increase given the cameras, sensors, radars, and other advanced technology. Likewise, though overall number of claims is expected to decline, the claims handling may become more complex, with the focus shifting fault determinations to technology and product liability issues rather than human error. In addition, as the technology emerges standards will need to be implemented for determining when and if a passenger should be required to take manual control of a malfunctioning autonomous vehicle.
Another major concern centers around cyber security. Rather than investigating questionable auto thefts, insurers may need to investigate questionable hacking of the computer in an automated car. Recently two security researchers conducted an experiment with a reporter from Wired magazine where they were able to wirelessly hack into and control the entertainment system, dashboard, steering, brakes, and transmission of a Jeep Cherokee while it was being driven. As vehicles become increasingly computer automated, similar incidents of hacking are expected. Insurers will have to decide exactly how and what to extent they will cover that risk.
Driverless technology will also have an impact on underwriting. Though some of the traditional underwriting criteria, such as the number of miles the insured expects to drive and where the car is garaged, will still apply, the year, make, model, and style of car may assume a greater importance. The implications of where a car is garaged and driven might be different if there are areas or dedicated lanes for automated driving.
The full spectrum of new risks introduced by and future implications of driverless cars remains to be seen. Insurers will need to stay on top of current regulations, technologies, and market trends as they emerge.
ABOUT THE AUTHOR
Lena Pond is a graduate of the Sandra Day O’Connor College of Law at Arizona State University. She specializes in insurance defense, insurance coverage disputes, insurance bad faith, professional liability, and general civil litigation. Contact her at 602.386.5654 or firstname.lastname@example.org.
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