posted 4 years ago

Autonomous cars: will manufacturers start providing insurance?

These cars are the future, but what about insuring one?

Autonomous cars are the future, but what about insuring one? Well, there’s been much speculation and questioning in recent months surrounding who would be to blame in the event of an accident.

Some companies believe that product liability insurance is the way forward, but will the car manufacturers start providing their own insurance policies to cover their own models? The truth is that nothing has been decided, yet. 

Telematics director at British insurer RSA Kenny Leitch told Reuters that car manufacturers will want to offer insurance directly to car owners to remove the risk of customers being put into courtesy cars from a different brand and thus risk losing their custom to that brand. 

Once autonomous cars start rolling off production lines in full force, motor insurers will have to come up with specific policies for those vehicles to challenge car manufacturers.

"One way forward for insurers is joint partnerships", Leitch concluded.

Volvo announced earlier this year that it will start the UK's most extensive autonomous car trial to date, in 2017. Labelled Drive Me London, Volvo will unleash up to 100 autonomous cars on real roads, driven by real people. Similar programmes will also take place in Sweden and China.

Volvo, Mercedes and Google have all reportedly said they will accept liability for accidents involving their driverless vehicles. Thus deducing that drivers, or maybe more appropriately named 'car owners', should only need third party fire and theft insurance.

Creators of the first ever car insurance policy back in 1904, Lloyds, released a statement saying: "Some might argue that if cars really do become crash-less, there may not even be a need for motor insurance. However, some element of risk would be retained by the owner of a car. Damage or theft can still occur when a car is parked in a driveway. It is possible that this risk could become part of a household contents policy coverage."

Cherry Chan, partner at consultancy firm Barnett Waddingham, said: "With cars becoming automated, risk may be transferred from the individual driver to the manufacturer, depending on future legislations. Accidents will in future be principally caused by the malfunctioning of systems, forcing manufacturers to insure whole fleets of cars instead of the driver insuring themselves. This shift from personal lines motor insurance to product liability insurance could introduce big aggregation risk caused by a system failure affecting multiple vehicles at once.

"It is also possible that damage and theft risk may become part of household contents policies requiring motor insurance companies to find other revenue streams to widen tight profit margins. However, there could still remain a need for motor insurance companies as human risk may not be eliminated entirely or accidents not caused by the malfunctioning of systems. The car may be able to be manually overridden and if an accident occurred in this case the liability would fall back to the driver."

There are still a number of consultations taking place surrounding liability when/if an autonomous car is involved in an accident. In current times, when two individual drivers have an accident, someone usually accepts responsibility resulting in a claim being made against them through their insurance. With autonomous cars it's a little different as, of course, there is no 'driver'. UK insurance company Adrian Flux recently launched the first ever autonomous car insurance policy, for cars such as the Tesla Model S.

Autonomous technology is here to stay. Manufacturers such as Volvo, Volkswagen and Toyota have all said they hope to have autonomous cars on our streets by 2020, however, there is much to do before then. Even with a well-covered insurance policy in place, I hope that there continues to be a manual override available for use in the event of a technological malfunction.

However, fully autonomous cars are not expected to hit our streets until 2025 – plenty of time to iron out these kinks.