Insuring the Future of Autonomous Cars
June 20, 2018
The widespread adoption of autonomous vehicles is anticipated to be a major force in changing the way Americans live. One of the industries most impacted by these changes may be the insurance industry. While many questions remain unanswered, the industry already has certain products that may serve as a platform for insuring risks in the next generation of automotive travel.
As required by state laws, individual drivers typically purchase their own insurance coverage for non-autonomous vehicles. These insurance policies offer a wide range of benefits to drivers. For liability, these policies afford coverage to defend and indemnify insured drivers from claims alleging that they harmed others through their negligent driving. The market for this coverage is driven by the underlying tort law regime rendering negligent drivers liable for the harm they cause. In other words, while tort law places the legal liability on the insured, contract law shifts the financial risk of that liability to the insurer.
Insurance products are shaped in large part by broader legal exposures, and insurance products available for non-autonomous vehicles may not be suitable in the autonomous vehicle landscape. For example, if there is no driver, or if a “driver” is not negligent in the operation of a motor vehicle, the law may not hold that operator legally liable for an accident that is caused by something outside of her control. (Some states, such as Michigan, are already taking this approach.) Insurers would in turn have no reason to offer products for drivers who do not face risk for claims against them or, at the very least, may charge less premium for a lower risk.
One potential approach would be to hold manufacturers responsible for accidents caused by the autonomous vehicles they sell, provided there is a showing of fault. Indeed, some manufacturers reportedly already accept liability for accidents caused by their self-driving systems in non-autonomous vehicles. This construct would be similar to existing tort law for products liability, where a developed body of case law already exists. Because insurers already afford coverage to manufacturers for other products liability exposures, the “new” insurance products would really just be an adaptation of the coverage that currently exists.
Other companies participating in the development of autonomous vehicles from component manufacturers to software developers to service providers likewise may face new liability exposures and seek to purchase new and larger amounts of insurance coverage.
So what will the policies of the future look like? Policies issued to manufacturers and others involved in the supply chain may evolve from current policies many firms now have in place. These include commercial general liability policies (which afford coverage for bodily injury or property damage caused by accidents), technology errors and omissions policies (which generally cover liability arising from certain acts, errors or omissions in the performance of specified services), and cyber liability (often packaged with technology E&O policies but also covering specified privacy-related risks). In addition to the legal exposure, companies that own significant assets (such as fleets of autonomous vehicles) may also seek first-party coverage under specialized property policies. The new insurance products will need to evolve with the technology and legal framework specific to autonomous vehicles to meet the industry demands, but the products available on the existing insurance market – which currently cover a broad range of industries – will provide a good start.