June 16, 2024

Autonomous vehicle insurance policies set to undergo ‘radical transformation’

The composition of insurance policies for autonomous vehicles will need to be significantly different from current conventional policies, according to a recent report.

GlobalData’s Autonomous Vehicles in Insurance report explains that while liability for collisions involving traditional vehicles typically falls on a driver, this will not be the case for vehicles with autonomous driving capabilities.

Referring to the Society of Automotive Engineers’ six levels of autonomous driving, where Level 0 has no automation and Level 5 is full automation, the report states: “From Level 4 onwards, liability will shift to the vehicle itself (as they will have no driver) so insurance products must adapt accordingly.”

As a consequence, the report suggests that car insurance products are likely to resemble more closely product liability insurance rather than traditional third-party liability insurance.

It further states: “The common scenario for an incident involving an autonomous vehicle will be for the victim to claim against the owner’s insurance policy, after which the insurer may seek compensation from the at-fault party. This could be the OEM (for design or monitoring defects), the IT service provider (for flawed data provided to the vehicle), or the software vendor (for system coding errors).”

According to Accenture and the Stevens Institute of Technology, this shift in the car insurance landscape will lead to a 40% decrease in gross written premiums in the personal motor line by 2040 and a 14% growth in the product liability market during the same period.

Some of the prominent car insurance providers actively involved in autonomous driving technology and auto industries, as identified by GlobalData, include Swiss Re, AXA, Munich Re, State Farm, and Tokio Marine. The report also mentions Covea, Hiscox, Chubb, AIG, and Uniqa as slower in adopting these advancements.

The report highlights that countries have had to revise legislation to establish how liability is determined in the era of autonomous vehicles, where driver error may no longer be the primary cause of accidents.

Furthermore, it mentions that the incorporation of advanced driver assistance systems in vehicles is reducing the frequency of traffic collisions and associated costs for insurers, but the expenses of repairing vehicles due to the sophisticated technology are increasing.

Moreover, the rise of autonomous vehicles, which are inherently connected to the internet, will bring about cybersecurity challenges.

“It is anticipated that a Level 5 autonomous vehicle will contain 300 million lines of code, with an estimated 180,000 bugs in the code, resulting in approximately 15,000 security vulnerabilities,” the report states. “Hackers could potentially compromise the ADAS in a vehicle during operation or even manipulate autonomous functions to cause a collision directly. Insurers must possess a solid understanding of cyber risk in autonomous vehicles to effectively manage their risk portfolios.”

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