Simon Walker, group chief executive of car insurance provider, First Central Group, explores how the market will be forced to change by the arrival of driverless or semi-autonomous vehicles.
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The race for driverless vehicles shows no sign of slowing down and the pace of development is unlike in any other industry, fuelling continuing transformation in the automotive and technology sectors.
But recent high-profile accidents, setbacks, and safety concerns have prompted moral and ethical questions, which threaten to slow down progress in the sector. They also mean that the insurance sector will itself be transformed by these new technologies.
Time to hit the brakes?
Most notably, a fatal collision involving a pedestrian and one of Uber’s autonomous vehicles has had a ripple effect across the industry. The company suspended self-driving car tests after the accident in March and the governor of Arizona, where the incident took place, has banned the company from further testing until the cause of the accident is established.
The incident raised important questions for all the manufacturers, tech firms, and businesses that are seeking to capitalise on driverless technologies.
Almost immediately after the collision, shares plunged for other prominent manufacturers, such as Tesla, which has also been investigated after a driver died in a vehicle that was running under Autopilot software control.
Meanwhile, there was more bad news for computer hardware manufacturer Nvidia, a supplier of autonomous driving technology. The company suffered one of the biggest drops in shares as a result of the crash. It even led the world’s biggest carmaker, Toyota, to say it was “assessing the situation” and to suspend its own autonomous car tests in March – a clear signal that driverless manufacturers should shift down a gear.
Government signals caution
Away from the headlines, the UK government’s recent decision to undertake a three-year law review into driverless vehicles indicates top-level acknowledgement of the need for greater clarity, particularly on legal aspects of the technology.
The review will examine crucial guiding principles that still need to be determined, including the allocation of blame for driverless car crashes, and how to distinguish between scenarios in which either a driver or a manufacturer may be deemed responsible for accidents.
It will also explore whether new criminal offences may need to be introduced, amid fears that automated vehicles could be hacked and operated remotely; all important legal problems that will require cooperation between technology companies, manufacturers, and insurers to ensure that liability is clear.
The future claims chain
As a result, insurers need to consider how they will adapt to the introduction of driverless vehicles. Regulation is already evolving, with the introduction of the Automated and Electric Vehicles Bill in 2017. This proposed to extend compulsory motor insurance to include the use of autonomous vehicles.
With software manufacturers playing such a crucial role in implementing driverless technologies, we’re likely to see them play a bigger role in the claims process too.
The first stage of claiming is likely to involve the insurer, as it does now, but we can then expect to see instances where the insurer seeks recovery from the vehicle manufacturer, if the car was in autonomous mode at the time of the accident. Beyond this, it is then highly likely that the manufacturer will seek compensation from whichever software provider wrote the code, if this is deemed to be the root cause of the accident.
Insurance will always be required, but it is likely to change drastically, both in terms of setting premiums and establishing liability.
Insurers should expect rates to be weighted towards the risk profile of the vehicle, rather than the driver; a complete u-turn on today’s situation.
We’ll reach a position where pricing is decided on an individual basis, as the software options available will mean that even vehicles that look the same could be fundamentally different.
The property industry went through a similar change, with the move in underwriting from postcodes to individual properties.
Customer concerns
While overcoming barriers to the adoption of new technology is difficult for any industry, redressing the disproportionate focus on the ‘future’ is long overdue.
We should welcome the fact that both the government and manufacturers are taking a step back to consider the wider implications of this technology. While the attraction of winning the driverless race is clear, businesses need to listen to their customers and keep safety firmly at the heart of their operations.
A recent study conducted by The Times identified a reluctance to embrace driverless technologies among UK consumers. It found that three quarters of motorists don’t feel confident that driverless cars will be safe to use. Interestingly, the risk of being hacked was identified as the biggest concern. Furthermore, two-thirds of drivers would not buy a driverless car, and almost one-third would not pay extra for one.
Similar results have been found in US consumer surveys.
Gearing up for change
With such drastic changes in technology, arguably it is inevitable that manufacturers will experience difficulties along the way. Businesses need to strike the difficult balance between ensuring safety and continuing innovation.
While companies feel confident about solving the technical issues, convincing the public to take their hands off the wheel may be more difficult. The Uber incident has done little to improve consumers’ feelings towards the technology, and their understandable concerns should be taken into account.
It’s an exciting time for the sector, but it’s now crucial to prioritise balancing the technologically possible with the socially acceptable.
Internet of Business says: This article has been prepared by First Central, and not by our independent editorial team.