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How self-driving cars are changing the face of car insurance

Latest Motor News // 18 August 2016

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The world is changing at a rapid pace. New technologies have altered our ways of life and have made many household ‘tasks’ much simpler and easier to complete. Self-driving cars are the next step in this evolution.

Self-driving cars are picking up momentum with Volvo, Uber, Apple and Tesla leading the way for the innovative technology, but what does this mean for car insurance for self-driving cars? We’re going to delve into what this means for car insurance in the UK.

While not expected to be on the roads until 2020, self-driving cars may well be the perfect vehicle we’re looking for. An easier and comfortable driving experience sounds great, especially when it comes to parking.

Did you know British drivers pay £14.2bn annually for motor insurance, which equates to 40% of all non-life premiums? An average UK policy costs £429 according to Association of British Insurers.

It’s said 90% of issues come from human error; meaning that the new technologies are a fantastic way to reduce accidents and save lives, as well as reduce insurance premiums.

Volvo’s Self-driving projects

Testing of self-driving cars has begun in the UK with funding from the government. Volvo has announced ‘Drive Me London’, Volvos self-driving project it plans to test in London next year and introduce to the roads in 2018.

Volvo Chief Executive, Hakan Samuelsson, said “The impact on the insurance industry is likely to be significant but let’s not forget the real reason for this – fewer accidents, fewer injuries, fewer fatalities. Autonomous driving cars are the single most important advance in automotive safety to be seen in recent years.”

Warren Buffet, CEO of Berkshire Hathaway, said “I think there will be a big reduction in accidents over a longer period of time. And of course, there already has – cars have been made way, way safer, but now when you start making the driver safe, that would be a big, big jump, and that will someday happen and when it happens there will be a lot less auto insurance written.”

Research conducted illustrated an 80% reduction of crashes of vehicles in the next 20 years as a result of self-driving vehicles.

Insurance premiums are due to decline by $20bn by 2020 internationally as a result of self-driving technologies such as automated braking and the lowered risk of liability. The other factors in the lowering of insurance premiums still include location and overnight parking.

An updated policy would cover loss or damages in case of:

  • Software update failures and security issues,
  • Satellite failure affecting navigation or failure of manufacturer software
  • Failure to override the system to prevent an accident
  • If the car gets hacked

Who’s fault is it if a self-driving car crashes?

The advent of self-driving cars has introduced a huge question to the car insurance market. When a self-driving car crashes, whose fault is it? If a self-driving car crashes into another self-driving car, both drivers would have nothing to do with the crash. Surely the makers of the car are to blame, especially if the driver themselves don’t even touch the wheel?

The issue becomes a little murky. New regulations are pushing for responsibility to be given to the human driver and not the manufacturer. A crash as a result of conditions like snowy roads would be one of the few reasons the blame would be on the manufacturer.

Another option being discussed is to have the manufacturer responsible. If a technical issue causes a crash, the fault is directed on the manufacturer. The safety levels of self-driving vehicles would need to be made consistent throughout all manufacturers as studies have shown this not to be done.

Other responsibility would be with the designers and suppliers responsible for any crash. The technology behind self-driving cars is complex with a large amount of research needed to be done.

The true fault could come to a mixture of both manufacturer fault and human error, before you see self-driving on your road, much more research and testing needs to be done. New technologies laws need to be revised before self-driving cars are made mainstream.