As I spent another weekend battling Sydney road congestion my mind turned to the future and what will change when fully
autonomous cars are a familiar sight on our roads. How will this impact our city planning? We may possibly have no need for traffic signals, road signs or large shopping centre carparks. Congestion is also predicted to ease. I have heard many industry representatives talk about the future of the insurance industry and customers' desire for instant service. However in reality do we really expect to have a car waiting for us and the hundreds of other consumers at a shopping centre at 4pm on a rainy Saturday afternoon?
KPMG reported that a lack of infrastructure has seen Australia drop to a lowly 14th out of 20 countries for autonomous vehicle readiness. Their report states that the key factors are “improvements to roads and electric charging infrastructure” . At IAG's investor day in May, IAG said the single most important barrier to autonomous vehicles in Australia is the list of more than 700 state and Federal laws that need to be changed.
One of the main benefits around the introduction of autonomous vehicles is the expected reduction in road accidents. This is due to the fact that more than 90% of road accidents are caused by human error . Remove the human, remove the error… as the saying goes.
There is no doubt about it. The introduction of autonomous vehicles will significantly impact the insurance industry due to the expected loss of motor income. It is expected that liability will shift to the car manufacturer's product liability policy, although this is still not entirely clear. Liability will be determined according to whether a car is fully under its own control or whether a car is nominally driving under its own control, but still requires driver supervision.
The issue of who is in control (and therefore who is liable) really goes to the heart of the topic – as Billy Joel said "It is just a matter of trust". The Tesla driver who died in Florida in March 2018, whilst using autopilot with his hands off the steering wheel, illustrates the issue of whether the driver believes that they or the machine is responsible. The driver had complete trust in the car, to the extent that he relied solely on the machine. The National Highway Traffic Safety Administration said that it had discovered no defects in Tesla's self - driving system after completing its own investigation into the accident. This could be a case of how the current phase of
automation might actually make us feel safer than we actually are; as examined in this year's Swiss Re SONAR report under the emerging risk "Dumbed down – is digitisation undermining human skills?" Would the scenario be any different if driver was aware that the car was programmed to take action to ensure it harms the fewest possible people and treat all life equally, to the detriment of the driver?
In the UK, the motor insurance industry is warning car manufacturers against the use of the word "autonomous" in their marketing. A report for the Association of British Insurers says the way some advanced vehicles are described can convince motorists that they have self-driving cars, when in fact this is not the case. It is interesting to note that some manufacturers have preferred the full autonomy model in order to remove any doubt as to who is responsible . We have seen this with some aeroplane crashes where the pilot has relied on the auto pilot or is confused regarding what appropriate action should be taken. Of course pilots receive thousands of hours training, car drivers do not.
If the liability does shift coverage issues will take time to resolve. That is the nature of product liability lawsuits. While CTP is unlimited, product liability is not, and the insured may run out of cover. If car manufacturers assume the liability, there is an issue as to how much cover is available in the market. Another issue arises if the driver has not uploaded the latest software, which may shift liability back to the driver. Currently the system for seeking compensation under the Motor Vehicles Act or equivalent is fairly straight forward. However, if the driver has to bring a claim under a product liability policy it may take a lot longer for the Court to determine liability.
How will the insurance industry respond to this?
The Government, auto manufacturers and the insurance industry are at the cross roads right now in terms of how much they should invest in the future of autonomous vehicles. They have to balance the competing needs of safety, town planning and congestion, whilst ensuring that drivers do not become overly reliant on digitisation. This requires collaboration across the public and private sector in order to provide a safe and cost effective solution. Insurance is at the forefront of this. Let's hope that the industry can deliver
the level of trust the consumers requires.