From January, driverless cars will be tested on public roads. What will such vehicles mean to the insurance industry?

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From January, the UK will allow driverless cars to be tested on public roads. What will such vehicles mean to the insurance industry?

It may seem like science fiction, but driverless cars are on their way to becoming reality.

From January, the UK government will allow testing of such vehicles to begin on public roads, while in countries such as Sweden and the US such tests are already underway. And manufacturers are introducing precursor technologies such as autonomous emergency braking (AEB), lane departure warning and adaptive cruise control as options.

However, there is still a long way to go, cautions UK car testers Thatcham Research chief executive Peter Shaw. Thatcham is one of the research centres in the running for the UK trials into self-driving cars. “When will I be able to buy an autonomous vehicle, put it in my garage and use it for my own purposes? Not for a long time,” he says. “We believe that’s circa 15 years from now and it won’t happen in a big bang. It will be a gradual growth of autonomous features on vehicles that are incremental.”

Cutting claims costs

Experts say autonomous features will reduce motor claims, with AEB alone credited for a 20% drop in the number of accidents. All new cars manufactured for the EU must be fitted with the emergency braking technology. “Over the next 10 years, if we see the adoption of AEB at rates Thatcham is trying to achieve, you would save around 1,200 lives and the number of accidents that would be avoided would be in the thousands, just from AEB,” says Shaw.

Autonomous technology should also help prevent fraud, a big source of claims inflation in the sector in recent years, through its ability to prove the number of passengers in a vehicle (with cameras on the vehicles in front and behind), prevent deliberate accidents and provide more evidence with which to thwart spurious claims. Fewer claims should mean insurers are able to offer more competitive prices to drivers with autonomous features like AEB.

Cars equipped with AEB already have a lower group rating. Direct Line Group’s head of motor underwriting Dave Meader says: “Most of our outlay will have to reflect the fact there are fewer claims. If the claims experience stacks up we will reward these people by offering cheaper premiums.”

One challenge for insurers is getting access to data that would enable them to use autonomous features as a rating factor. “I was at a meeting a couple of months ago at the ABI with heads of Thatcham, a number of insurers and the SMMT (Society of Motor Manufacturers & Traders, the governing body of vehicle manufacturers) to discuss this,” Meader says. “If, when someone types in their registration number, we know a car has emergency braking technology, we can reward these people who are taking steps to safeguard themselves and other road users.”

Driverless technology is developing hand-in-hand with telematics, which the Boston Consulting Group predicts will account for 15% of the motor market by 2020. Regulation should help telematics expand out of its current niche markets. ECall is one example and will be fitted in all new cars from October next year. The 112 eCall system automatically dials Europe’s single emergency number if an accident occurs, giving the emergency services the vehicle’s location.

“It’s not a big step to also potentially notify your insurer at the same time and it’s very possible to be notifying other parties at that point as well,” says Shaw. “The connected car could make the connected claim. It could also be at that point booking the car into a body shop, and doing an initial damage assessment. So actually it could be ordering parts for the car at that point as well.”

Product liability overtakes driver liability

Data generated by the connected car should have a fundamental effect on how motor insurance is underwritten. “As cars become more autonomous in their functionality, even if they are not totally autonomous, the vehicle data will become increasingly important and the personal driver data perhaps less important,” Shaw says. “The emphasis shifts towards the product and vehicle performance and away from personal driving skills.”

But important questions remain in the move towards a fully autonomous future, including who will be liable in the event of an accident? “From an insurer perspective it’s going to be very important to understand if you need the driver to be able to overtake at any time or is the driver out of the question?” Shaw says. “That needs to be established from a legislative and insurance viewpoint.”

Meader adds: “Is it the person in the car, the manufacturer of the vehicle or the person whose technology is in the vehicle? That will need a lot of discussion from all the parties involved.”

And while the number of incidents are expected to fall as autonomous features are brought in, the cost of repair when incidents do occur could be much higher than in conventional vehicles. Insurers need look no further than electric cars to see how specialist repair work can cause claims to escalate. Questions are also being asked about security and the vulnerability of autonomous technology to cyber crime.

And surveys suggest there is a lack of social acceptance for autonomous vehicles. In one study by insurer Churchill, more than half of those asked said they would not purchase a driverless car and a quarter believe such vehicles would not be safe.

“These cars are going to be so expensive initially so they need to be attractive to the consumer, or they won’t sell,” Shaw says. “Driving is essentially about freedom and if you take away that freedom then a lot of the attraction of driving disappears. So manufacturers are working hard on how you maintain that enjoyment of the vehicle in the context of the future world.”