What Will Self-Driving Cars Mean For Insurance?

A GATEway vehicle (Image credit: GATEway)

“There’s a tech innovation arms race underway to create vehicles that don’t crash,” said Kenny Leitch, Global Telematics Director at RSA. “We intend to be right in the middle of it.”

Considering 93% of accidents involve human error, and 76% of them are caused solely by it, the promise of autonomous vehicles could have as negative an impact on collision underwriting as it delivers even greater benefits to society. Already, accident rates have fallen dramatically, as cars have become smarter, and roads made better. Parking has gotten easier, too.

“Ultimately, the purpose of insurance is to let people go on with their lives, knowing that they’ll get help if something catastrophic happens,” Leitch explained, it’s why RSA is the insurer lead on GATEway, a public/private project launched in late 2014 to research and test automated vehicle technology on U.K. roads.

“The need for insurance doesn’t end with autonomous vehicles, it just changes.”

That need is slowly coming into focus, aided by Google’s first self-driving car crash in February, and Volvo’s declaration late last year that it will accept all liability when its cars are in autonomous mode.

Things will get more complex, according to Leitch, even if drivers are taken out of the equation. Liability coverage may follow the Volvo example, as it shifts from personal to product.  However, policies will still need to address variables, such as equipment failure, Internet connectivity interruption, or even hacking. The thorniest issues could emerge from vehicles performing according to design, yet resulting in unanticipated side-effects.

“Who is going to write the algorithm of death that enables the onboard computer to choose between saving the life of a driver, or that of a pedestrian in the seconds before impact?”

The argument for the role of insurance is buttressed by the certainty of injury and death, no matter what technology solution.

“Even if we could reduce the 1,700 annual traffic accident deaths in the U.K. by 90%, that could still leave 20 people dying from, what, system failures?” Leitch said.

Such challenges are a subset of the broader effects of the Internet of Things, as automated intelligence replaces decisions once made by human beings. The questions are endless: If the lives of pet tropical fish rely on a home heating sensor, do they need to be insured? What about the power company providing a constant current to the smart devices in a home?

RSA is experimenting with new product sales, too, according to Steve Jay, who leads the company’s innovation as Head of Product Development & Propositions at More Th>n, a business RSA founded to shake up traditional approaches to insurance.

“We base insurance on our customers’ needs, not products that have remained unchanged for many, many years,” Jay said. “By understanding their needs, we can develop offerings and tech that address their needs in new ways.”

Its current test of a service called Whistle uses pet insurance as a launching pad for a variety of prompts and reports on exercise, diet, and preventative treatments.

“Pet insurance gets more expensive as animals age,” he explained. “If we can help them be healthier by meeting their needs, pets and their owners are happier, and it’s a better business driver.”

“We call our role in meeting these needs ‘underwriting progress,’” Leitch added.

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