The UK government is creating a new insurance framework to address the liability issues arising from self-driving cars, the secretary of state for transport revealed yesterday.
While automated vehicles are expected to make collisions rarer, the current insurance framework might not fully protect the people and businesses involved in an accident, Chris Grayling explained during a speech at the Association of British Insurers on Monday.
In an accident caused by an autonomous vehicle, it is likely that only the driver using the vehicle would be insured, and this could lead to victims having to take vehicle manufacturers to court – which would be time-consuming and expensive.
The new system will “cover the use of automated vehicles and when the driver has legitimately handed control to the vehicle. This will ensure that victims have quick and easy access to compensation,” Grayling said.
The government’s Automated and Electric Vehicles Bill, which is currently making its way through parliament, will establish the new framework and will mandate compulsory insurance.
Completely self-driving cars are expected to reach the market and to be used on UK roads by 2021, the secretary said during his speech, calling the potential benefits “tremendously exciting.”
But insurers need to do more ahead of the arrival of the technology to Britain’s roads, according to one analytics firm.
“The Government’s decision to drive change in the insurance industry means it’s pedal to the metal for insurers,” Paul Ridge, banking & insurance specialist at SAS UK & Ireland, told Insurance Business.
“With new autonomous vehicles hitting the market, it’s imperative that traditional insurance providers ask themselves – how can we use this technology to our advantage and not get left behind? The answer lies in their data,” explained Ridge.
More insurers need to appreciate the value of data and the real-time insight that connected cars can provide, he said, adding that there is a “torrent of potential data sources.”
“Insurers must be willing to adapt to these changes through product innovation. Traditional risk pools could reduce, but new areas of demand emerge. If an autonomous car is involved in an accident with another vehicle while the car and not the driver is in control, then who is at fault?
What new risk do autonomous vehicles present? These are the key questions that insurers need to explore,” Ridge said.
Analytics has the power to help incumbent car insurance companies – many of which are established and trusted brands – remain relevant to consumer, according to the specialist.
He added: “Whether it’s through in-house innovation or partnerships with insurtech innovators, success for insurers depends on the ability to analyse and exploit data.”
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