Californian auto insurers are facing greater uncertainty as the golden state government greenlights self-driving car rules.
While formerly cautious in the face of faceless vehicles, California has changed tact to embrace the future.
The state Department of Motor Vehicles issued a set of proposed rules this month for self-driving cars. The change of heart could clear the way for automated cars to hit the roads by the end of the year.
Nevada was the first state to allow the use of autonomous vehicles in 2011. California wasn’t far behind, adopting legislation soon after – although the restrictions around use and testing on the roads was strict.
The state had frustrated the automated car industry with its cautious approach to driverless cars due to public safety concerns – meaning companies developing their robot cars often had to cross state lines to test them out.
Now, though, California will allow those manufacturers to self-certify the safety of their vehicles – following the federal government plan.
So what does this mean for insurers?
While this move wasn’t wholly unexpected, as legislators continue to open doors for autonomous vehicles, it is another reminder to the auto insurance sector that big – and potentially unwelcome – changes are looming.
In its 2015 annual report, filed in February last year,
Allstate addressed the impending arrival of automated cars with alarm.
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“Driverless cars or technologies that facilitate ride or home sharing,” the report said, “could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses, and we may not be able to respond effectively.”
More recently, start-up Ohio insurer Root has begun discounting insurance premiums when its Tesla customers use autonomous mode.
The insurance product assumes the cars are safer when being robot driven – thus removing human error from the equation.
This context-based policy coverage could have far-reaching consequences in the auto insurance industry.
Tesla, itself, is also offering its own insurance on its vehicles in Asia.
According to the Insurance Information Institute (III), “some aspects of insurance will be impacted as autonomous cars become the norm.”
“There will still be a need for liability coverage, but over time the coverage could change … as manufacturers and suppliers and possibly even municipalities are called upon to take responsibility for what went wrong.
“Product liability might incorporate the concept of cost benefit analysis to mitigate the cost to manufacturers of claims. Coverage for physical damage due to a crash and for losses not caused by crashes but by wind, floods and other natural elements and by theft (comprehensive coverage) is less likely to change but may become cheaper if the potentially higher costs to repair or replace damaged vehicles is more than offset by the lower accident frequency rate.”
In another blow to the wider insurance industry, it is thought vehicle-related workers’ compensation claims would likely drop away, too, “as will the share of healthcare and disability insurance costs related to auto accidents.”
“As cars are become increasingly automated the onus might be on the manufacturer to prove it was not responsible for what happened in the event of a crash,” it states. “The liability issue may evolve so that lawsuit concerns do not drive manufacturers and their suppliers out of business.”
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