Dr Christoph Lauterwasser, managing director, Allianz Center for Technology claims in a press release, The new rules of the road: Get ready for driverless driving’, that the automobile liability coverage is really ideally fitted to cover the situation with automation.
He believes there should be no concerns regarding insurance coverage and that this is crucial because the number of connected cars being sold on the market is increasing significantly. With higher sales and increasing connected vehicle adoption comes more vehicle data that can be used to support claims – such as the automated first notification of loss claims as well as the clarification of how accidents occurred in the first place.
He explains: “Sensor data allows insurers to know the extent of damage to the vehicle, whether the damage to the vehicle is more or less severe. Vehicle data in co-operation with the vehicle manufacturers, can serve similar purposes. With connectivity there will be cyber-risks to the vehicles because connected vehicles are connected to the internet and so, naturally, they will be a potential target for cyber-attacks. It’s an accumulation risk for insurers as many vehicles could be affected by a cyber-attack.”
Automated, or autonomous driving, is in his view the next significant trend which will become reality over the next few years. Speaking primarily about the German market, Lauterwasser says Mercedes is introducing a Level 3 vehicle to the market this year – the first passenger car that is automated. He agrees that most people think about Tesla when it comes to autonomous driving, more than any other vehicle manufacturer, and explains that at present Tesla’s cars are operating at Level 2+ of autonomy – meaning that there is a need for human driver to pay attention to the road during transit.
He adds: “With Level 3, the driver may divert their attention from the other traffic according to the Road Traffic Act. It’s a first for German roads. This is something you can buy as a customer. This is a first step [towards] more automated and autonomous driving. In Germany the driverless vehicles can operate in defined operational domains under the new law on autonomous driving.”
The domain has to have been previously approved by the local authorities and by Germany’s Federal Motor Authority, which is connected to the Federal Ministry of Transport. “They have the task of making sure the vehicles are fit for driving and whether they can operate as autonomous vehicles,” he explains. There is also need for technical supervision, a center that directs vehicles that don’t know what to do in a given situation on the road by taking over control, remotely, to initiate a maneuver.
However, the most important trend in his view from a road safety and insurance perspective is the market penetration of advanced driver assistance systems (ADAS). He predicts that the market penetration of these technologies will exponentially increase. The outcome of this trend should be a reduction in the number of accidents. Yet, he foresees the complexity and the costs of repairing vehicle is likely to rise – even with the “a strong move towards electric vehicles, with new product offerings from the insurers side. They might, for example, be related to damages to the battery.”
So, to what extent does automobile liability insurance for connected and autonomous vehicles remove liability from drivers, or does some liability remain? Lauterwasser points out that liability is prescribed by law, and he says: “In Germany the regulation on autonomous and automated driving provides for owner liability to apply to all motor vehicles without exception.”
He assumes that most European countries will follow the same path as Germany has taken. This includes there being strict liability for all accidents whereby a third-party is injured. The country’s law mandates third-party motor insurance for autonomous vehicles, so the insurance cover will include accidents caused by a technical fault caused by the vehicle.
“In principle you can [also] pursue a claim against the vehicle manufacturer, requiring proof of harm done by the vehicle and to prove a fault of the product (i.e. the automated vehicle).” This would require insurers and/or their customers to engage with experts, making the claims process complex and expensive. The same situation arises with connected vehicles.
So, if a vehicle suffers from a hacker attack, the law requires the third-party to receive compensation from motor insurance. He explains that this enables the faster introduction and adoption of connected and autonomous vehicles because the protection for victims of road traffic accidents is guaranteed. Once this claim has been settled, he believes there should be “a recourse claim against the vehicle manufacturer, allowing the insurer to get the money back from the manufacturer where a fault of the product can be proven”.
With third-party guarantees in place, and the possibility of recourse to gain compensation from vehicle manufacturers, he believes there should be no concerns for insurance coverage for connectivity and autonomous. Customers will also have the ability to buy coverage for damage to the vehicle itself to insurance risk to their vehicles. He suggests there are more challenges to consider than the aspect of insurance coverage, including the quantification of automated vehicle risk.
He comments: “Over time we will need to understand from the insurance side the risk for automated and autonomous vehicles.” The trouble is that insurers don’t, as yet, have much experience when these vehicles come to the market. This requires insurers to extrapolate their experience and also to look into virtual simulations and testing. He adds: “It will become very important is to have the appropriate risk data to be able to measure the risk, and also do accident research for prevention and optimization of the systems.”
“There are many smartphones solutions on the German market, and Allianz is rolling out a solution with additional sensors on the windscreen,” he says before commenting that this means that there is a plug and play solution already at hand. “People can deploy these vehicles without any delays, and we also have a robust liability regime or system with the long-term experience of how to handle claims,” he says.
There is still much uncertainty within the market regarding automation risk and insurance policy pricing though. To mitigate it there is a need for more data, and over time this data will enable insurers, carmakers and other parties within the connected and autonomous vehicle ecosystem to build up their experience. In contrast, he points out that insurers have gained experience with electric vehicles (EVs) and their claims.
EVs have gained significant market penetration in his opinion and, in turn, this means insurers have gained the necessary data and experience to manage risks appropriately. He concludes: “It’s not there in terms of claims and risk exposure with regard to automated and autonomous vehicles but we will become more confident with the risk assessment and challenges regarding claims.” No matter what happens in the future, insurance clients should still closely examine the small print to ensure that they have the right level of coverage to protect them when things go awry.