Earlier this month, Håkan Samuelsson, president and chief executive of Volvo Cars, caused a significant stir when he said Volvo “will accept full liability” whenever one of its cars is in autonomous, or so called 'self-driving', mode. Knee-jerk speculation was that car manufacturers would eat some of the insurance industry's lunch, but now the consideration is whether they can digest the depth of responsibility.
Alex Bell, managing director in KPMG’s CIO advisory practice, said: “As the vehicle makes more decisions, the potential liability of the … manufacturer will increase too. In addition, losses covered by product liability policies will most likely increase because the sophisticated technology that underpins driverless vehicles will also need to be insured.”
Insurers and brokers are questioning whether manufacturers can deal with not only the intense complexity of liability issues involed with driverless cars, but also the ‘human side’ of the equation – how will accident benefit coverage, for example, be managed?
According to forecasts released by KPMG this week, a decline in accident frequency due to safer vehicles and the adoption of autonomous vehicles could shrink the US personal auto insurance sector by 60% within 25 years. It estimates an 80% potential reduction in accident frequency by 2040, resulting in a potentially drastic reduction in loss costs and premiums. It also notes, however, that average accident expense could increase from almost US$14,000 currently to roughly US$35,000 as the technology embedded in the cars becomes more expensive.
While Volvo's Samuelsson has urged regulators to work closely with car makers to solve outstanding issues such as questions over legal liability in the event that a self-driving car is involved in a crash or hacked by a criminal third party, clients will need to be reminded that the line between insurance starting and car manufacture liability beginning is unclear.
Volvo was the first car maker to publicly make such a promise on the question of liability.
Google, not a manufacturer but still a major player in the self-driving car ecosystem, has also been dogged by speculation that it too wants to break into insurance.
As driverless car technology continues to advance and the insurance companies look to adapt their coverage models, there will be a period of transition. Brokers will play a key role in this transition and as an advocate for consumers and the conduit between the insurance company and the policy holder, they will be looked upon to provide advice to their customers at each stage of technology progress. The likelihood may be that this will only be achieved through collaborative efforts between car manufacturers, insurance companies and brokers.