Two-in-one insurance policies. Where should liability lie?

The proliferation of autonomous vehicles presents a significant opportunity for not only the automotive industry, but also insurance providers. As momentum builds, we are increasingly seeing insurance positioned at the frontline of autonomous advancement. Looking further forward, we will see the insurance industry evolve significantly to adapt to the technology and driving habits of the generations to come.   

The UK Department of Transport (DfT) in February of this year announced the concept of so-called ‘two-in-one’ insurance policies as a way of covering both the driver and the car when in autonomous mode. Designed to make sure that, should the individual be driving manually or when in autonomous mode, the policies would ensure that the party not at fault is still properly compensated – in much the same way that motor insurance works at present. Claims made against accidents involving a vehicle in driverless mode will then be covered by the insurance company who will reclaim the losses from the party responsible, which in some cases will be the vehicle manufacturer.   

To date, debate has revolved around where liability should lie; either with the driver, manufacturer, or, as some have suggested, with the highway authority if proper structures/sensors have not been put in place to accommodate driverless vehicles on the roads. However, the concept of two-in-one insurance policies could go some way in addressing the tricky issue of having different types of cars on the roads at the same time, while also addressing the issue of where the liability will lie. 

Society is becoming increasingly litigious and both individuals and companies are looking to protect themselves through insurance. Equally, the rise of autonomous vehicles will add a fresh nuance to car sharing and the uberisation of journeys, as the number of parties involved in crash and claims events amplify.   

As autonomous vehicles become more of a reality on our roads, insurers will undoubtedly require independent third parties to verify potential insurance claims and determine liability. By harnessing driving data and applying sophisticated data analytics, insurers will benefit from the crucial insight they need to forecast individual risk. On-board telematics technology will be critical in allowing insurers to determine who or what is at fault – whether the driver or one of the vehicles.   

Car manufacturers will also increasingly have to take brand reputation into account as the risks associated with actions against the makers of autonomous vehicles increase, and as highlighted by the UK government, will be a separately insured party in any incident. Therefore, it is expected that original equipment manufacturers (OEMs) will need insurance policies of their own. A crash will always entail a claim and liability must rest with a party. When autonomous driving technology causes an accident, there is no human error at play except the error involved in that car’s design or interpretation of data. As such, OEMs will need data and analytics to underpin insurance cover to defend these claims and to pay out in the event of successful action.   

Using telematics to bring the Algorithm Economy to the automotive sector will sharply reduce insurance fraud and bring down premiums. Right now, about £50 of every annual car insurance policy covers the cost of insurance fraud. With telematics and therefore data analytics in place, most of that fraud could be spotted straight away. For example, where telematics technology is used, the sensors can register location, speed, acceleration, driving style, and the G-forces that impact the car. This means that in the event of an accident, the determinants of a crash are more transparent, fraud is easier to detect, and it ultimately leads to faster response times to customer claims and lower insurance premiums going forwards. 

We have found that insurance policies underpinned by telematics technology on average result in 50% fewer claims than traditional policies. By 2020, consultancy Ptolemus estimates that nearly 100 million vehicles will be insured with telematics polices, growing to nearly 50% of world’s vehicles by 2030.   

It may be decades before regulators allow vehicles to be built without manual controls, but ultimately, accidents will still happen. With the proliferation of autonomous vehicles, determining liability will become more complex, requiring a more sophisticated assessment of the incidents that occur. While the advent of autonomous cars could revolutionise transportation offering a safer, more fuel-efficient, and comfortable experience, this revolution will not be possible without a new, data-led approach to the way we insure the vehicles on our roads. Determining crash liability in the driverless future will be an essential step in making that future a safe reality.   

Jonathan Hewett, Chief Marketing Officer, Octo Telematics 

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