Car Insurance for Self-Driving Cars: Challenges and Opportunities

What are Self-Driving Cars and Their Levels of Autonomy?

Self-driving cars are vehicles that operate independently, without requiring human intervention. However, there are different levels to a self-driving car, each outlining the degree of the car’s autonomous nature. A self-driving or autonomous car ideally has the following six levels:

Level of Self-Driving Car	Overview
Level 0	No automation; the human driver controls full driving
Level 1	Basic assistance is available, such as speed or steering control, but both are unavailable together. Cruise control is an excellent example of this feature.
Level 2	The car can control both speed and steering together, but the driver must remain alert and supervise.
Level 3	The car drives on its own in particular pre-determined conditions. However, the driver must remain ready to take over control when asked.
Level 4	The car can drive itself in most situations without human involvement, but only within specific areas or conditions.
Level 5	Full automation; no human driver needed at any time or place.

 

How Does Liability Shift with Autonomous Vehicles?

When you’re driving a car with complete control, it becomes easier for insurers to place liability on the driver if a road accident ever happens. However, determining autonomous vehicle liability isn’t easy. As self-driving cars take over the driving duties, accidents can be linked to several technical issues. 

Sensors not detecting an object or software making a wrong lane-turning decision might become a common cause of accidents, shifting liability from the human driver to companies responsible for designing, manufacturing, and updating car technology. 

Instead of blaming the driver, investigations will focus on vehicle defects, software glitches, map data, cybersecurity, and even hardware failures. Hence, instead of the person behind the wheel, the car maker, car part suppliers, or tech developers may become responsible for paying the compensation.
 

Challenges and Opportunities in Insuring Self-Driving Cars

Since insurance for driverless cars is a complex aspect, individuals may think it comes with numerous challenges. However, it also presents several opportunities. Here’s a look at both the challenges and opportunities. 

Challenges in Insuring Self-Driving Cars

The following are the key challenges linked to autonomous vehicle insurance:

• Establishing Fault 

Establishing autonomous vehicle liability is one of the most challenging aspects because multiple companies are involved in developing self-driving cars. So, if an accident takes place, insurers can find it difficult to determine who’s at fault – the car maker, software developer, sensor supplier, data provider, or someone else. 

It makes establishing fault really complicated and can even lead to legal disputes about who should pay for damages or injuries caused by the autonomous vehicle.   

• No Standard Regulations

Most countries still follow insurance laws made for human-driven vehicles. Hence, you’ll find very few rules that clearly state what data must be shared after an accident, how to determine whether technology is at fault, or whether the car owner/car maker/software provider should be held liable. Until governments establish universal guidelines, insurers will have to navigate numerous grey areas and uncertainties.   

• Cybersecurity and Hacking Risks

Self-driving cars depend heavily on software, internet connectivity, and cloud systems. If any of these systems get hacked, someone can remotely control the vehicle, steal personal data, track the car, or disrupt safety functions, causing extreme damage to passengers and those in the car’s proximity.

• Limited Access to Vehicle Data

After every road accident, car owners typically submit their car’s pictures, witness statements, and damage reports to evaluate what exactly happened and who is at fault. With self-driving vehicles, insurers can struggle to obtain relevant data because it’s mostly stored in software and sensors. 

Car manufacturers are generally reluctant to share this information with any third party, making it difficult to determine the correct cause of the accident, which can delay claims and create legal conflicts.

Opportunities in Insuring Self-Driving Cars

The following are a few potential opportunities that can be explored:

• Creation of New Insurance Products

Traditional Car Insurance policies only cover human mistakes, such as rash driving, speeding, etc. Since they don’t cover faults of autonomous cars, there’s a scope to create new insurance products that cover faults caused by faulty sensors, software malfunctions, navigation errors, and other potential faults that can be attributed to driverless cars.  

• Fewer Accidents due to the Removal of Human Error

Human errors typically cause the most accidents. If you analyse the top causes of car accidents, you’ll find speeding, drunk driving, distraction, fatigue, etc., as the common reasons. Thankfully, these errors get eliminated in autonomous cars. As technology becomes more advanced and reliable, you can expect road accidents to decrease, resulting in lower payouts for insurers. 

• Partnership with Car Manufacturers 

Currently, all car insurance policies are sold separately from the car. As autonomous vehicles become more common in the future, automakers can start partnering with car manufacturers to bundle vehicle purchases with built-in insurance that covers technology risks. This partnership creates an opportunity for insurers to collect technical data directly from car manufacturers, making it easier to determine who was at fault in the accident.
 

Why Do Autonomous Cars Still Need Insurance?

Even though advanced technology is expected to reduce road accidents by eliminating human errors, autonomous vehicles aren’t 100% immune to road accidents. They can meet road accidents due to risks, such as hardware or software failure, unexpected road conditions, bad weather, hacking, or malfunctioning defects. 

Hence, having insurance on autonomous cars is essential to financially cover individuals and properties that may get damaged due to an accident. It’s also necessary for product liability claims, where car manufacturers or tech providers must compensate if their system causes a crash.
 

How Are Premiums and Claims Affected?

As driverless cars reduce the likelihood of road accidents due to human error, the number of accidents is expected to decrease in the long run. It can lead to insurers charging lower premiums. However, in the initial stages, premiums on self-driving car insurance may remain higher because there are no standard regulations or industry-specific guidelines to standardise it.

You can also expect claims to shift from personal car insurance to product liability claims, meaning car manufacturers will be held liable instead of drivers. As autonomous cars continue collecting data, claim approvals can become faster because evidence of what happened is recorded automatically.
 

Conclusion

Self-driving cars are slowly entering the consumer markets, changing how we drive. It’s also changing one crucial thing that’s largely overlooked – autonomous cars are changing the auto insurance market. The global insurance market currently lacks standard guidelines and regulations for creating new autonomous vehicle insurance policies, leaving it in a state of uncertainty. 

However, if one explores the challenges and opportunities in self-driving Car Insurance we’ve discussed in this blog, then one can get a good starting point. If you’re exploring reliable insurance options for your four-wheeler, you must check Shriram Car Insurance. Whether you choose comprehensive or third-party insurance, you’ll get generous coverage along with numerous add-on cover options.
 

FAQs

1.What is different about insuring self-driving cars?

Insurance for driverless cars focuses more on the car’s software, sensors, hacking, etc., rather than human errors, as the cause of accidents.
 

2.Who is liable in road accidents involving autonomous vehicles?

Determining liability is a complex aspect of autonomous car insurance because multiple companies play a role in ensuring the smooth operation of driverless cars. After an accident, insurers must investigate whether the liability lies with the car manufacturer, software company, or hardware supplier.
 

3.How will self-driving cars affect insurance premiums?

Initially,   premiums will be significantly higher due to the lack of regulations and guiding principles. However, it may lower over time.
 

4.Are new types of insurance products needed for AVs?

Yes, new insurance products are needed for AVS, specifically those that cover software failures, hacking, system malfunctions, etc.
 

5.How do insurers handle cybersecurity risks in driverless cars?

It’s still being explored. However, a potential method may be to develop specialised cyber insurance policies.