Last Tuesday, California became the third state to legalize driverless cars, a concept automobile under development by Google that could one day revolutionize the way we drive. But the development raises a host of liability questions for insurers.
While noting that these cars are still years away from being produced on an assembly line, Tom Kavanagh, director of the insurance practice for PricewaterhouseCoopers, says it's still interesting to ponder this question today: If there is no driver, then who assumes liability if there is an accident, the owner or the manufacturer?
This, he says, would add a layer of complexity to automobile insurance that does not exist today and it will be up to both the legal system and insurance carriers to figure these questions out.
If the cars prove safer, a contention made in the marketing of these vehicles, then that could have a profound impact on the price of insurance, as frequency and severity from auto accidents are reduced. Ultimately, it could mean lower auto premiums for auto owners.
Another concern is the data that these automobiles will collect and who takes ownership of it.
Kavanagh points to the use of telematics and some of the privacy concerns controversy over the use of data to determine price.
“There will be some similar challenges on it related to this,” says Kavanagh.
He says it will still be years before insurers have to face the driverless-car issues, with earliest manufacturing forecast in 2015, if not later.
“I don’t think [the insurers] are going in any direction yet [on this],” says Kavanagh. “They are approaching this like they would any issue, working with their legal and compliance departments and with regulators on timing and related issues.”
A spokesperson from Google declined to comment, but did acknowledge that the insurance implications are important and will need to be worked out.
The company also issued a statement saying, “Self-driving cars have the potential to significantly increase driver safety.”
Robert Passmore, senior director of personal lines policy Property Casualty Insurers Association of America, says there are those that believe the driverless car will mean the end of auto accidents, translating into the end of auto insurance.
On the other hand, despite the enhanced safety features the car conceivably would bring, there are liability exposures that would continue to arise for the vehicle’s owner.
The technology will probably make the cars more expensive, he says, and their increased value will need to be insured against damage from natural events and theft.
And despite the technology, notes Passmore, there is still the risk of a collision with vehicles still being driven manually.
In legislation that has been passed by at least two states, California and Nevada, the cars must have an operator and the ability to override the computer.
“The major concern that we had was that somebody, for the purposes of liability, for the purposes of traffic law enforcement, is considered the operator of that vehicle, whether they are sitting behind the wheel or sitting in a control room somewhere,” Passmore says. “I think that is something that, in both states, was addressed. But other than that, it, and the whole issue of improvements in auto technology, are something that most insurers will be watching closely.”
At the nation’s largest insurer, State Farm, Public Affairs Specialist Arlene J. Lester says, “While it is too soon to give an opinion or endorsement of these vehicles, we are watching the advancements made in this arena with great interest especially due to the potential it has on making cars and roadways safer for all drivers. Safety is always our number one priority.”