Insurance Consequences for Driverless Cars

Written by:  Hilary Chung

Drivers may soon be taking a back seat to computer software. As the technology for driverless cars is developing quickly, both insurance companies and legislators will have some catching up to do. With the transition from human drivers to computer software, the current framework of accident liability is challenged. In entirely self-driving cars, the driver becomes simply another passenger. The legal question becomes who is liable in the event of an accident, and the big issue for the insurance industry is what will happen when there are no longer drivers left to insure.

Automobile manufacturers are stepping up to the plate and some have already agreed to bear the cost of insuring driverless cars. At first glance, this seems like a natural solution. As the control shifts from the driver to the manufacturer, it seems reasonable for the insurance burden to shift as well. However, the issue is not so simple. Will the manufacturer still be liable in an accident caused by the failure of the driver to maintain the vehicle in a proper state of repair? The product-liability type insurance will have to be tailored to some specific coverage issues for driverless cars.

The other big impact of driverless cars is on the cost of automobile insurance itself. While the new technology can reduce the incidence of accidents dramatically, it will not be perfect. The insurance industry may have the opportunity to sell more coverage to automobile manufacturers or companies involved in developing software since when the technology fails, these companies could be on the hook for significant damages. Furthermore, the property damage could be more substantial if expensive sensors and cameras are destroyed in an accident.

Another opportunity for the insurance industry is to sell insurance for damage caused by hacking. For instance, researchers have demonstrated that they can hack into the computer software of commercial vehicles from a simple laptop. While the frequency of accidents will likely decrease, this will not be the end of automobile insurance. Instead, both the law and the insurance industry will have to adapt and change to the new issues that emerge when the driver relinquishes control of the vehicle.

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