Clear determination of responsibility is essential to ensuring effective insurance coverage of driverless vehicles, but the “next 10 years may have less clarity about responsibility than the past 40 or 50 years,” according to a new report released on Thursday by the Insurance Institute of Canada.
The report, titled Automated Vehicles: Implications for the Insurance Industry in Canada, is a “call to action for Canada’s insurance industry to become engaged in discussions with automakers, regulators, and others who will influence the introduction of semi-automated and self-driving vehicles in Canada, and to become a champion for the expected reduction in traffic fatalities and serious injuries.” In particular, the report explores how vehicle automation is anticipated to affect road safety, claims, road infrastructure, insurance premiums and policy coverage over the next decade. [click image below to enlarge]
Note: V2I means “vehicle to infrastructure”; V2V means “vehicle to vehicle.”
Automated Vehicles: Implications for the Insurance Industry in Canada is structured around several “critical questions,” including:
Who will be held responsible for traffic collisions?
Will higher repair costs limit insurance savings? and
When will fully self-driving vehicles become available?
“A challenge for the insurance industry over the next 10 years will involve determining who is responsible for collisions,” the report said. “Conventional vehicles will share the roads with semi-automated vehicles and the first self-driving vehicles. Personal liability for most collisions will begin to shift to include a mix of personal and product liability.”
According to the report, over the next five to 10 years, conventional, non-automated vehicles will continue to account for most of the cars and trucks in Canada. While the frequency of collisions resulting in serious injuries and vehicle damage will decline for new, semi-automated vehicles, this will be offset by the expected higher cost of repairs for vehicles that experience collisions. As a result, the impact of vehicle automation on insurance claims costs and industry revenues will only begin to emerge over the next 10 years, relative to the significant disruption expected over the next decades, the report said, adding that it is important for the industry to begin now to prepare for the extensive changes vehicle automation is expected to ultimately bring for the industry.
“There is the potential for the insurance industry to step up as a champion for the safety benefits that may flow from the appropriate use of vehicle automation, as the industry did with graduated licensing, the fight to eliminate drinking and driving, use of seat belts, and a number of other road safety measures,” the report said. “This is a critical time for the insurance industry to become engaged in the discussion about vehicle automation, and to champion the remarkable potential to reduce traffic fatalities and serious injuries.”
The report, the second in a series of Emerging Issues Research Reports by the institute, is authored by Paul Kovacs, founder and executive director of the Institute for Catastrophic Loss Reduction and president and CEO of the Property and Casualty Insurance Compensation Corporation. It concludes with seven recommendations to help the insurance industry prepare for semi-automated and self-driving vehicles:
Create an opportunity (potentially a national forum) for the private insurance industry, governments, regulators and other champions for road safety to work together to secure reductions in traffic fatalities and injuries through the introduction of automated vehicles and connected vehicle systems. In particular, there could be a national, multi-stakeholder effort to educate Canada’s drivers about the proper use of the emerging driver aids in order to improve driver behaviour and prevent collisions;
Undertake a research program, including a comprehensive assessment of policy issues and regulations, to ensure that they accommodate the deployment of semi-automated and self-driving vehicles. (For example, should all new vehicles be required to record when vehicle technologies are engaged? Should this information be available to insurance companies when resolving a claim to ensure that responsibility is fully documented and fraud is eliminated?);
Monitor developments in selected other jurisdictions concerning the regulation of semi-automated and self-driving vehicles, and requirements for licensing, vehicle production, and insurance;
Work with regulators to clarify liability and develop policy wordings. This would focus on shared personal and vehicle responsibility for collisions involving semi-automated vehicles, predominantly product liability for collisions involving self-driving vehicles, and clear wordings about damage resulting from cyberattacks or road infrastructure failure;
Establish a joint working group with the Canadian Council of Insurance Regulators to clarify the expected regulation of insurance for semi-automated and self-driving vehicles;
Form a group to work with the General Insurance Statistical Agency. This group could identify the specific changes in the statistical plan that would best support measuring the impact of the new vehicle technologies. The group could also seek access to loss data from select other jurisdictions around the world to secure data required for sound underwriting; and
Undertake communications initiatives to inform drivers and other stakeholders about the importance of insurance protection for all vehicles, including vehicles with automation, and the correlation between the price of insurance coverage and the cost of claims paid.
Peter Hohman, president and CEO of the Insurance Institute of Canada, said in a statement that “the road safety benefits of the new technologies are welcome, and the insurance industry has just started to discuss how to adapt to the transition towards completely driverless vehicles. Our report provides valuable analysis and information in support of moving that conversation forward.”