Insurers urged to seize 'opportunity' as driverless cars hit UK roads

Coinciding with the launch of driverless car trials in Greenwich, Milton Keynes, Coventry and Bristol last week, the Department for Transport highlighted insurance as one of the main issues that must be addressed as fully autonomous driverless cars become more commonplace on UK roads.

The DfT said one aspect of its Pathway to Driverless Cars Summary and Action Plan report that is an "ongoing" action is to: "Work with the insurance industry to develop requirements governing insurance of highly and fully automated vehicles and engage with the [European Union] over their plans for automated vehicles."

While development of the technology is still at a very early stage, there are a number of questions about what the implications may be for the insurance industry.

Ruth Graham, motor partner at law firm BLM, told Post insurers should view the trial of driverless cars and the potential impact as a positive development.

During the trial stage of the technology an instructor must be in the driverless car to take control if something goes wrong. Graham said it is not clear at this stage who will provide the instructor - the manufacturer or an outside company - but was confident that this would be a potential benefit for insurers.

She told Post if the car was to fail and the instructor had to take over the manufacturer would need a product liability policy as well as an existing motor policy.

While Graham warned the price of policies could reduce as cars become safer, she added that the subsequent impact on claims would provide a fillip for insurers.

Predictions around the impact of driverless car technology on motor rates come following a 4% year-on-year reduction in the average premium paid for a private comprehensive motor policy in 2014, according to the latest Association of British Insurers' premium tracker.

However, despite the potential knock-on effect in the motor market, which has been a constant source of pain for insurers in recent years, driverless cars could yet have a positive influence on profitability as a result of a significantly improved claims environment.

Graham explained: "I don't believe there will be [policy price] increases. It will be safer on the roads because the human element is taken out of the equation.

"The claims process will be quicker with all the technological advances, such as autonomous braking systems. This technology should be viewed as an opportunity not a threat."

All driverless cars will be fitted with a dashboard camera by the manufacturer, which will give insurers more information about incidents when dealing with a claim and make it more difficult to make a fraudulent claim, Graham added.

However, it will be "at least five years" before driverless cars are fully integrated onto UK roads, Graham said, and even then there will still be a need for "traditional" motor policies because "a large percentage of drivers will always want to drive".

Tom Moss, retail technical director at Allianz, agreed there will "always" be people who will be unwilling to give up the driving experience in favour of being driven by fully autonomous vehicles.

This is supported by research from aggregator Uswitch, which found that 48% of 953 consumers surveyed would be unwilling passengers in an autonomous vehicle.

Moss told Post: "It's a watching brief, but the reality is that the change will take many, many years. It's a very slow change."

However, he did concede that the motor market will become smaller if driverless cars take off. "There will be fewer accidents," he said, "and that's for the greater public good."

Another change will be the way risk is assessed and the shift from drivers to vehicles and the incumbent software.

Moss said the process of assessing risk will be made easier by focusing on the autonomous technology.

As well as drivers who may want to stick to cars they have full control over in the future, there will always be other vehicles, cyclists and pedestrians sharing the road - meaning insurers will inevitably have a part to play in the future.

Gus Park, director of motor at Direct Line Group, explained: "As a result, there will still be the potential for accidents and therefore a need for insurance.

"Our view is that the current legal framework should continue, with insurance being held by the owner of the vehicle. However, the cost of insurance could therefore become cheaper in correlation with a declining accident rate."

Meanwhile, another issue is determining the blame during the claim process.

Nick Corrie, managing director at telematics firm Trak Global, said: "It will be interesting to see how the degree of autonomy from vehicle to vehicle corresponds to the degree of indemnity for the ‘driver' of the vehicle if an accident were to occur. Determining fault is likely to be a real challenge - is it the manufacturer, vehicle scheme operator, or driver who would ultimately be held responsible?"

However, Barry Street, head of claims engineers at Covea, said the industry is aware of the challenges that driverless technology will present and that the sector has enough time to prepare itself for them.

"It's potentially a game changer," he said, "The important thing is not to over-react to this and to take things sensibly."

This article was published in the 19 February edition of Post magazine.