How driverless cars will change insurance

The first fully autonomous vehicles (AVs) will be in showrooms by 2020, speakers predicted at a Young Insurance Professionals of Toronto panel last Thursday.

But before everyone sits back as a computer handles the brakes, the gas and everything else, the insurance industry should prepare for a dangerous period when driver-driven cars and AVs are on the same road at the same time. “As humans interact with machines on the road, you’re going to have mistakes,” says Scott Cober, national transportation leader at Marsh Canada.

Also dangerous will be vehicles switching between autonomous and human-powered modes.

“When we have cars partly driven by humans and partly driven by computers, drivers will become deskilled and unused to driving,” says Barry Kirk, executive director of the Canadian Automated Vehicles Centre of Excellence. “That’s going to cause a great risk factor.”

Read: What’s it really like in the driver’s seat of a driverless car?

Plus, it can bring coverage questions to Uber-tricky levels.

“When I press the button and go into an autonomous lane and have an accident, I’m not sure how that will affect my manual driving coverage,” Cober says.

New regulations may reflect those of ride-sharing in the U.S., where different insurers provide coverage depending on what activity is taking place.

Chris Reid, director of strategy at Intact Financial Group, points out the industry tends “to overestimate the impact of new technologies in the short term but tend to underestimate it in the long term.”

For example, some auto manufacturers have announced that they will accept all liability for accidents involving their autonomous vehicles, which will of course decrease the risk—and premiums—on personal auto policies.

Read: Canadians split on driverless cars

The panel also discussed a need to change fault charts to address any potential joint and several liability issues with AVs involved in accidents. Cober predicts that when two AVs crash, their computerized systems will produce enough data to determine fault, but when an AV crashes with a human-driven car, the legal system will have to get involved.

“I honestly think in the voluntary adoption stage and the preferred adoption stage, where you’re 50 percent human drivers/50 percent automation, is a massive opportunity,” Cober says, “but once that reaches the tipping point and there’s widespread adoption, there’s the fear.”

Read: Google’s driverless car gets into first at-fault accident

Although personal policy revenues will diminish, opportunities will exist for brokers and carriers in niche and specialty products such as cyber and vehicle sharing.

“I think the shift from personal to commercial is going to be a big one,” Reid says, “but to me, the concept that is more transformational is the concept of shared.”

U.S. car-sharing start-up Turo, for example, partnered with Intact and Belairdirect before its launch in Alberta, Ontario and Quebec. Those insurers’ policyholders can rent out their cars on whichever days they’re not using them, and any accidents during that time don’t count towards their personal policies.

In the meantime, brokers should prepare themselves for significant change. “The 2020s will be exciting, they’ll be disruptive,” says Kirk. “There’ll be winners and a few losers, so fasten your seat belts because that decade will be amazing.”

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