Auto Insurance For Self-driving Cars: New York’s Legal And Coverage Considerations – Arthur D. Little has been at the forefront of innovation since 1886. We are a recognized thought leader in connecting, innovation and change in technology-intensive and integrated industries. . We enable our clients to build innovative capabilities and transform their organizations. ADL is in the most important business centers around the world. We are proud to serve most of the Fortune 1000 companies, in addition to other leading corporations and public sector organizations. For more information, please visit

The first modern car is generally considered to be Benz Motor Car No1. Patented in 1886 by Karl Benz, this was the “missing link between automobiles and horse-drawn buggies” in the days before automobiles were invented.

Auto Insurance For Self-driving Cars: New York’s Legal And Coverage Considerations

Auto Insurance For Self-driving Cars: New York's Legal And Coverage Considerations

One hundred year old fellows and there is a world of difference. Especially when it comes to advances in vehicle safety technology; Blind spot monitoring, lane control, emergency braking, traction control, and drowsiness detection et al are now entering the global car pool.

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Over time, these features will play an important role in reducing the 1.25 million deaths worldwide due to vehicle accidents (as reported for 2014).

However, the truth is that no matter how good these safety features are, they cannot fully compensate for the number one factor in traffic accidents, us!

In the United States, 94% of crashes are human error from speed, alcohol, distraction or sleep. The National Safety Council estimated approximately 40,000 Americans died on the roads in 2016, a 6% increase over the previous year.

In the UK, according to this report by Matthew Avery of Thatcham Research, 23% of motor claims are related to transport incidents. Of these, three quarters occurred during the transition. This accounts for £1.7bn of claims caused by human error that will be eliminated by autonomous vehicles.

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The problem with talking about autonomous cars is that not all autonomous cars are the same. That is why there is a J3016 standard to define them. The international standard for autonomous vehicles was defined in 2014 by the Society for Automotive Engineers International (SAE). It is based on six levels of customization from zero, for no exercise, through to Level 5 for full exercise.

This tray explains it well. Levels 0-3 are when you need a human driver to take control, even if there is a level using partial automation. Levels 4 & 5 describe situations when an automated driving system is in control, including human driving

To put this into context, Tesla’s Autopilot system is (only) Level 2 today, although they can sell themselves higher. The first production ready Level 3 car is expected later this year in the form of the Audi A8.

Auto Insurance For Self-driving Cars: New York's Legal And Coverage Considerations

While autonomous vehicle technology is developing at a rapid pace, the biggest barrier to adoption is the rules and regulations of the road. Every case is different, but they all have one thing in common. They are all rules written for a custom car by a custom person.

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To find out more about how governments and industry are preparing for the changes headed our way, I found the

The idea of ​​an industry expert. David Williams from AXA UK is a 30 year veteran of the insurance industry and is heavily involved with the UK Government’s Agency for Connected & Personal Cars.

Believe undoubtedly the UK led the way with not signing the Vienna convention for us in the first place. Them

(AEV) is going through Parliament as we speak. Regulations and codes of practice for testing autonomous vehicles have been in place in the UK for some time now. “

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If you don’t know, the UK Government’s AEV License is the law that will enable auto insurance for autonomous vehicles in the UK.

Some claim that the US is leading the way. Maybe in Silicon Valley, but when it comes to regulation it’s a mixed picture. Some states allow driverless cars on the road while others do not. Last month, Reuters reported that US Transportation Secretary Elaine Chao of President Trump’s administration is about to “rewrite regulations that are a barrier to robot cars.”

So, with all this technology coming our way, making it safer on the roads, will this drive up insurance costs?

Auto Insurance For Self-driving Cars: New York's Legal And Coverage Considerations

“You would think so, wouldn’t you. But the truth is that car repair costs in the UK have gone up by 32% in the last three years. This is mostly due to the costs from the additional technology fitted in the cars, mostly in safety equipment

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. But only as safety feature technology becomes more widespread and as its unit costs come down. Then you expect to see a safe dividend flow through lower insurance costs. “

The argument for autonomous cars is clear-cut. Technology makes for better drivers than us mere mortals. Which leads to the near elimination of accidents caused by distraction, fatigue and inefficiency. The result is people have free time to work, sleep, play and eat during their travels.

However, before we sound that death knell, let’s remember that autonomous car technology is still in its infancy. Accidents happen, as seen with the death of a Tesla while on Autopilot in 2016. And today’s news of an Uber self-driving car being involved in a fatal accident.

And Waymo, Google’s autonomous car project, with more than four million miles under its belt also reports “excesses” while in autonomous mode in their latest reports to the DMV.

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However, the good news is that technology can and will only get better. Just like the trolley argument and the moral and ethical questions raised by artificial decision making there will be an acceptable medium, IMHO.

In the long run there will be fewer accidents and lower levels of claims. But this is, of course, a double-edged sword for investors with very low profits.

The question is not whether auto insurance will change or not, because it will definitely change. The real questions are when and how it will change. With the help of David, I set out four effects of autonomous cars on car insurance.

Auto Insurance For Self-driving Cars: New York's Legal And Coverage Considerations

In the US, auto insurance accounts for around $175bn of the P&C market. Over the past decade, the frequency of both liability and personal injury claims resulting from motor vehicle accidents has remained largely unchanged.

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However, the personal injury cost per claim has risen by 30% over the same period. Autonomous cars will change this trend. Moving towards self-sufficiency will see substantial savings in managing small claims and payments for insurers.

But these savings will be matched by significant reductions in profits. In the UK last year, car professionals wrote about £8bn in private motor insurance premiums. Some estimates I have seen predict a drop of up to 50% to 80% in auto insurance premiums!

With a reduction in accidents and incidents will come a reduction in fraud. Not because there are fewer incidents, but because the information available to the provider will be better.

A gullible customer has little or no time to think of elaborate answers when the data the insurer needs comes from telematics and sensor data in his car and cell phone. Insurers are able to determine the best picture of what happened without customer input.

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“Yes of course. However, this does not allow complete and comprehensive cooperation between car manufacturers and suppliers when it comes to data sharing. There is a long way to go to get that right. And we do not forget that there are regulatory issues to think about data privacy. It all sounds great in theory.”

The battle over access and ownership of data will run and run. That is a story for another day.

When, on October 8th 2015, the boss of Volvo, CEO Haken Sammuelsson, said,  “Volvo will accept full liability whenever one of its cars is in autonomous mode” it seemed to indicate the end of auto insurance .

Auto Insurance For Self-driving Cars: New York's Legal And Coverage Considerations

Volvo was the first to speak and other manufacturers have followed suit. Essentially, when the manufacturer’s autopilot is in the driver’s seat, the insurance liability shifts from the driver to the manufacturer.

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However, the truth is that auto manufacturers are not willing to take the risk of the insurance. After all, they have spent billions of $ on R&D to make our roads safer and reduce accidents by 80-90%. They do not do this to then have to bear 100% liability for anything that happens on the road.

The AEV Bill in the UK makes it clear when liability will transfer from the ‘Driver’, and that is only when talking about 4 or 5 vehicles. From that point liability transfers to the Vehicle, but the RTA affect

“Many people think that the liability will just be transferred to the manufacturer, but it is not that simple, and the AEV fund ensures that there are no gaps.”

This is an important point. Because AEV insurance will impose strict obligations on the insurer to pay in the event of an incident involving the insured vehicle, regardless of fault. Then the insurer can pursue recovery as a second step.

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As the liability shifts to the vehicle, the structure of the auto insurance policy will fundamentally change. Risk notification based on the driver’s age and claims that history will no longer be

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