Written by Angela Fang, Officer of the Actuarial Science Club at the University of Texas in Austin
The level of autonomy increases in vehicles as technology and time advances. Some of your vehicles may already come equipped with automated features, such as cruise control, lane-centering, and collision avoidance. Eventually, maybe in ten years, cars with full autonomy will become more commonplace on the road. There are undeniably many societal benefits to having autonomous vehicles (AV), such as a reduced number of accidents and the promotion of the economy. However, there are many questions related to risk that need to be answered before AVs become more popular.
Before AVs appear in the market for public use, insurance companies must identify and quantify risk. They must determine what kind of rating variables must be implemented and the rate relativities of the different categories within each variable. The technology involved must also be accurately priced so that when claims are filed, insurance companies compensate claimants fairly and efficiently.
Some of those filed claims may come from accident claims, which raises the question of liability. Should manufacturers or software developer be held liable, no matter the circumstance? In this case, which is known as product liability, there would be a high demand for actuaries and lawyers to prepare and protect the manufacturers and software developers from constant litigations. Alternatively, owner liability would be less complex and would place the responsibility to the owner of the vehicle when the owner’s vehicle is at fault. This would be extremely expensive for the claimant, which would lead them to shop for first-party insurance, the third option. Liability could fall on one of these three options, or be a combination of any of the above.
Even after liability is determined, regulations are tricky on their own. Liability may not be consistent from state to state, because insurance is regulated at the state level. For example, one state may practice product liability, while another may practice first-party liability. What would happen if an accident occurred outside of an AV owner’s jurisdiction? Additionally, technology evolves quicker than regulators can keep up with. However, it takes roughly eleven years for the automobile industry to have everyone with the new technology. This transitional period, where there are different generations of vehicles on the road and every state is at different stages of implementing their own unique regulations will be the most difficult part of the process. This creates a very dynamic environment where it’ll be difficult to determine how AVs will be received by and function in the public.
There is also a concern of privacy and cyber security. AVs will produce a huge amount of data, but who will own and be responsible for the data? While predictive analytics help insurance companies determine premiums based on how well a driver drives, there has always been a concern of exactly what kind of information is collected. Additionally, a computer-operated piece of technology such as the AV will be highly susceptible to hacking, where the hacker could potentially collect private data, such as favorite destinations, or even take control of the vehicle. Cyberliability, or insurance in the event of a hacking, could be purchased, but it adds to the cost of owning an AV.
While the AV undeniably has many positive aspects that can improve road safety, there are many complicated aspects that need to be ironed out. This technology is still being developed and tested, but workarounds for the problems mentioned may come about in the near future.