Highlights:The debate on the timeline of fully autonomous vehicles traveling on US highways rages on, with the optimists in the industry predicting initial applications to begin as early as 2019 and the skeptics questioning whether 2035 is a realistic launch date.
Experts agree that self-driving cars present the auto insurance industry with major challenges, but also with significant near-term opportunities.
The greatest potential of automated vehicles in the short term will derive from the vast amounts of data they create. Autonomous-vehicle manufacturers, software companies and insurers will all be interested in analyzing this data not only to improve existing products, but also to develop new value-added services. In addition, billions of dollars in premium revenue will be available to those carriers that are first to launch insurance services for this new risk category.
Introduction:
What do we mean by ‘autonomous’
Who’s making self-driving cars and autonomous-driving technology?
Regulation of self-driving cars
Where are the testing locations for self-driving cars?
What do self-driving cars mean for the auto insurance industry?
Self-driving cars and big data
The human element and consumer attitudes toward driverless cars
The takeaway for insurers
The race for self-driving cars has been accelerating significantly in the last two years with more pilot programs popping up across the globe and more auto manufacturers and technology companies getting into the field.
While most experts agree wide consumer adoption is still years away, from a technology perspective the launch date for fully automated self-driving cars could be as early as 2019 in initial applications such as public transit or ride-hailing services.
How fast these autonomous vehicles will get to the point of widespread adoption will be impacted by a number of factors in addition to technology. These include regulation and legislation, the security of the data these cars need to operate, the ecosystem of supporting industries, including insurance, and of course consumer attitudes and ethics.
What do we mean by ‘autonomous’?
According to the Society of Automotive Engineers, there are five levels of automated vehicles:
Level 1: Driver Assistance. The driver controls the vehicle, but smart features enable the car to alert the driver to conditions, the environment and obstructions.
Level 2: Partial Automation. The vehicle has combined automated functions, i.e. acceleration and steering, but the driver remains engaged.
Level 3: Conditional Automation. The vehicle manages most safety-critical driving functions, but the driver must be ready to take control of the vehicle at all times.
Level 4: High Automation. The vehicle is capable of performing all safety-critical driving functions, but the driver has the option to control the vehicle.
Level 5: Fully Autonomous. The vehicle is completely driverless and will not feature driving equipment.
Level 4 is the “fully automated self-driving cars” to which experts refer currently.
Who’s making self-driving cars and autonomous-driving technology?
The clear leader in the industry is Google’s Waymo, which has conducted five million road miles of testing in 25 cities and many more in computer simulation. Its main fleet is comprised of Chrysler Pacificas, although key partners include Fiat, Jaguar and Honda ‒ and Lyft.
Among the auto manufacturers are well-known players such as Audi, Chrysler, Daimler, Ford, GM, Hyundai, Toyota, Volkswagen, and Volvo, but there are also plenty of newcomers such as Faraday Feature, Local Motors, Lucid, and NextEV.
Altimeter Group, in its report titled “The Race to 2021: The State of Autonomous Vehicles and a “Who’s Who” of Industry Drivers,” gave detailed profiles of all auto manufacturers involved in autonomous-vehicle technology and development. It also featured some 50 hardware and software companies actively developing various components for autonomous vehicles. Tech giants Microsoft, Apple, Google and China’s Baidu have been leading the self-driving technologies, but there are many startups such as Comma.ai, Drive.ai, and Oryx Vision getting involved.
Regulation of self-driving cars
In 2017, the U.S. Department of Transportation (DOT) issued a set of voluntary guidelines, called “A Vision for Safety 2.0,” providing recommendations and suggestions for industry’s consideration and discussion. They are designed to unify the development of automation features, including full autonomy and advanced driver assistance systems (ADAS), and to help unify industry, local, state, and federal government efforts to that end. The guidance also streamlines the self-assessment process for companies and organizations. “This Guidance is entirely voluntary, with no compliance requirement or enforcement mechanism. The sole purpose of this Guidance is to support the industry as it develops best practices in the design, development, testing, and deployment of automated vehicle technologies,” the agency noted.
Earlier in 2016, the DOT had introduced 15 benchmarks automakers would need to meet before autonomous vehicles hit the road. It also asserted the rights of each US state to regulate insurance. The policy report, “Federal Automated Vehicles Policy: Accelerating the Next Revolution in Roadway Safety,” addressed the roles of the federal and state governments in regulating the emerging self-driving vehicle technology and issued this statement about liability: “States are responsible for determining liability rules for highly automated vehicles (HAVs). States should consider how to allocate liability among HAV owners, operators, passengers, manufacturers, and others when a crash occurs. For example, if an HAV is determined to be at fault in a crash then who should be held liable? For insurance, states need to determine who (owner, operator, passenger, manufacturer, etc.) must carry motor vehicle insurance. Determination of who or what is the “driver” of an HAV in a given circumstance does not necessarily determine liability for crashes involving that HAV. For example, states may determine that in some circumstances liability for a crash involving a human driver of an HAV should be assigned to the manufacturer of the HAV.”
This led to the introduction of a flurry of bills (more than 50 bills in 20 states) in 2017 providing some degree of regulation of self-driving cars. Twenty-two states and Washington, D.C., have either passed legislation or adopted regulations through a governor’s executive order.
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