Self-driving cars, also known as autonomous vehicles, have been very much in the news in recent years. Many people predict that widespread adoption of autonomous cars will reduce the number of automobile accidents by at least 90%, and many experts believe that number is understated by 5% or more. Since there are about 6 million car accidents in the United States during an average year, it is easy to see what could happen once every car on the road is fully autonomous. However, no one is predicting that self-driving cars will eliminate all accidents. That raises the thorny issue of how insurance companies will handle the accidents that do occur.
A Brief Overview of Autonomous Cars
The Society of Automotive Engineers defines five levels of vehicle autonomy. At the lowest level, the driver has full control, but smart features warn the driver of obstructions, conditions and the environment. At the highest level, the car will not have a driver or even a steering wheel. When most people think of a self-driving car, they are thinking of vehicles that are at the third or fourth level. At the third level of autonomy, the driver must retain his or her ability to take control at all times, but the vehicle can manage most of the safety-critical functions. At the fourth level, the driver can assume control of the vehicle, but the car can perform all safety-critical functions.
Why Are Autonomous Cars Creating Problems for the Insurance Industry?
Historically, insurance companies have usually looked to assign blame for an accident by identifying the at-fault driver. Changes to the laws in many states have altered how liability is assigned. Some states are no-fault, meaning that each driver’s insurance company typically pays the claims filed by its policyholders whether they are at-fault or not. Other states, including Arizona and Nevada, permit fault to be prorated among all drivers involved in the accident by determining the percentage of blame that each driver deserves.
Obviously, the first issue to be addressed is how to determine fault if there are no drivers. Should the automaker be held liable for the accident? What if the car was modified after its sale, and what if the modifications resulted in an accident? What if the car’s owner did not obtain updates to the vehicle’s software? Who pays if a hacker takes control of an autonomous car and causes an accident? If the LIDAR fails, is the LIDAR provider or the automaker responsible? So far, the consensus is that the automaker should be held liable if an accident results from the failure of the vehicle’s autonomous features, and Mercedes-Benz, Volvo and Google are already assuming liability for crashes caused by a failure of their vehicles’ self-driving systems. However, the issue gets a bit murkier if the crash is the result of an aftermarket modification or the failure of a third-party software or part. How these incidents will be handled is still an unresolved issue, but cases involving third-party suppliers in crashes of traditional vehicles hint that these suppliers could be named as defendants in personal injury lawsuits.
The second problem facing insurance companies involves their dependence on statistical data to measure risks. Insurance underwriters can predict with surprising accuracy the risks posed by drivers in certain age groups, for example, or those who live in specific metropolitan areas. These statistical tables have been compiled over many decades and from millions of claims. However, because self-driving cars are relatively new and not very numerous, insurance companies do not have the necessary data to gauge their risks. Furthermore, if the automaker is going to bear the brunt of the liability in the event of a crash, how does this affect the risks for the company providing the car owner’s insurance? The inability to accurately assign risks has led some insurance companies to charge exorbitant premiums or refuse to insure self-driving cars. Tesla is attempting to mitigate this problem by offering buyers of Tesla vehicles the ability to purchase insurance through the company. Whether other automakers will follow Tesla’s lead remains to be seen.
Third, if car owners are not held responsible for crashes, how will insurance companies entice them to carry full coverage on their vehicles? Currently, virtually all lenders make full coverage mandatory for the entire term of the loan, but many drivers who pay cash for their vehicles voluntarily carry full coverage so that they can recoup their losses if their cars are involved in an accident for which they are held responsible. What about liability insurance? Although every state currently requires minimum coverages, will these laws need to be revised? If there are no drivers to be found liable, why will car owners need liability insurance?
As an industry, the providers of car insurance must find answers to the many questions posed by self-driving cars. Fortunately, they have plenty of time to conduct research and formulate plans before a high percentage of cars on American roads are fully autonomous. It will be several more years before fully autonomous cars are offered to the public, and widespread adoption of the technology could take an additional two or three decades. The insurance industry has been forced to adapt to innovative technologies before, so there is little doubt that it will find a way to adapt to self-driving cars.
It should be noted that changes in how insurance companies handle liability for self-driving cars can also lead to changes in how personal injury lawsuits will be handled. New precedents will be set, and there will likely be new laws enacted. At Lloyd Baker Powerhouse Attorneys, we will be keeping a close eye on the issues. In the meantime, if you have suffered an injury in a car accident in Nevada or Arizona, we stand ready to use our experience and resources to help you secure a fair settlement. Contact us today for a free consultation. The number for our Las Vegas office is 702-444-2222, and the number for our Phoenix office is 602-265-5555. If you prefer, you can contact us through our website.