Autonomous Vehicles and Implications for the Insurance Industry

Not long ago, the idea of fully autonomous or driverless vehicles was restricted to science fiction movies. However, thanks to the great strides currently being made by automotive, technology, and artificial intelligence companies, many industry experts are predicting that more and more autonomous vehicles may soon be filling our roads in greater numbers. The implications of this shift from manual-drive to autonomous vehicles are like to be far-reaching, and may fundamentally change the business model of automobile accident insurance.

In discussing automated vehicles, it is not uncommon for different people to have different ideas of what exactly “automated” means. Currently, there are six generally accepted categories of vehicle automation, as is set out in the Society of Automotive Engineers’ Automated-Driving Levels (SAE Levels):

Level 0 - No Automation: at level 0, there are no automated functions and the driver controls all aspects of the vehicle’s operation.

Level 1 - Driver Assistance: at level 1, most functions of operation remain controlled by the driver, though the vehicle can assist to automate certain aspects in very limited circumstances. At this level, either steering or acceleration (gas and braking) may be automated under constant driver supervision, but not both at the same time. The automatic cruse control and collision-avoidance braking features currently offered in many higher-end or luxury vehicles would be considered Level 1 automation by most standards.

Level 2 - Partial Automation: at level 2, most functions are still controlled by the driver, though both steering and acceleration may be automated simultaneously under constant driver supervision. Tesla’s well-known Autopilot mode is considered to be a Level 2 automation by most standards (though some argue that Autopilot mode blurs the line between Level 2 and Level 3).

Level 3 - Conditional Automation: at level 3, the vehicle will operate itself from start to finish in most well-controlled conditions, though the driver must still be ready to re-take control at a moment’s notice. At the time of this writing, there are not currently any level 3 vehicles commercially available in the North American market.

Level 4 - High Automation: at level 4, the vehicle will operate itself from start to finish in most on-road circumstances, and the driver does not need to retake control or pay attention while driving. By most standards, level 4 vehicles are able to operate on most public roads and roadways, but not off-road or other extreme terrain.

Level 5 - Full Automation: at level 5, the vehicle can manage start-to-finish driving in all conditions, without any human interaction in any situation. The human is merely a passenger in a level 5 vehicle.

As vehicle automation progresses and becomes more mainstream, questions about the insurance implications have arisen as well. Although some companies and industry experts have begun commenting on what a potential insurance scheme may look like, this conversation is still largely speculative and often boils down to a calculation of risk. On one hand, a truly autonomous vehicle may decrease the risk of collisions to such a degree that motor vehicle accidents become a thing of the past and the cost (or need) for insurance greatly falls. However, another argument suggests that automation may only be safer and more effective within an exclusively automated system where all vehicles on the road are automated and following similar collision-avoidance algorithms. In this argument, an irregular or unpredictable driver (think of a drunk driver travelling at a high rate of speed and swerving across several lanes) may still cause problems for an automated vehicle which relies on a algorithm based on rational action. Other industry insiders have questioned whether there will ever be market demand for a truly automated vehicle, citing potential concerns about safety in extremely dangerous driving conditions (think about “driving” through Roger’s Pass in a January whiteout blizzard, without any control over the vehicle you are travelling in).

While the autonomous vehicle market, and the technologies emerging from that market, are opening the doors to many conversations which even ten years ago seemed far-fetched, the point remains moot for the vast majority of consumers. Currently, the most technologically advanced and automated vehicles on the mainstream market (most visibly being the Tesla Model S) have not yet crossed the barrier from Level 2 to Level 3. Also, the vehicles which currently employ this technology are extremely expensive and make up a very minor segment of the market, and not suitable for the needs of most mass-market consumers. Although public and private entities are currently making great strides to begin addressing these questions, it is likely to still be quite some time before the question of motor vehicle insurance for fully-autonomous vehicles becomes an issue that the mainstream consumer is forced to address.

Izaak Atnikov