In the view of Travelers Companies Inc TRV, all cars should be treated equally whether driven by man or by machine and owned personally or commercially.
“If separate compensation and liability structures govern and/or have primacy over different types of vehicles and their owners, questions and uncertainty will arise around issues such as appropriate forum, liability and evidentiary standards and the application of various no-fault-type systems,” Travelers said in a white paper.
To simplify crash compensation and minimize regulatory uncertainty, the insurer advocates applying the present-day auto insurance structure to autonomous vehicles. This means vehicle owners, not manufacturers, purchase insurance.
Why Traditional Auto Insurance Works
The plan makes sense to Paul Newsome, managing director of equity research at Sandler O’Neill.
“I think for the most part individual insurance is probably going to stay as long as you’re going to have manual override,” Newsome told Benzinga.
And as long as there are situations requiring off-roading, lawn parking or construction-driven rerouting, he expects manual override to exist and for drivers to be liable for incidents.
By his assessment, a precedent liability structure for semi-autonomous vehicles has been set with the nation’s train system. In the case of a train accident, the engineer or railroad company has been found liable rather than the manufacturer. Most recent auto accidents involving semi-autonomous vehicles have similarly been attributed to user error or external circumstances.
Why Product Liability Insurance Doesn’t Work
The alternative is to protect AV manufacturers under product liability insurance.
With auto insurance, insurers with deep resources compensate crash victims before, if relevant, recovering payments from manufacturers for damages related to product deficiencies.
With product liability insurance, consumers have to pool their complaints and, in a lengthier battle, confront a manufacturer’s formidable legal staff in order to win compensation.
“Unless somehow product liability insurance structure is changed to make it really easy for an individual to go after the product manufacturer, then you’re not going to have the immediate coverage that you would out of the current [auto] structure,” Newsome said.
Additionally, product liability is seen to be lacking in relevant coverage areas, such as incidents involving theft or weather damage.
“Drivers will also always have insurance needs that go beyond liability,” according to the Travelers white paper. “Vehicle maintenance by owners (e.g., getting tires and brakes fixed, installing technology/software updates, sensor maintenance) entails personal responsibility and liability, which is properly addressed through insurance.”
What New Tech Means For Premiums
New technology will provide insurers access to driving data to craft individual premiums that appropriately reflect exposures. At the same time, Travelers expects a shift in pricing and underwriting to include driver-based and vehicle-based systems and allow assignment of differentiated premiums.
Altogether, the company suggested coverage ceilings be high enough to reflect increasingly expensive technology in AVs that results in increasingly expensive crashes.
“We’ll have fewer and fewer accidents per driver, but the average cost of those accidents will continue to rise,” Newsome said. “And the total cost, which is frequency times the average cost of claims, will likely continue to rise.”
A consistent pop in premiums will then drive insurance revenue higher.
“Further, AVs are sure to present new risks and liabilities (e.g., cybersecurity threats), which can be addressed by a new generation of insurance products,” according to Travelers.
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