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What do self-driving cars mean for liability insurance?


Beverly Hills is home to some of the world's most exciting cars. Step outside, and you'll find Lamborghinis, Ferraris, Bentleys and Rolls Royces rolling down the streets. But these days, the cars driving the most excitement are the ones with the massive sensor arrays mounted on top.

For years, the city has dreamed of a fleet of autonomous vehicles (AVs), and its website asserts it's only a question of when and how these cars will reshape the nation's roadways, not if they will. That means we can expect to see more of them on the city's streets and on streets throughout the nation, and we can expect some larger conversations about insurance and liability.

Insurance companies are paying close attention

The makers of self-driving cars say the vehicles will lead to fewer accidents and injuries, but that hasn't always been the case. Early reports out of the University of Michigan's Transportation Research Institute found that AVs got into more than twice as many crashes as human drivers. These crashes were typically less severe, but even small problems can be costly when they involve self-driving technology.

A recent article in the Financial Times said the use of collision avoidance in a car's grill and bumper can greatly increase the expense of something so simple as a fender bender. That's given insurance companies some concern, but the larger question may be how to assign policies:

  • Should the individual owners of self-driving cars hold their own insurance?
  • Or should the manufacturers carry the insurance?

Many insurance companies argue in favor of the traditional model. They say it's more flexible. It allows police, courts and insurers to assign fault and financial responsibilities on a case-by-case basis. And they say the flexibility will be important as the nation's roadways transition from drivers to driverless cars.

But the standard model may not always make sense. Fully autonomous vehicles raise new questions about human responsibilities. It's possible that drivers, legislators and insurance companies may need to think about self-driving cars more in terms of product liability. This may be particularly true, says one expert at AIG, as the question of data plays a larger part in the assignment of fault.

At the cusp of a new frontier

With the introduction of AVs, the nation is entering a new automotive age, and Beverly Hills and its citizens are leading the way. We can expect to see more advances in AV technologies and more types of AVs on the roads, including trucks. And we may expect new laws and policies to reflect the new realities of the nation's roadways.

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