Broker Check

Autonomous Vehicles - An Insurer's View

January 26, 2021

As a major insurer, Travelers has actively addressed the issues surrounding the development and insurance of autonomous vehicles (AVs). The Travelers Institute has updated a 2018 position paper "Insuring Autonomy: Auto insurance Will Lead Through Changing Risks" on these issues. Overall, their position is that auto insurance as we know it can be adapted to AVs.

Key points from the position paper:

  • The AV industry is growing. As of December 2020, 58 companies had active testing permits in California, and those companies collectively drove over 2.8 million miles in 2019. Waymo One began fully driverless rides that year.
  • The COVID-19 pandemic has affected driving behavior. On one hand, miles driven in the first nine months of 2020 were 14.5% less than the same period in 2019. On the other hand, traffic fatalities were 13.1% higher in third quarter 2020 compared to 2019.
  • Consumers are not yet ready for AVs. In a 2020 survey by Partners for Automated Vehicle Education, almost three quarters of respondents said the technology was "not ready for prime time", and 20% thought it would never be safe. (Fear of losing control may be a factor.)
  •  94% of crashes are attributed to driver error. A goal of AVs is to increase safety. Partial automation can present risks of driver distraction and lack of attention. A Travelers survey found 37% of drivers used social media; 36% shopped online while driving.
  • As of January 2021, 28 states and the District of Columbia have laws regulating AV deployment or testing. Only a few states have considered insurance issues. The U.S. Department of Transportation has just released updated guidelines for automated vehicles.
  • Travelers believes the current auto insurance structure is best suited to address compensation issues. The alternate product liability model would force victims into lengthy litigation. As an example, Takata air bag litigation is continuing although initial injuries occurred in 2004. The existing system minimizes consumer confusion, regulatory uncertainty and market disruption.
  • Insurance will have to adjust to cyber security risks and road sharing of AVs and non-AVs.
  • Insurers can pay claims and subrogate against manufacturers for product liability claims.
  • Travelers is partnering with the AV industry and other stakeholders in developing insurance solutions.
  • Even fully automated vehicles will need physical damage insurance for non-collision events, and liability for maintenance issues. One question not addressed is who will compensate crash victims who don't own a vehicle. (The alternatives appear to be the owner's policy or personal accident insurance covering riders, pedestrians and cyclists.) Any system must provide full and timely compensation, efficient claim resolution and encourage safety. Higher bodily injury and property damage limits will be needed.
  • Travelers supports standard data governance and cybersecurity requirements. Insurers must be represented on any advisory board, in policy making and stakeholder forums.

The full position paper can be found on the website.