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Automated Vehicles: Potential Insurance Implications Robert Tremblay Director, Research Insurance Bureau of Canada June 2, 2014

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Introduction

Automated vehicle technology is on the verge of maturity.

Technology moves fast; can insurance follow the changing needs?

What about the regulatory environment? Licensing, mandatory insurance?

There are potential insurance implications. But before we discuss, we

need to understand a few concepts…. Image Source: 18n9w1n479iimjpg.jpg, http://jalopnik.com/5533132/william-shatners-ten-favorite-cars, http://i.kinja-img.com/gawker-media/image/upload/18n9w1n479iimjpg.jpg, April 30, 2014

3 3 I N S U R A N C E B U R E A U O F C A N A D A / D A T E / P R E S E N T E R

Types of Insurance

Personal Automobile

Home/residential

Commercial Insurance (non-standard) Commercial vehicle fleets

Businesses, buildings, machinery, production interruptions, product liability etc.

Reinsurance

Global risk transfer for personal and commercial lines

Surety bonds

Linked to product liability, performance

Image Source: http://www.uhlagency.com/news/5-reasons-to-use-an-independnt-insurance-agent, captive-agents-vs-independent-agents-300x232.jpg, http://www.uhlagency.com/wp-content/uploads/2013/03/captive-agents-vs-independent-agents-300x232.jpg, April 30, 2014

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Players

Self-insurance Large businesses/organizations

Governments

Primary insurers (private or public)

National

Reinsurers National

Global

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First party Damages to your vehicle

Own injuries

Third party (except in no-fault systems) Damages to other vehicle(s)

Bodily injuries to others

Punitive damages

No-fault system Each party responsible for own damages

Cannot sue for punitive damages beyond compensation scale

Automobile Insurance

Image Source: Lower-My-Car-Insurance-300x199.jpg, http://tipstotreasure.com/lower-my-car-insurance/, April 30, 2014

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Business as Usual for Insurers?

Still speculating, no clear direction yet

Have to go by insurance principles

Industry responds to needs

Impacts potentially will be felt at different stages of

technology implementation Development

Introduction

Maturity

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Concept of Liability

A party can be held liable if that party’s conduct or product causes harm to another

party.

Parties in a liability-insurance-covered incident:

the insured (first party)

the insurance company (second party)

the injured or property owner.

Third-party liability insurance is a vehicle insurance that covers an insured whose

vehicle caused harm to someone else or caused damage to property and that insured

is held legally responsible.

Image source: liability-insurance-660x429.jpg, http://smallbiztrends.com/2013/05/lawyers-professional-liability-insurance.html, http://smallbiztrends.com/wp-content/uploads/2013/05/liability-insurance-660x429.jpg, April 30, 2014

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Liability Chain

Who is responsible if something goes wrong? Currently, the driver of a vehicle is responsible for being in control of the motor vehicle.

But … at level 4 and certainly at level 5 of autonomy, the driver is no longer a driver. He

or she has surrendered this function to the machine.

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Development Phase

Not just an enhancement of existing technology Requires extensive testing in a real driving environment.

Insurance is critical for “real life” testing.

Basic insurance coverage is required, but is there a need to go further?

Self-insurance is an option – usually large corporations will seek performance

bonds or excess coverage, beyond the self-insurance limits.

There will be a need for product liability for software developers, sensor suite

manufacturers, and interactions between sensors and vehicle.

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Automobile insurance will still be necessary due to coexistence of

driverless and human driven cars

Insurance industry will need to have good data for pricing. Need to use collision stats during testing/development phase

Introduction Phase

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Maturity Phase

With time, the cost structure of automobile insurance will be

affected.

We can expect physical damages to vehicles: theft, vandalism.

Bodily injuries, both minor and catastrophic impairment, will be

reduced.

Image Source: Jetsons-car.jpg, http://www.autoinsurancecenter.com/jetsons-style-flying-car-soon-to-be-a-reality.htm, http://www.autoinsurancecenter.com/assets/images/Jetsons-car.jpg, April 30, 2014

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Individual transportation providers might go beyond

the auto manufacturers.

Business models will affect insurance requirements.

Business Models

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Changes in Types of Risks

Hacking/terrorism

Data breaches

Inappropriate response routine by program causing crash

Technologies coexisting

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This new technology will bring challenges.

Insurance industry is adaptive.

Cooperation and constant dialogue among all stakeholders will ensure

success.

You can expect insurers to support car or transportation pod owners and

businesses meet their insurance needs of the future.

Challenges Ahead

Image Source: 6a00e5521907818834015434679e56970c-320wi, http://restoringtheimage.typepad.com/.a/6a00e5521907818834015434679e56970c-320wi, http://restoringtheimage.typepad.com/my_weblog/2011/08/rough-road-aheaddrive-on.html, April 30, 2014

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Questions ?

Thank you!

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