With the liability for autonomous vehicles placed at the doorstep of insurers, Insurance Times explores how the recent government consultation on automated lane keeping technology could prove to be a headache for insurers amid a growing list of safety concerns .
Katie Scott Insurance Times 15th October 2020
In August last year the UK government launched a consultation into the safe use of the automated lane keeping system (ALKS) on British motorways Aug , issuing a call for evidence to explore whether ALKS complies with the definition of automation under the Automated and Electric Vehicles Act 2018 (AEVA).
Neil Ingram , head of motor product management at DLG, states the insurance considerations around ALKS are multi-faceted. Firstly, there is likely to be an increase in claims severity “because for the first time the person sat behind the wheel will be considered a passenger and not the driver. We’ll have one extra claimant per claim”.
Ingram also feels that without thorough testing, it will be difficult for insurers to price and underwrite the risk of cars with ALKS technology accurately, especially considering the safety threats raised by Avery.
“As an industry, we want to be able to say look, these vehicles will be safer and therefore that will clearly impact on insurance premiums – it’s very difficult for us to say that and my concern is, actually, we could see things go the other way, particularly if it turns out that these systems are less safe than humans,” he said.
“Without Thatcham really being able to test these vehicles and understand how each of these different systems respond and react in certain scenarios and situations, it’s very, very difficult for us to understand the risk and therefore to accurately price and underwrite these vehicles.”
One core strength of a carrier has been the decades of data available to price risk and set premiums. Where there is no historical data available or it is unreliable (e.g. pre-covid models) this upsets the apple cart. The enterprise with the real-time data has the competitive edge. Take Tesla with far more data from its advanced software ij each vehicle. More even than Google with WAYMO.
This has major implications for motor insurance; is it the insurer who insurers the vehicle in the USA rather than the Driver in Europe or the Auto OEM who insures for product liability?.
There are not only these issues to consider. Maarten Ectors is Chief Innovation Officer at L&G and written of the high potential for major disruption as risk predictability is no longer dominant.
He writes:
The future is unclear. The only certainty is that risks will become more volatile and disruption more frequent. In a world with less certainty, innovation will be more important than ever. The risk of failure will be higher for older products. At the same time the pay-outs for successful new products will be shorter for which more of them need to be launched.
Directly relevant to the discussion about ALKS Ectors continues: - ,
"Many financial institutions have products which are heavily impacted by risk. Mortality risk for life and pension. Risk of inflation, default, fraud and security incidents for lending and investment. Accidental risk for car, home and business insurance. In a world where risk can change overnight, e.g. a global pandemic, the existing actuarial models based on 30 years of data no longer are valid. A simple Tweet, e.g. Elon Musk, or Reddit post, e.g. GameStop, can have enormous market effects. Smaller companies will launch exponentially more products which will need loans and insurances. Index-based and national debt investments will become a lot more risky. Tokenising risk and packaging it up in small time-bound slices will become possible, e.g. a risk token representing 100 robot taxis in London today provoking a mortality with a maximum exposure of £10M. These risk tokens can be offered on distributed exchanges where they are valued and sold to the highest bidding high-frequency trading professional investors. Climate change risk and opportunities can be tokenised. Political risk can be tokenised. Even Tweet risks can be tokenised. The world of finance will look totally different in a tokenised economy where new risks can be tokenised, valued and traded in seconds. "
Worth reading the full article Digital Transformation and Disruption: the future of finance
Big questions with big implications needing big answers and strategies i.e. Insurance 2.0
This means that if ALKS is classified as an autonomous driving system and cars featuring ALKS are listed as autonomous vehicles under AEVA, then motor insurers will be liable for claim payouts rather than the vehicle’s manufacturer. Neil Ingram, head of motor product management at DLG, explained: “Without the Act, the vehicle would be driving itself and anybody that was harmed in an accident caused by the vehicle would essentially have to go and sue the manufacturer for any damages.
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