One step on a complicated path as Mercedes states it will accept liability for road traffic accident crashes when certain models fitted with Level 3 Advanced Driving Assistance Systems (ADAS) are driven by the ADAS rather than the driver in limited and highly specified circumstances. The implications of liability responsibility on the march to ADAS 5 for OEMs and insurers are massive and discussed below. 

Outside these ring-fenced situations the auto insurer will cover the liability as the human driver is in full control. That will lead to interesting negotiations as Mercedes and the carrier use data from vehicle telematics and other evidence to judge if the driver took back control in seconds when the ADAS required them to do so.

In the event of a disengagement that may occur when the car encounters road works, tunnels or inclement weather, the Mercedes Drive Pilot system will give the driver a 10-second warning allowing them to assume control, at which point Mercedes’ legal responsibility in the event of a crash ends. Neither will the company be liable for any crashes that occur should the driver fail to take over in time.

As the “user in charge” rather than the “driver” while the vehicle is in self-driving mode, the occupant will not be legally liable for offences such as speeding or dangerous driving.

“Absolute clarity is required for drivers in terms of their legal obligations behind the wheel and their understanding of how the system operates, especially during a handover from system to driver.”

Drivers who have become engrossed in other tasks for extended periods may take a long time to regain control when prompted by the car — something called “coming back into the loop”.

“Insurance claims will require scrutiny, so the provision of data to help insurers understand who was in control of the vehicle at the time of an accident, system or driver, will also be vital,” 

The ultimate aim is, of course, full autonomous vehicles (AV) at Level 5 ADAS.

Mercedes is the second manufacturer to receive legal approval in a certain territory for the use of a Level 3 autonomous driving system, following the approval in Japan in 2020 of Honda’s Traffic Jam Pilot on Honda Legend models.

Audi’s A8 is said to have Level 3-capable technology though it has not been deployed to production models yet. In April, BMW will launch its next generation of 7 Series and the electric i7 equivalent, both of which will be equipped with Level 3 technology.

All these OEMs are facing the challenge of manufacturing a mix of internal combustion engine vehicles (ICE) and electric vehicles (EV) with dates from 2030 to later when they are 100% EV manufacturers. That still leaves a massive vehicle parc of ICE vehicles that will continue on the roads complicating supply chain logistics and muddying the waters as road traffic accidents involve vehicles with varying levels of ADAS from 0 to 3, 4 and eventually 5. 

The amount being invested in the transition to EVs by ICE OEMs is eye-watering and in parallel there is considerable investment in and consolidation of repair networks by private investors, banks and VCs. 

For the last 15 years, we have seen the influence of financial institutions, investment banking and private equity targeting industry consolidation through multi-shop operators (MSOs). Today, small to medium-size MSOs are now partnering with private equity companies to help accelerate their growth. These aggressive consolidators, known as multi-location operators (MLOs), such as Crash Champions, Classic and CollisionRight, are building regional and super-regional platforms to compete with the larger legacy consolidator MSOs like Caliber and Boyd/Gerber in the US. Similar change is happening in Europe.

And what about the 100% EV manufacturer Tesla? It is unencumbered by an ICE legacy, has added a new German Giga Factory to its US and Chinese ones and intent on driving down the total cost of ownership of Tesla vehicles. A complete EV ecosystem including not just manufacturing AVs and one day AVs but also maintaining, upgrading, repairing, recycling and insuring them. 

GM, Toyota, BMW, VW and all the major OEMs are on that strategic path and auto insurers need a strategy to ensure a profitable share of these ecosystems as they evolve at an ever faster pace.

There is the potential for both co-operation/collaboration and competition. The current challenges of supply chain disruption that slowed vehicle production, drove 2nd hand vehicle prices and car parts prices upwards and lengthened vehicle repair times and continue to impact the industry. Auto OEMs might well be in the driving seat in solving these challenges and auto insurers follow that lead. 

But global and national carriers can equally grow the complete ecosystems to be the driving force in both insurance and repair as long as there is legal freedom to choose where a vehicle is repaired amongst repair networks meeting safety and regulatory requirements.

The role of insurtechs to enable both carriers and OEMs to repair and replace vehicles is key as are the data aggregators and managers solving the challenges of dealing with mixed vehicle parcs and the data driven services needed to maintain and repair them. 

The various factors impacting all players has been well described in many recent articles including: 

A Perfect Storm is Brewing in the Auto Insurance Industry

Auto Claims and Collision Repair: The Great Reset

Tesla, Other Car Makers Have Edge Over Incumbent Auto Insurers: Moody’s

The changes are also reflected in the number of new products and services being offered to consumers and commercial customers ranging from embedded insurance to UBI based products rewarding better driving behaviour and helping prevent accidents. Short-term car insurance, special products for, say uber drivers that not only deliver insurance but also driver retention benefits for mobility service providers and fleet owners. 

The total ecosystem potential is enormous limited only by the large number of legacy systems or part-legacy systems holding back some carriers. This offers much opportunity for the new microservices, API driven, cloud-native coretech platforms like EIS, Genasys to free carriers to deliver ecosystem and product innovation. .

Carriers like Liberty Mutual and esure have set their future paths of innovation based on this new coretech approach whilst other full stack insurtechs have chosen to build their own platforms.

Initiatives like that of Mercedes taking ever increasing liability for road traffic accidents over time will place pressure on carriers and their incumbent core technology partners to anticipate the competitive pressures these innovations place on the insurance markets. 

These pressures and how to deal with them were discussed in detail in Creating value, finding focus and choosing the right insurtech partners 

For now- how do you plan to to anticipate the ramifications of the Mercedes announcement?