How Will Insurance Cover Self-Driving Cars?

Self-driving vehicles are already on roads in several cities and are predicted to become normal in the next few decades.  How will your insurance cover you if you’re the operator of a self-driving car? If someone else’s self-driving car injures you or damages your property, will the owner have coverage for your loss?

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The Badlands, South Dakota.

First, it may be a moot point because self-driving cars could reduce accidents to the point where the cost of insurance coverage becomes nominal or coverage becomes totally unnecessary.  Preventable human error – texting, adjusting the radio, hasty lane changes, etc. – is estimated to cause 94% of all motor vehicle collisions.  One industry forecast projected widespread adoption of autonomous vehicles would reduce premiums by 80% and lead to a $25 billion loss for insurers by 2035 as reduced accidents reduce the need for coverage.

On the other hand, while autonomous cars may reduce the need for liability and collision insurance, they may require new forms of insurance such as cyber security coverage.  Even existing conventional cars can be hacked, and self-driving cars are likely to grow more and more vulnerable to electronic intrusion.  Imagine if your car were susceptible to the same malware, ransomware or other abuse as your computer or phone.  It may ultimately be necessary to procure cyber security coverage for your autonomous vehicle.

One possible answer is manufacturers may simply assume all liability associated with their autonomous vehicles.  Google, Volvo, and Mercedes-Benz already assume liability any time one of their vehicle’s self-driving system is at fault for a collision.   Tesla has its own insurance program for owners of Tesla self-driving vehicles.

Another suggestion is future drivers may not need insurance because they may not own their cars.  Self-driving vehicles may lead to widespread reliance on car sharing services.  Unlike Lyft or Uber which rely on human operators, self-driving ride-share vehicles could operate around the clock at a much lower cost, making it practical for urban drivers to rely entirely on ride-sharing for daily transportation.  Future autonomous vehicle ride-sharing fleets would likely self-insure, as Google’s subsidiary Waymo intends to do when it launches its self-driving ride-share service in the coming months.

Whatever the result, self-driving cars will ultimately present some form of risk, and manufactures, drivers, municipalities and insurers will have to decide how to allocate that risk among themselves.

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