Self-driving cars are speeding from the future into our present. But what effect will such tech have on the way we view transport, and crucially liability on the road? Insurers cannot afford to hit cruise control and wait to find out
With growing demand for electric vehicles and a greater focus on autonomous technology, designing cars is getting more expensive. And the manufacturers are struggling to pay for it.
That’s why Fiat Chrysler is merging with Groupe PSA, which owns the likes of Peugeot and Vauxhall. It also explains a tie-up between Ford and Volkswagen, which have agreed to work together on a $7bn project to develop electric and self-driving cars.
Big tech firms are also collaborating with original equipment manufacturers or even entering the market, for example, Google Waymo and Apple. Furthermore, Baidu from China builds a global autonomous driving ecosystem. “There will likely be much more M&As and partnership activities in the future,” says Evangelos Avramakis, head of digital ecosystems research and development at Swiss Re Institute.
But it’s not just the vehicle manufacturers that are being forced to adapt to changing demand. The cars they are developing will change the cities and towns they are designed to navigate.
Across the planet, people’s expectations of travel and even the very way those people behave will be changed by that technology. Shared car ownership is likely to become the norm, while people may become less likely to use a zebra crossing when they know that an autonomous vehicle is programmed to stop whenever someone walks out in front of it.
That affects everyone from city planners to taxi drivers.
Car pool economy?
Avramakis thinks this change to the way we use transport will initially centre around an app. He says that while the mode of transport may change, the reason for travelling will not. “As a consumer, you actually don’t really care much about the type of transport,” he says. “You care about how to get from A to B in the most efficient way.”
“Apps are currently the only interface we have to get access to services. In the future smart assistants might be the ‘new’ interface, where no apps will be needed. And again then, you won’t need five smart assistants managing your mobility journey. One might be already enough,” he adds.
In the shorter term, at least, Avramakis reckons an Uber-like app will direct its users toward a cocktail of sharing-economy type services that will get them from their homes to work more quickly and more efficiently. What he imagines is nothing we don’t already see: it’s simply e-scooters or e-bikes – so-called last-mile technology – twinned with public transport that has an on-demand twist.
One of the major considerations is the question of liability – who is responsible if the car is involved in an accident; if there is a greater risk of accident with cars driven by different drivers with varying levels of experience and familiarity with the vehicle; and what level of pre-loss risk management is in place to ensure liability is clear
At present, he says, there are limitations to the way mass transit can be individualised.
“In very urban areas, it’s very hard to take a car to go to work,” he says as an example. “If everybody wants to go to work by car, there are not enough streets or there are not enough parking lots.”
So, he imagines commuters using shared transport that will adapt its route to get the riders as close as it can to their final destination.
He says: “We might see new mobility business models entering the markets that will combine shared and public transports. Every city has a unique DNA and so there will no longer be a no one-size-fits-all approach. Key drivers would be commuters’ productivity gains, highly smart personalisation, and urbanisation.”
Self-clearing traffic jams
Avramakis reckons cities will get smarter, too. For example, traffic planners may start to use AI, linked to people’s mapping apps and to traffic lights, to send cars on different routes in order to avoid jams during rush hour.
Furthermore, the data infrastructure (i.e. 5G, smart city disposition, pedestrians smartphones and sensors, etc.) will be more critical as real-time data will need to be shared among all mobility parties involved.
But, he warns, that technology comes with risks. Who would be liable for an accident as a result of dud information being shared between the centralised traffic planner, apps, the cars themselves and street infrastructure, like traffic lights?
Avramakis believes that this will signal a “significant shift” in the way liability is attributed.
Instead of drivers, parts makers and data providers are likely to be blamed more for crashes.
More data, easier answers?
Insurers will need to develop new real-time risk models and underwriting and pricing decisions might have to be done in milli-seconds. At present, they depend on historical data and claims management information to predict the future. But with more automation comes more real-time data that will enable carriers to better underwrite risks and find who – or what – was at fault in an accident.
Anthony Monaghan, who runs broker Marsh’s manufacturing and automotive practice for the UK and Ireland, says the old rules will still apply. “Evidence of a clear and robust approach to risk management is key if insurers are going to respond to insurance needs at inception and at the time of loss,” he explains.
“One of the major considerations is the question of liability – who is responsible if the car is involved in an accident; if there is a greater risk of accident with cars driven by different drivers with varying levels of experience and familiarity with the vehicle; and what level of pre-loss risk management is in place to ensure liability is clear.”
Must get a head start
To understand the risks, insurers need to get ahead of the curve and “cannot afford to watch and wait”, warns Jonathan Moss, global head of transport at law firm DWF. “With the assistance of technology, underwriters will offer insurance dependent on how many miles per week the driver covers, the specific areas where the driver travels, and the driver’s safety record.”
Moss points to car sharing as one of the developments that insurers need to keep up with.
“With the success of the likes of Zipcar, households may own one vehicle and ultimately no vehicle. Insurers will have to address new issues when assessing premiums and preparing policies, including an increased risk of deterioration of the vehicle as it is used more frequently, and more accidents as the car is driven by lots of drivers with differing claims profiles.”