How Software Can Calibrate Insurance to Fit Autonomous Vehicles

How Software Can Calibrate Insurance to Fit Autonomous Vehicles

(Image credit: Shutterstock.)

By virtue of forward-looking investments and the promise of a mobility revolution, the autonomous vehicle (AV) industry is now worth close to $37 billion, growing at an annual rate of 16 percent. However, as more and more cars with varying levels of autonomy continue to hit the road, especially in the U.S., questions surrounding accountability and compatibility with car insurance are surfacing.

If a computer is helping drive your car, who is at fault in the event of a traffic violation or a serious crash—the person behind the wheel or the original equipment manufacturer?

The Law Commission of England and Wales as well as the Scottish Law Commission are calling for definitive answers, advocating legal protections for AV owners and placing the burden of liability onto the companies responsible for the technology—a responsibility that German auto giant Mercedes Benz, in fact, recently assumed.

Regardless, decisions that implicate either car or driver will remain contested in the absence of sufficient data, which has already bred complex litigation and questionable outcomes in places like New Jersey, Arizona, and Florida, among others.

Thankfully, advances in sensor technologies are redefining existing insurance frameworks and arming insurers with the information they need to justly assign liability.

Current Practices

Besides traditional flat-fee insurance plans, many insurance companies have adopted integrated GPS hardware systems and telematics, otherwise known as Usage Based Insurance (UBI). These devices generate driver scores by analyzing the actions and decisions a driver makes to inform premium increases or discount rates.

However, UBI does not take into account external factors such as road conditions, vehicle dynamics, or surrounding drivers, and thus lacks the capacity to fully recognize the difference between defensive and reckless driving. For instance, slamming the brakes to avoid a collision with a reckless driver or an oblivious pedestrian would prompt a negative score, risking one’s status with their insurance-carrier. Assessing insurance based solely on a driver’s actions is often misleading for the insurer and unfair to the driver.

Updating Insurance for the AV Generation

Software-based solutions, on the other hand, continuously analyze a driver’s entire environment, providing insurers with a wealth of details that explain why a driver did what they did—or in the case of semi-autonomous vehicles, pinpoint why a vehicle responded a certain way. Sensor-derived vehicle data ultimately helps determine all conditions during a collision, a frequent point of contention for today’s insurers.

AI-enabled data collection is the oil change insurance companies and car owners desperately need, especially as vehicles with advanced driver assistance systems (ADAS) and various levels of autonomy become more and more common. Insurance providers will need to partner with automotive manufacturers and technology companies to apply real-time data sets to insurance plans and streamline claims processes—a strategy recently jumpstarted by a handful of key players including Europe’s largest digital insurer, wefox, mobility intelligence company Otonomo, and mobility and energy tech company Henshin Group.

Insurance companies are beginning to recognize the advantages of smart data collection and have even started to invest in the AV market. AV technology developer May Mobility recently received funding from insurance giants Tokio Marine and State Farm, signaling the industry’s support for technologies that fully illuminate, and ultimately reduce, road accidents.

These types of collaborations will grant insurers access to data that inform how self-driving vehicles navigate roadways, adding new dimensions to their assessment of driver-vehicle behavior.

Dude, Where’s My Insurance Plan?

Despite the revolutionary potential AVs offer the transportation sector, they present insurance companies with unprecedented challenges.

Bridging the gap between auto insurers’ current offerings and drivers’ expectations will require sophisticated technology that provides a greater understanding of road conditions, surrounding environment, vehicle health, driver behavior, as well as brand and model-specific vehicle behavior—ascertained through collection and analysis of crowd-sourced data—which insurers need to make proper assessments. And as vehicles become less hardware-reliant and more software-driven, opportunities for data collection will proliferate.

By partnering with OEMs, carmakers and technology firms, insurance companies can more accurately assess risk factors and road accidents involving autonomous decision making, ultimately spawning insurance plans that put insurance companies, their customers, and the evolving AV market on the right road to the future.

State Farm and Ford Partner on UBI for New Vehicle Owners