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Autonomous vehicle insurance: Self-driving cars and insurance

Team AckoJun 27, 2022

From being found only in science fiction books, self-driving vehicles have now nearly become a reality. This upgrade that most of us may be looking forward to seems to be just around the corner. However, if a vehicle requires little or no human intervention, does it need to be insured? In this article, we will be discussing autonomous vehicle insurance, especially self-driving car insurance. Read on to quench your curiosity!

Autonomous Vehicle Insurance

What is Driverless car (or) Self-driving Car? and how does it work?

Imagine being driven around in a car that takes you safely to your desired destination. All you have to do is enter its location. Then, just sit back and enjoy the ride. The car automatically adapts to different scenarios using sensors. Almost like it has a life of its own. 

Doesn’t this fantasy remind you of the fictional car Chitty Chitty Bang Bang? Well, that’s what a self-driving/autonomous car is like and it may become a reality in the distant future. Companies like Tesla have already started producing such vehicles and it may eventually become the norm.

Levels of autonomous vehicles

Completely autonomous vehicles may seem like the best-case scenario. However, based on the extent of automation, there can be a broad spectrum of driver-enabled to fully self-driven vehicles. Using these criteria cars are classified into different levels as follows.

Level 0

This level usually refers to cars that are completely manual. Meaning, they will require driver intervention and are not automated in any way. Cars on this level could include the currently mass-marketed cars that have no automated components and require driver input to function.

Level 1

Level 1 usually refers to cars that are automated but that also require driver intervention. Such cars may possess assistance systems such as digital navigation, cruise control, emergency brake assistance, etc. However, a driver’s skill and alertness are still crucial to drive these cars.

Level 2

Level 2 four-wheelers are usually partially automated. In these cars, multiple automated systems work in harmony to execute simple driving manoeuvres like parking, speed control, lane departure warning, etc. However, here too, a driver’s alertness and input are needed.

Level 3

Cars on this level feature conditional automation. Meaning they may drive autonomously under certain conditions. For instance, during highway driving. And in such times, drivers may be able to divert their attention to other things. However, this is not recommended in usual driving situations.

Level 4

Cars that are considered level 4 usually offer a completely automated driving experience. They can self-drive on highways, as well as in city traffic. Nonetheless, the driver can take back control at any time. Also, in dangerous scenarios, the car may give back control to the driver or stop safely.

Level 5

Cars that may be considered level 5 are fully autonomous. They do not require a driver and so there are only passenger seats. A user just needs to set the pick-up and drop location. The car will navigate and drive on its own. Owners of such cars may not even require a driver’s licence.

Driverless cars and insurance

Since driverless cars are not liable to human error, do they require car insurance? Since completely autonomous cars are not available in India, this question can only be answered hypothetically. Yes, completely self-driven cars may most likely require driverless car insurance!

As discussed earlier, most partially automated cars require driver intervention. Thus, leaving room for the possibility of accidents. Even in fully automated cars, software errors or manufacturing faults can come about. Thus, autonomous vehicle insurance may be required either way.

How is car insurance premium calculated for self-driving vehicles?

Since completely automated cars are not available in the Indian market, this question can also be answered only hypothetically. Currently, car insurance is calculated based on the car owner’s driving history. But since autonomous cars do not require a driver, the technology and safety features employed in the car may be considered to determine the car’s policy premium.

Other factors that may be considered for determining policy premium

Below are some of the other factors that may be considered while determining the policy premium for a self-driving car. These may be common across all automation levels.

Why you may need car insurance for autonomous cars

One might assume that an autonomous car may not require car insurance because of the safety it provides. However, below are some of the reasons why autonomous vehicle insurance may be required.

1. Varying automation levels

As previously discussed, cars are classified into different levels from 0-5 based on their extent of automation. The extent of automation could range from partial, high, to full automation. Thus, in cars that are not fully autonomous (levels 0-4), human intervention could still cause accidents.

2. Human errors and tech faults

Cars that are fully autonomous may be able to avoid the errors caused by bad human driving. However, they may also be susceptible to machinery breakdowns or technical faults. After all, machines can fail sometimes too. Thus, it is crucial to insure even a fully autonomous car.

3. Damage cover

Just like regular cars, fully autonomous cars are also at risk of theft, loss or damage. These damages could include damages resulting from accidents or natural and man-made calamities, like earthquakes, cyclones, riots, etc. Thus a Comprehensive Car Insurance Policy may be needed.

Since autonomous cars may not be able to guarantee 100% safety, buying car insurance may be legally required. Also, as per the Motor Vehicles Act of 1988, every automobile owner ought to buy at least Third-party Insurance. This will offer financial protection against third-party liabilities.

Self-driving cars insurance issues

Below are some of the issues that may come up for insuring autonomous cars.

1. Repair expenses

The number of car accident incidents is predicted to decrease as a result of full automation. However, the technology required for automation may be expensive. Thus, repair costs may also be on the higher side. So, this safer technology may or may not reduce overall repair costs.

2. Car ownership

As per a report by the Society of Indian Automobile Manufacturers (SIAM) in February 2022, car ownership has been on the decline. So, it is speculated that self-driving cars may add to this and encourage people to opt for shared transportation. Thus, benefiting many and reducing the ride cost.

Self-driving cars make it difficult to pin the responsibility on a particular party in an accident. The law currently punishes only humans, so in the case of a machine, it may be difficult to judge. Perhaps the makers of the car could be held accountable in such accident scenarios.

4. Diminishing Risks

One of the crucial reasons of going to the length of creating a self-driving car is to make the roadways safer. Even though self-driving cars are at an early stage of achieving perfection, they have paved a way for lesser chances of fatal errors.

People buy an insurance policy for their vehicles for the sole purpose of insulating themselves against risks. When a vehicle is damaged due to an accident, the sudden financial crunch is born by an auto insurance company to continue without monetary hiccups.

5. Unemployment

It is an open secret that advancements in technology have resulted in severe unemployment. A single computer has replaced hundreds of humans doing manual work. Machines have enhanced the efficiency of any workflow up to ten folds. Self-driving cars are no exception to this phenomenon. They will increase unemployment. People will no longer require chauffeurs to take them around.

With respect to auto insurance, self-driving cars will disrupt the car insurance claim process. Even if a claim is raised, say due to human intervention resulting in an accident, investigating a claim will hardly need the “human element.”

For example:

In the future, humans involved in an accident might be taken to the hospital by a self-driving ambulance. A towing car of similar type might take the damaged vehicle to the workshop.

Damages might be assessed with the help of data from the damaged car itself. Drones might provide information about the extent of damage and cost of repair/replacement. Repairing the damage could be done on workstations similar to the ones currently used to manufacture a vehicle. Once the vehicle is ready to be delivered, it might drive itself to the owner!

The risks of self-driving vehicles

Although autonomous vehicles come with their advantages, they come with their risks too. Below are some of the risks that autonomous vehicles are vulnerable to.

  • Road safety: Currently, autonomous vehicles are not legalised in many parts of the world. This can be attributed to the lack of concrete evidence on the safety that these vehicles can provide.

  • Cybersecurity: Another major concern in autonomous vehicles is cyber security. Since these vehicles run on software, there is the possibility of them being hacked and stolen. There are also privacy concerns.

Also, read: Vehicle Scrappage Policy in India

Do Autonomous Vehicles Mean The End Of Auto Insurance?

You enter your car, set the air conditioning, select your music playlist, enter your destination in the vehicle’s GPS and it drives you there while you sit back and relax. Is that your idea of an autonomous vehicle? If yes, then it might take a few years for vehicles to reach that level of automation. When that happens, will it be the end of the road for auto insurance?

Automation Levels

Partial automation, High automation, Full automation are types of automation in a vehicle. The level of automation will determine the level of human intervention needed while driving the car. Full automation meaning no human intervention at all. A vehicle’s level of automation and human intervention will ultimately determine its risk profile and insurance premium.

To Err Is Human

Fully automated cars will play a huge role in enhancing road safety. As they do not require human intervention, they will reduce the possibility of human errors while driving. Drinking and driving, texting and driving, not following speed limits, neglecting traffic signals, rampant lane changing, etc. are common human errors that cause road accidents. Automated cars will negate such errors. However, they can cause accidents due to technical errors. Thus, automated cars might not be 100% safe as they are vulnerable to technical risks.

Fewer Claims, Less Premium

Autonomous cars will reduce the number of road accidents, leading to less number of accident-related claims. This will have a domino effect on the premium charged as well. With fewer accidents and fewer claims, the premium demanded by car insurance companies will also reduce.

Who’s Liable?

Currently, the driver of a car is held liable for the damages arising due to a car accident. But, who’s liable in case of autonomous cars? Probably, the cars. In case of full automation – where it doesn’t matter who is sitting inside the car – it is likely that a car will be held responsible for ‘driving’ and not the ‘driver’, who is merely a passenger in such cases.

What About Theft and Calamities?

As of now, a Comprehensive Car Insurance policy not only insures your car against accidents, it also covers car theft and calamities. Just like the vehicles manufactured today, autonomous cars will also be vulnerable to car theft, and natural and manmade calamities. Auto insurance will certainly come in handy in case an autonomous car is stolen or is damaged due to a calamity.

In a nutshell

Self-driving cars may eventually become a reality. Apart from helping us avoid the stress of driving, they may also make our roads safer. Nonetheless, there is always the risk of unfortunate accidents. And the cost of spare parts may be expensive. Thus, car insurance may be applicable even for future autonomous cars and financially protect us from accidents then.

Frequently asked questions

Below are some of the frequently asked questions regarding autonomous vehicle insurance.

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How is the market for driverless cars?

Due to safety concerns, self-driving cars are not yet legalised in many parts of the world. In India, we currently do not have any self-driving cars in the car market. However, this may change with the evolution of better and more compelling technology.

What impact will driverless cars have on the auto insurance industry?

Driverless cars may significantly reduce the rate of road accidents. However, accidents may still occur due to technical faults or software glitches. Also, damage/loss resulting from theft and natural and man-made causes may still occur. Therefore, car insurance will still be applicable then. Although the frequency of car insurance claims may reduce.

Who is responsible for an accident involving an autonomous car?

Since autonomous cars have no human driver, the liability may have to be borne by the manufacturer. This could include the parties that put together the car like sensor vendors, software engineers, design developers, etc.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet; and is subject to changes. Please go through the applicable policy wordings for updated ACKO-centric content and before making any insurance-related decisions.

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