The UK’s first motor insurance policy was introduced in 1896 – shortly after a new law increased the speed limit for cars from 2 mph to 14 mph miles in towns and 4 mph in the countryside. Just three months earlier, a jury heard the first reported incident of a pedestrian victim of an automobile collision – in which the driver claimed he was driving at 4 mph. The jury returned a verdict of ‘accidental death’ and no prosecution was made. The coroner said he hoped “such a thing would never happen again”.
Fast forward to 2016, and the national statistics on personal injury accidents on public roads reported an increase of 4% in road deaths to 1,792, compared with 2015. The present time has also seen changes to technology that would have once been incomprehensible.
At a recent event, hosted by the Association of British Insurers (ABI), the industry was given a first-hand opportunity to speak about the challenges and benefits that flow from the (very real) prospect of adapting to autonomous vehicle technology.
Headline discussion points included:
- The opportunity the technology brings to the UK and the need for industry to identify and consider ways to prevent associated risks now.
- The market for autonomous vehicles technology could be worth £28 billion to the UK economy by 2035.
- Levels of consumer trust in autonomous technology is low and varies across different jurisdictions.
- Shifts in the market are already being seen, which includes consumer preference towards electric from petrol vehicles.
- The forecast that by 2040 there will be 50% manufacturer insurance and 50% personal insurance in respect of motor claims.
- The role of car manufacturers in providing drivers with familiarisation of the new technology via driving lessons and tests.
- The proposal of bilateral agreements between hardware component manufacturers, car manufacturers and software manufacturers to avoid unnecessary prolonged litigation between the technology supply chain.
- The recognition of safety concerns flowing from drivers of connected cars “deskilling” their driving skills required for driving non-autonomous cars. Adapting skills to doing less with autonomous cars (but safely) is paramount.
Keynote speaker, Secretary of State for Transport Chris Grayling MP, declared that we had taken an “unprecedented leap forward in travel”. Referring to the prospect of “cleaner” modes of transport, he remarked how fully autonomous vehicles could provide more independence to those with disabilities and the elderly, as well as reduce traffic, congestion and harmful fumes; providing safer roads by removing human error, which is 85% responsible for all road traffic accidents today.
Grayling remained confident that the first autonomous cars would be available in the UK by 2021.
A crucial milestone
Matthew Avery, Director of Insurance Research at Thatcham Research spoke about some industry shifts that have already begun, including the shift:
- From petrol to electric vehicles.
- From non-automated to autonomous vehicles.
- With mobility becoming a service e.g. Uber and Zipcars.
Viewing the emerging insurance framework as an enabler of the ongoing technology – and bringing safer roads – continued as a strong discussion theme. Indeed, AXA UK’s Technical Director David Williams said the focus needed to be on what he called ‘The four T’s: transport, time, testing and trust’, particularly in respect of the handover of control from the driver to the vehicle and from the vehicle back to the driver.
Whilst Williams commented on the anticipated overall cost savings of £33.6 billion over 10 years (across labour, fuel, insurance and vehicle utilisation), he provided illuminating statistics about low levels of consumer trust in autonomous technology and how it varies across different jurisdictions. Consumers in the following locations have indicated they would not feel safe in a fully autonomous vehicle: 81% Korea, 79% Japan, 74% US, 72% Germany, 64% India and 62% China.
Much of the discussion - quite rightly - was on the burden shifting from the driver to the manufacturer and the importance of data sharing to determine responsibility for an accident. A shift from personal insurance to product liability insurance is likely, with the manufacturer being primarily responsible for providing swift compensation – creating a chain of driver to motor insurer; motor insurer to car manufacturer and car manufacturer to product liability insurer.
Indeed, the forecast was offered that by 2040 there would be 50% manufacturer insurance and 50% personal insurance in respect of motor claims.
That picture is likely to be supported by offering the driver a one fee package – covering the cost and maintenance of the car (including software updates) and insurance.
Another important aspect of that new liability landscape is the need to take proactive steps to avoid unnecessary prolonged litigation between the technology supply chain. Bilateral agreements between the hardware component manufacturers, car manufacturers and software manufacturers is likely to be a suggestion that becomes louder.