Driverless vehicles are the next stage in vehicular evolution. Phil Oultram and Andrew Schütte take a look at how the advance of this technology will affect the transport industry.

Race to the future

Much of the technology needed for driverless cars already exists. We already have cruise control, emergency braking systems, self-parking systems, cameras, sensors and GPS guidance. The race is now on to develop this technology into semi-autonomous and fully driverless vehicles. Japan tested a fleet of driverless trucks in 2013 and aims for fleets of autonomous trucks by 2018. The US is also making leaps and bounds into the technology.

Here in the UK, the Government has recently announced its own driverless car initiative. A code of practice is due to be published shortly to facilitate the testing of autonomous cars on the roads in Milton Keynes and Coventry.

Time, access, safety

The Government sees major potential benefits in driverless cars. People will have more free time: the average driver nowadays spends nearly 250 hours each year behind the wheel. Once fully developed, there will be better access to private transport: those without a driving licence will no longer need to rely on taxis or public transport, providing greater independence for the elderly and disabled. Emissions and congestion will decrease through better use of road space and communication with roadside infrastructure. Perhaps most importantly, the Government also says that accidents will decrease.

Most accidents happen because drivers make mistakes. A computer has none of the behavioural disadvantages of a human driver. It does not make subjective judgements about speed or distance. It does not get tired.

Today, 35% of accidents are caused by misjudging the width of a vehicle. 20% are caused by reversing into objects or people. 15% of accidents are caused by a driver hitting another vehicle in the rear. These types of accidents, and the other 20% of accidents caused by human error, ought to be significantly reduced, if not eliminated, by driverless cars.

Costs savings

As driverless technology takes hold, the costs burden on businesses for vehicular transport will change. Fuel efficiency will improve. Testing in Japan revealed that, using the computer’s ability to react in milliseconds, vehicles could drive so close they could take advantage of the slipstream effect, saving 15% on fuel costs.

A reduction in road traffic accidents will also produce savings. Fewer collisions ought to mean lower insurance premiums, and fewer excesses to pay.

On the other hand, the impact of driverless technology on vehicle maintenance, and the cost of adapting/maintaining a  road network and emergency service to be fit for driverless cars are all unknowns. There are bound to be commercial winners and losers as the technology progresses. Who these will be, and where the costs and the benefits will fall, is very much up for grabs.

Are we there yet?

The immediate future is not, however, streets full of autonomous cars. In the short-term we are more likely to see semi-autonomous vehicles, where qualified drivers are able to hand over control to the computer or take it back as appropriate. Exactly how driverless vehicles, or semiautonomous vehicles in driverless mode, interact with human drivers and road and weather conditions is one of the big questions to be addressed.

Insurance

If human error is removed from the equation, responsibility for safety will shift away from human drivers towards vehicle manufacturers, software/navigation systems providers and, potentially, those responsible for upkeep of the highways.

This means motor insurers’ business models and underwriting processes will have to change. Insurance will need to cover programming errors, failure to safeguard systems from cyber attack, and engineer error, as well as provide cover for the driver should he or she override the computer.

Cyber risk is already a concern for motor insurers, with onboard computers vulnerable to hacking. Greater reliance on technology will mean cyber risk will become relevant not only when it comes to thefts but also safety. Concerns in the insurance community about inexperienced or poor drivers are likely to give way to more systemic concerns such as the consequences of a GPS blackout or the vulnerabilities of particular operating systems.

Put simply, insuring an autonomous vehicle is a product liability risk rather than a traditional motor risk. Semiautonomous vehicles will require a hybrid of traditional and product liability cover.

As vehicle manufacturers move towards driverless models, the buyers of insurance will also start to change. Instead of legions of consumers, each of whom is more or less likely to cause or suffer injury; insurers may become more reliant for their premium income on a limited number of vehicle manufacturers. As the number of insurance buyers shrinks, so their ability to demand premium reductions is likely to grow. The profile of motor risks may also change from high frequency/low value (lots of RTAs typically worth thousands of pounds) to low frequency/high value (a limited number of system failures causing loss or injury, but potentially worth much higher sums).

As technology develops into uncharted territory, insurers will also face the challenge of pricing risks without any meaningful loss history or data.

The law

The Government has said that existing law, together with its code of practice once published, will be sufficient to deal with the current testing of driverless vehicles in the UK. Unlike in some US states, users will not need to stump up a large surety bond, provided adequate insurance is in place.

There is, however, recognition that (a) extra clarity will be needed on civil and criminal liability issues if an automated or semi-automated vehicle is involved in a collision; (b) that rules on vehicle maintenance and MOTs may need to be revisited; and (c) that safety standards may need to be reviewed.

For both insurers and the judges who will have to decide questions of liability, understanding the technology will become increasingly crucial as driver vs machine liability arguments become part of the road traffic litigation landscape.

The future

There is some way to go before driverless technology becomes part of our daily lives, but this is not science fiction or even the distant future. In whatever direction the technology develops, what seems certain is that the commercial impact  of autonomous vehicles will be felt amongst vehicle manufacturers, energy producers, insurers – and everyone connected with transport and infrastructure.

In other words, all of us.