The Department for Transport has proposed amendments to the UK motor insurance framework to include provision for automated vehicles (AVs). This is one part of the UK Government’s aim to develop an international transport technology revolution, which will include the development of driverless cars and the launch of a commercial spaceport. These initiatives were announced by the Queen in her May 2016 speech and will form key provisions of the Modern Transport Bill, which is expected to be published in early 2017.

Under the Government’s proposals, the insurer will provide cover for both a driver’s use of a vehicle and the car’s AV technology. The insurance offered would be a unified product, covering the motorist whilst driving the vehicle conventionally and the vehicle whilst in autonomous mode.

Expanding AV technology presents insurers with a wide array of questions and uncertainties:

  • It is very difficult to assess the level of risk involved in such a new technology as there is currently an extremely limited amount of data modeling on the subject. Each individual driver may, for example, use the AV technology for different amounts of time or make different modifications to their AVs.
  • It is also unclear to what extent cyber hackers or terrorists may be able to “hijack” AVs. Two major terrorist attacks in Europe in 2016, the Bastille Day attack in Nice in July 2016 and the Berlin Christmas market attack, were both caused by hijacked lorries.
  • It is not yet known how attractive AVs will prove to insurance fraudsters.

These difficulties are heightened by the fact that the AV insurance market is expected to become extremely competitive, since according to some estimates, the majority of vehicles on UK roads will be autonomous within 15 to 20 years.

The government is doing its best to allay the concerns of organisations representing victims of motor accidents. Under the proposals, insurers would be entitled to recover from the vehicle manufacturers if the accident were caused by an AV fault. In its January 2017 publication “Pathways to driverless cars” (available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/581577/pathway-to-driverless-cars-consultation-response.pdf), the Government responded to its latest consultation on the subject and stated that the victim will have a “direct right against the motor insurer, and the insurer in turn will have a right of recovery against the responsible party, to the extent there is a liability under existing laws, including product liability laws.”

The UK insurance industry has also formed the Automated Driving Insurance Group (ADIG), headed by the Association of British Insurers, to determine guidelines for which party should be responsible in crashes of AVs: the drivers, or the vehicle manufacturers.

The eventual impact on insurers is not yet clear, but it seems beyond doubt that the AV revolution will force motor insurers to change the way they assess risk and set premiums.