In recent months driverless cars have increasingly made international news. In July the UK government began a consultation on proposed changes to the law surrounding liability for accidents and insurance cover to accommodate automated car technologies, while in August in the U.S., Uber announced a plan to trial driverless cars in Pittsburgh.
Driving the development of driverless car technologies is Google; according to its website, its driverless cars have driven over 1.5 million miles to date. An estimate by the Boston Consulting Group suggests that the driverless car market will be worth US$42 billion by 2025.
For the insurance industry, driverless cars present both challenges and opportunities. In particular, in the event of an accident, insurers will need to consider how to apportion liability in circumstances where there is no driver who can be deemed to be at fault. Another issue for insurers will be the calculation of premiums, given that actuarial data regarding the age, sex and driving record of policyholders will no longer be relevant.
Proponents of driverless cars argue that they make accidents far less likely by preventing human error, and therefore premiums for policyholders should fall. However, driverless cars are likely to be more expensive than conventional cars to replace or repair, at least initially, and consequently premiums may remain high to cover the higher costs in the event of loss. Driverless cars will also remain susceptible to damage by theft, vandalism, natural events and loss caused by the human error of drivers of other, conventional cars.
South Africa is yet to formulate a legislative framework for driverless cars. In the meantime, South African insurers should pay close attention to developments elsewhere, as it is likely that lawmakers will apply similar principles and draw on foreign law when drafting their own policies. Due to the similarity of their legal systems, the UK government's consultation, described above, will be of particular interest.
It will be some time yet before driverless car technologies can be used on any large scale in South Africa. Significant investment, planning and time will be needed to ensure that South African roads and markings meet the standards required for driverless cars. But given the high rate of road fatalities in South Africa, driverless cars will be an attractive proposition for car owners and policymakers alike, which may hasten their arrival. Insurers should prepare accordingly.