Insurance issues and solutions
In terms of insurance, there are several factors at play. As an emerging technology, autonomous vehicles necessitate development of coverage solutions and evolution in legal theories of negligence. Reduced traffic and the subsequent decrease in property damage, bodily injury and associated claim expenses will lower the overall cost of claims.
However, this could be a double-edged sword, as the potential arises for increased product liability costs. Was it a software or hardware malfunction? Did the consumer alter the software or fail to install required updates? These sorts of questions will be asked as insurance policies and case law catch up with the technology.
As with any risk assessment, some of the first steps will be to determine the extent of the risk as well as the tolerance for that risk. Will companies assume the risk, retain it, or transfer via contract to an insurance company? Insurance carriers need to develop their understanding of the technology and how the extent of deployment and different levels of fleet automation could require changes in policy language, the reevaluation of loss trends, and affect an entity’s rates.
How to deal with autonomous vehicles
City infrastructure needs to connect with the autonomous system to allow for better and faster movement of vehicles. For example, smart streetlights, traffic signals, sidewalks and parking garages should be set up to maximize the throughput of driverless vehicles. Local governments should actively encourage investment in vehicle-to-vehicle (V2V) and vehicle-to-infrastructure (V2I) technology, which can make driverless and highly automated cars safer. Examples include federal Smart City grants, matching loans from state infrastructure banks or public/private partnerships to accelerate investment.
In December 2016, Audi launched the first V2I technology in the United States, in Las Vegas. The technology sends real-time signal information via an onboard cellular data connection from smart traffic management systems that monitor traffic signals. In addition, big data collected from smart garages and streets can accurately predict traffic patterns and facilitate faster commute times. Many other cities and university campuses such as Atlanta, Boston, Kansas City and the University of Michigan’s Mcity have followed suit.
The goal is to gather data on how driverless cars interact both with other vehicles and a city’s infrastructure and learn what is needed to deploy the technology fully.
Related to V2I technology is the need for better-made and easier-to-understand traffic signs, lines and infrastructure in general. Many cities rely on old, crumbling infrastructure and could use new connected signs, reactive paint and roadside-assist communication. Self-driving vehicles will rely on cameras, light sensors, GPS and other advanced technology to identify people, bicycles, signs and traffic control advisories on roads.
Vital to many of the V2V and V2I interactions are the speed, security and available spectrum of 5G networks. Reliable wireless communication is crucial to the functionality of autonomous vehicle technology and its integration with infrastructure. Municipalities should proactively reach out to regional wireless broadband providers to plan for related infrastructure growth so that future needs — such as public safety and transportation — can be fulfilled.
There is no hiding from cyber liability. In the event that self-driving cars fall victim to cyberattacks, municipalities must adjust their cyber, automobile, general liability, public officials and even law enforcement liability insurance coverage, accordingly. As with any new technology, the coverage implications will extend far beyond the obvious auto liability concerns. Municipalities must engage their broker, agent and carrier partners early in the process to address current exposures in testing environments, and start discussing the road map for future deployment of the technologies in real-world situations.
Safety in general must also be addressed. “Cities have an opportunity to come together and lobby their state governments to advance their concerns around the safe operation of autonomous vehicles in their communities,” according to the National League of Cities in its autonomous vehicles policy preparation guide. This means managing the risks proactively and in the same framework as the entity’s overall enterprise risk management.
Considering the aforementioned risks, now is the time for governmental entities to create policies specifically oriented toward autonomous vehicles and related technology. Government planners should determine how existing laws and municipal codes will influence the development of autonomous vehicle technology. That means working with urban planners, public works managers, IT specialists, law enforcement leaders, regional agencies and others to create a plan that addresses the deployment of this technology and its integration with existing transportation infrastructure.
Boston has already begun working on a long-term plan for autonomous car technology, which involves working with state transportation experts and partnering with the World Economic Forum to test autonomous cars.
Driverless cars are coming, but with the right planning and determination, major risks can be identified and addressed.
Thom Rickert (firstname.lastname@example.org) is vice president, head of marketing and emerging risks specialist at Trident Public Risk Solutions, member of Argo Group. Rickert has extensive underwriting and marketing experience in all property and casualty lines of business, spanning multiple segments and industries, with a special focus on public entities and education.