Tech conference speakers raise questions about autonomous vehicle manufacturers’ liability

Nearly two months after the Ontario government launched its pilot program for testing autonomous vehicles, speakers at the P&C Insurance Technology Conference suggested that driverless cars and other innovations could significantly change the auto insurance model.

“Clearly you are seeing some manufacturers step up and say that they will assume liability for when the car is in autonomous mode,” said Karim Hirji, senior vice president of international and ventures at Intact Insurance. But how manufacturers insure against their liability, Hirji suggested, has yet to be determined.

“Are these companies going to self-insure, and what’s the impact on the balance sheet by those companies doing so?” Hirji told ICTC attendees during a panel discussion Monday at the Metro Toronto Convention Centre. “Or more likely, will they want to partner with an insurance company in some sort of ecosystem to actually provide coverage and take that capital risk on like we do today?”

The panel – titled Mobility, Technology, Regulation and Insurance – was moderated by Catherine Kargas, vice president of management consulting firm MARCON. Kargas asked Hirji whether he anticipated reinsurance for manufacturers’ liability for autonomous vehicles.

“It could be a reinsurance arrangement, it could be a quota share arrangement or it could be a strict insurance arrangement like we have today and I think that’s going to depend on each company’s balance sheet needs and their efficient use of capital,” Hirji said. “I think on the personal lines side, you are going to see a whole slew of different areas. You are going to see regular personal lines policies like we see today, because there are still consumers who are going to want to drive their own vehicle.”

The insurance industry is really in the “early days” when it comes to new models driven by emerging transportation technology, suggested Jason Storah, executive vice president for broker distribution at Aviva Canada Inc.

“At what point (are drivers) actually taking control of the vehicle, and if you think about where this could play out, right now in Canada generally and certainly in Ontario, the auto insurance market is driven by insuring millions of Canadian drivers,” Storah added. “That could easily move towards and we expect it to move away from insuring millions of individuals to potentially insuring a handful of technology providers or a handful of (original equipment manufacturer) providers and manufacturers, and so the entire landscape is changing.”

Related: Ontario announces plans to test automated vehicles on roads in the province

Discussions on how this would work are taking place at Daimler, suggested Alifya Curtin, general counsel for Car2go North America (which is owned by Daimler).

“Right now, we are in an area where we are not sure which way we are going to go, because the autonomous technology is created by us but there are also components supplied by other companies and then we are asking about shared liability with suppliers,” Curtin said. “If our Car2go vehicles go autonomous, how would we change that liability from our members’ liability to the vehicle manufacturer’s liability? How do we work with our insurance company to kind of bridge that gap, and for us, our partnership with our insurance company is critical.”

Ontario launched its autonomous vehicle pilot Jan. 1, said Logan Purdy, manager of the road safety policy office for the Ministry of Transportation of Ontario.

The pilot requires that a driver be in the driver’s seat, Purdy noted.

“The regulatory framework in every jurisdiction was never written as a vehicle driving down the road,” he said. “It’s always about the driver behaviour, so at this point we want the driver in the seat.”

A “lot of companies” have expressed interest in the pilot, Purdy said during the panel. “At this point, we haven’t approved any applications but even in California it took a few weeks for that to occur.”

The pilot is scheduled to last 10 years, with the ability to extend it to 12 years, he added.

“If you are an original equipment manufacturer, a research institution company that sells automated parts, you can participate in the pilot of testing vehicles on Ontario roads,” Purdy said. “In Ontario we have over 100 companies in the connected and automated field, so I think it’s just a matter of time, especially with the richness of our auto sector and a lot of the great minds that we have coming out of our universities, we want to keep them here in Ontario.”

Hirji suggested consumers will become “agnostic” on how they buy transportation.

“Is it through taxi, through ride sharing, through car sharing, renting a vehicle… perhaps you are going to have a product that offers bundles around all of those from a personal lines perspective,” Hirji said. “I think what’s interesting is on demand insurance, so when we talk about millenials, if they are looking at different ways of moving from point A to point B, do they have a way to buy insurance, on the spot, as they are actually participating in that activity? I don’t think the answers are there yet but I think there is a whole different set of models that could potentially develop over the next few years.”