The preferred way to transfer risk of automated cars: Travelers

The public policy division of Travelers is recommending that a “clear risk transfer mechanism” be in place to adapt auto insurance for autonomous vehicles.

“While there has not been widespread attention paid to how liability and compensation will be addressed as AVs [automated vehicles] multiply, product liability has been raised as the inevitable default option,” says a recent Travelers white paper Insuring autonomy: How auto insurance can adapt to changing risks, issued by the Travelers Institute earlier this month. “That presumption should be challenged. Unlike auto insurance, alternative risk transfer mechanisms like product liability are not structured to be primary, comprehensive solutions.”

The wide-ranging paper addresses several other issues related to the use of automated cars, including regulation, insurance, technology, cybersecurity, education and industry representation.

Elaine Baisden, chief underwriting officer of personal insurance at Travelers, told Canadian Underwriter that the principles outlined in the white paper apply to the Canadian market as well. In particular, she said, “ensuring that a clear risk transfer mechanism is in place and which addresses timely and appropriate compensation will help facilitate the development of autonomous vehicles and the improved safety we expect they will bring to our roads.”

In addition, existing auto insurance regulation, both for personal and commercial vehicles, can be adapted specifically to resolve claims and provide fair compensation to accident victims as vehicles become more autonomous.

“There would need to be licensing and safety regulations first and foremost,” Baisden said. “Again, we’d want to ensure that a clear risk transfer mechanism is in place [that] will help facilitate the development of autonomous vehicles and the improved safety we expect they will bring to our roads.”

Baisden also called for “better data-sharing between auto manufacturers and insurance providers,” including appropriate consumer privacy protections and strong cybersecurity requirements, to help increase safety and mitigate risks over the long term.

“As regulations evolve, we believe the insurance industry should also play a central role in the policymaking and stakeholder discussions related to autonomous vehicles,” she added.

The white paper recommends establishing strong cybersecurity requirements for autonomous vehicles. “Cyber-related risks impact the safety of our communities in a world with autonomous vehicles,” Baisden said. “If a cyber incident occurred, it would be important to have a record explaining what happened, not only for insurance-related purposes, but also for future risk mitigation and preventative efforts.”

While research suggests the adoption of autonomous driving technology will lead to fewer accidents, collisions that do occur will likely result in costlier repairs and raise difficult questions relating to driver and manufacturer liability, victim compensation and data collection. The general risks attached to vehicle ownership (whether or not the vehicle is autonomous) remain, including risks related to weather and theft.