Self-Driving Cars Spark Debate Amongst Car Insurance Companies

Tue, 4/24/2018 - 12:59 am by Kirsten Rincon

 Recent accidents involving self-driving cars have sparked controversy over issues regarding fault and liability that are directed toward insurance companies.

As of 2013, a total of 12 U.S. states and the District of Columbia have passed legislation relating to self-driving cars. These states include Florida, Nevada, California, Alabama, Arkansas, Louisiana, Michigan, North Dakota, Pennsylvania, Tennessee, Utah and Virginia.

With the rise of self-driving cars, insurance companies have had to begin formulating a new plan to tackle this developing technology. “If the day comes when a significant portion of the cars on the road are autonomous, it will hurt GEICO’s business very significantly,” said Warren Buffett whose company, Berkshire Hathaway, owns the insurance giant GEICO.

The way car insurance works, and has worked since the early 1920s, is that it places the responsibility on whomever was driving the vehicle that caused an accident.  However, if a human isn’t driving a car when it is involved in an accident, who is to blame?

“It’s certainly a topic of heavy conversation right now,” says Rick Gorvett, staff actuary for the Casualty Actuarial Society, a trade group for people who analyze risk for insurance firms.

Insurance rates are generally based on a number of different factors directly relating to drivers, such as their claim histories, driving record status and safe driving habits. Thanks to the use of apps that have been created to track driving habits like speeding, insurers have been able to use the collected data to grant safe drivers discounts and other perks. Yet with more and more driverless cars out on the roads, insurance companies are being forced to change their business model to focus more on automakers than drivers.

Analysts and researchers have predicted that autonomous vehicles will help reduce car accidents by a whopping 90 percent. Nevertheless, the car accidents that do occur will most likely be caused by machine errors. “At least the current thinking is that the manufacturers will be ultimately responsible for a lot of these future accidents when an automated vehicle is involved,” Gorvett says.

Depending on how states currently regulate insurance companies, certain standards may need to be updated and/or changed to tackle the issue of self-driving cars. The state of Michigan, for instance, has recently passed a law that specifies that an automaker assumes liability and insures every car within its make in which driverless systems are deemed to be at fault.

With that being said, autonomous vehicles flooding the roadways is not set to occur until much further into the future. So until that day comes, insurance companies will continue to determine fault and liability on a case-by-case basis.