Volvo’s recent show of confidence in its technology with its announcement that the company will accept all liability for accidents caused by its autonomous cars (also known as driverless or self-driving cars) points to a possible paradigm shift in the way motor insurance will work in South Africa in the future.
This is according to Simon Colman, Underwriting Executive at SHA Specialist Underwriters who says that motor insurers might find in 20 years’ time that the amount or requirement of their traditional cover is greatly diminished. “As motor vehicles become more autonomous, the liability of accidents is more likely to fall into the laps of the manufacturers, rather than the drivers.”
Currently, local motor vehicle owners have to insure their own vehicle because they will be responsible for the damage caused to their vehicle, as well as another vehicle(s) and its passenger(s) if they are responsible for causing an accident, says Colman.
“What Volvo is saying is that if one of its autonomous cars is involved in an accident and it is found that the technology failed and resulted in the accident, the company will pick up the bill. This makes sense because if the technology failed then the likelihood of it being the fault of the manufacturer is increased and one could argue that they’d liable for the damage to cars and passengers in any event,” says Colman.
He says this points to the fact that the level of liability for motor vehicle manufacturers is increasing while the liability for drivers is decreasing. “By creating autonomous features and vehicles, the manufactures are increasing their exposure to liability because they are no longer just responsible for the safety features of the cars, such as brakes or steering wheels, but the actual control of the vehicle too.”
The sort of consumers who will invest in this type of car are more likely to be those who care more about safety rather than speed or fuel economy, he says. “It will be interesting to see how this develops in South Africa, as there will be a long period where autonomous, as well as ordinary vehicles, are on the road at the same time.”
Colman says that autonomous features are nothing new as many motor vehicle manufacturers have already incorporated elements such as parking assist, distance and
cruise control which take some responsibility away from the driver. “The insurance industry will of course have to continuously shift their risk perceptions as these features progress from “safety assistance” into the realms of absolute vehicle control.”
A further point worthy of consideration would be the possible increase in subrogation related matters where the insurer of the vehicle seeks recovery from the manufacturer for any “own damage” claims that they believe have been caused by, or at the very least contributed to, by malfunctions, he says. “The core type of liability cover required by manufacturers will not change, it will in all likelihood still be product liability driven.”
Colman adds that the liability for manufacturers of autonomous and networked products is not necessarily limited to motor vehicle manufactures. “As people begin to rely more and more on technology, the risk of liability exposure increases for all manufacturers.”
For example, the recent case whereby an Apple watch saved a man’s life after it alerted him to the fact that he was displaying the early signs of a heart attack, enabling him to get to a hospital in time to stablise his heart rate. “While Apple does not advertise this as a feature of the product, this type of technology is likely to grow in popularity in future along with the expectations of consumers, leading to an increase in liability risk for the manufacturers.”
He says businesses and the insurance industry will need to take into the account that the rate of progress of technological development is now accelerating and its impact on liability is shifting. “How risk was viewed yesterday may not help in the future. To ensure effective risk management it is vital to plan ahead for all possible future outcomes,” concludes Colman.