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Risk managers unprepared for self-driving cars

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Autonomous vehicles have yet to drive their way into the radar of most risk managers, according to a survey.

Sixty-five percent of more than 100 risk managers that Munich Re America Inc. surveyed during the Risk & Insurance Management Society Inc.'s conference in April said they have done nothing to prepare for the self-driving cars' arrival in the market, with initial takeup being largely consumer.

While 65% have done nothing to prepare, 23% have discussed the new technology internally, 8% have established a task force and 4% have created an operational plan.

“One surprise for us was the number of people not doing anything,” said Mike Scrudato, New York-based senior vice president of new strategic markets and leader of the mobility domain practice area. “Given the amount of activity that this technology and this segment has seen over the past 12 to 18 months, we would've expected a little bit more activity around organizations to at least study the potential impact on them.”

A 2016 Munich Re study on autonomous vehicles considered some of the questions connected with AVs, such as who will be liable when an AV is involved in an accident and what kind of impact will AVs have on the tools underwriters use to evaluate risks.

The study suggested that, from a risk management perspective, manufacturers should consider such steps as creating simple and conclusive schemes to record when the driver overrides the AV computer, reputational risk insurance coverage as media focus on autonomous technology grows, and a disabling function as a response to any attempts to alter or enhance the software.

“We feel that given the potential impact autonomous vehicles, it's important for us to take a leadership role,” Mr. Scrudato said.

In a January study, consultant McKinsey & Co. said consumers are likely to adopt self-driving vehicles in 2020 and become the primary mode of transportation by 2050.

Autonomous vehicles suffered a potential setback in May when the driver of a Tesla Model S electric sedan was killed in an accident when the car was in self-driving mode.

“We feel that there are potential safety benefits of the technology, Mr. Scrudato noted. “That said, we feel there will feel continue to be car crashes. There are 100 people killed every day in car crashes. Hopefully, this technology can reduce that.”

Mr. Scrudato also said that Munich Re also sees safety benefits not only in AVs, but in crash avoidance technology that is being deployed in new cars and the aftermarket.

The importance of AVs is underscored by a National Highway Transportation Safety Administration study that driver error is estimated as the cause of 94% of accidents.

Reducing driver error also will reduce accidents, Munich Re America said. The economic losses are significant, according to the National Safety Council, resulting in deaths, injuries and damage totaling $412 billion in 2015.

“With innovative companies making significant strides in the development of self-driving cars, it's no longer a matter of if, but rather when the time will come for the wide-scale adoption of AVs,” Tony Kuczinski, president and CEO of Munich Re America, said in a statement. “The timeline for adoption may be sooner than many realize. As such, it's important for companies to start preparing now for how this technology could potentially impact their business, to both leverage opportunities and most effectively mitigate risks.”

Fifty-five percent of risk managers in the survey said cyber security is the greatest insurance concern connected with autonomous vehicles, as risk managers believe the greatest threats are thieves hacking into vehicle data systems and the failure of “smart road” infrastructure technologies.

Security concerns were followed by allocation of liability in roadway mishaps, economic disruption, safety, and the cost of technology to repair damaged vehicles.