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Self-driving cars put insurers to the test

Self-driving cars put insurers to the test

Progress in the race among established and new car manufacturers to field autonomous vehicles is challenging insurers trying to keep pace with developments in transportation.

From dealing with unfamiliar vendors and stakeholders to questions of liability and coverage, the insurance sector must navigate myriad fronts in their efforts to offer appropriate products and coverages for the next generation of automobiles.

According to California Department of Motor Vehicles autonomous vehicle disengagement reports for 2017 — which describe disconnections either from technical failure or drivers taking control — Waymo, the Mountain View, California-based autonomous driving development unit of Google parent Alphabet

Inc., logged the most miles of autonomous vehicle testing in the state at 352,545, followed by General Motors Cruise Automation L.L.C., a unit of Detroit-based General Motors Co., at 131,675 miles.

Italian-American auto manufacturer Fiat Chrysler Automobiles N.V. will be supplying Waymo with “thousands” of Chrysler Pacifica hybrid minivans beginning in late 2018 for a planned autonomous ride-hailing service slated to begin in Phoenix this year, according to a statement from the automaker. The new vehicles will result from a collaboration between Waymo and FCA engineers to design self-driving vehicles built on a mass production platform. FCA declined to provide further information. Waymo did not return a request for comment.

Meanwhile, GM has filed a safety petition, part of a regulatory filing required of new vehicles, with the U.S. Department of Transportation for its fourth-generation self-driving Cruise AV, which has no steering wheel, pedals or manual controls, to be on the road in 2019, according to a statement from the automaker.

“We’re now getting an idea about how quickly autonomous vehicles will roll out. It looks like we’ll see deployments in a few cities this year or next,” said Paul Carroll, CEO and editor-in-chief at Insurance Thought Leadership Inc. in New York. “But we still don’t know a lot of things. How soon will we move from Level 4 — autonomy within a heavily mapped, limited area — to full autonomy?”

Autonomous vehicles initially will likely have both a limited geographical footprint and set of driving condition tolerances within which they can operate, said Hilary N. Rowen, senior counsel with Clyde & Co in San Francisco and an observer to the Uniform Law Commission Drafting Committee on Highly Automated Vehicles for the American Bar Association Tort Trial & Insurance Practice Section.

Such limitations for these early vehicles make them better candidates for fleet application than for personal use, she said.

In its 2018 Self-Driving Safety Report, GM said it had “combined the best of Detroit, Silicon Valley and our teams around the world” in the development of its program. This development model, which involves new types of players, raises questions for the insurance industry.

“Historically, we saw two stakeholders participating in the mobility segment: original equipment manufacturers and component suppliers,” said Jose Heftye, sharing economy and autonomous mobility practice leader for Marsh L.L.C. in San Francisco. “Now there is a third stakeholder, the on-demand platforms,” which could include logistics firms and others, he said.

Suppliers may not be aware of their exposures, said Robert W. Peterson, professor at Santa Clara University School of Law in California. “An OEM held primarily responsible for a loss can pass that loss up the chain to the responsible supplier.” Innovative technology used to develop the vehicles raises further questions.

In the absence of a court interpretation, Ms. Rowen said, it’s unclear whether a vehicle’s automated driving system — the hardware and software that controls the car in autonomous mode — can be a covered entity under an auto insurance policy.

“The system is not itself … an insured under an auto policy,” Ms. Rowen said.

“It is still early to determine where the liability risks would fall, and many of these questions are top of mind for insurers,” Lex Baugh, CEO of North America general insurance for American International Group Inc. in New York, said in an email. “The law as it relates to products liability and software embedded in products will evolve as we gain experience with the new technologies.”

Insurance policies for autonomous vehicles may need to be a combination of personal liability, commercial liability and product liability, Mr. Heftye said, to reflect the needs of policyholders who may use the vehicles for personal use and for rideshare or commercial purposes.

“As our mobility behavior changes, we have to think about risk and exposure differently,” Mr. Baugh said. “The shift is upending our conventional wisdom about liability and the way that we predict the cost of risk; however, we know the risk will not disappear. It will shift, largely from human to machine, which will blur the lines between personal and commercial risks,” Mr. Baugh said.




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