Driverless insurance could cost more

Cyber-security could add new expenses to auto coverage, discovers by Louis Bedigian.

Auto insurance has remained the same for several decades but a host of new technologies – ADAS, connectivity and most of all autonomy – could reshape the future of who pays for what and when. Yet, the crystal ball has not revealed who will be liable for cars that drive themselves and, aside from a few brazen comments by automakers pledging to take responsibility, no one is eager to make that call.

Technology brings about another change that could leave a lasting impression on auto insurance – the need for cyber-security. If a car’s security systems are breached, who pays for the damage that might ensue? Will insurers foot the bill, or will they expect consumers to pay a premium for cyber protection?

George Onofrio, of application development at the Auto Club Group (AAA), had a few things to say on this topic. Speculating about the broader market, rather than providing specific details about what AAA plans to do, he said that insurers could “absolutely” offer coverage for cyber-security protection. “You’re already seeing some insurance companies offer coverage for identity protection,” he said. “There could very well be an opportunity where you offer some coverage in the event that your vehicle was hacked or compromised. It’s no different than if a feature in your car fails and you get into an accident, you’re covered. I could see it going there as the possibility. It all depends on how safe these vehicles are, how vulnerable they are to hacks.”

Onofrio said that cyber protection “could get baked in” to standard coverage, similar to the way a car is covered if and when a malfunction leads to an accident. Cyber threats are among the potential problems that would be out of the driver’s control. “If you’re not driving the vehicle, are you liable as an owner of that vehicle?” he questioned. “Or is the manufacturer liable in the event that a safety system doesn’t function or isn’t able to react?”

While cyber-security is an important issue, there may not any need to panic. Onofrio added: “As of right now, it’s been an academic exercise to hack into a car. Will it, could it? I think at some point anything can be hacked. Unless it becomes lucrative for a hacker to hack into a car, it’s really just an exercise.”

Who’s to blame?

Hacking or not, it will be more difficult to determine fault as vehicles become more autonomous. Auto insurers will be tasked with examining a mix of fully- and partially-autonomous vehicles, as well as those driven by humans. Viral Patel, chief enterprise architect at the AAA, thinks that connectivity could help clear up any confusion created by the mix of automobiles.

Said Patel: “In the past you only had limited attributes to look at to really understand the risk. Now, because of the connected vehicle, you have a lot of data points. Absolutely that will have an impact, I would say more positive than negative.” Onofrio concurred, adding: “The data will have to tell you, was it truly a green light? Who was at fault? I think a lot of it is going to come down to the data you can extrapolate from the situation and did the vehicle perform the way it was supposed to perform?”

In the event that Internet access is lost, Patel expects automobiles to take a page from smartphones and simply hold the data until connectivity resumes. “That’s how a lot of technology works,” said Patel. “Let’s say you’re in a place where you don’t have any connectivity, you still have certain services. Apps still collect data and it just keeps it on your phone. And soon as there’s connectivity, it transfers the data.”

The final costs

If autonomous cars successfully reduce the number of accidents, the cost of insurance should go down. That’s the theory but Onofrio isn’t sure that consumers can count on lower premiums. “These new safety features are helping people survive accidents,” he said. “The severity of some of these impacts becomes less but the repair-ability now goes up. You’ll see there is kind of a trade-off but the important thing is that people are surviving. They’re able to walk away from crashes that maybe years ago they couldn’t.”

That doesn’t mean insurance costs will skyrocket, however. Onofrio said that many of the advanced safety features have come from “trickle-down” technology that starts out in expensive luxury cars before appearing in economy sedans. If it’s cheaper to manufacture, it won’t cost as much to repair or insure.

Said Onofrio: “It’s always going to be more expensive now than it was 10 years go to fix a vehicle. As you get economies of scale and as you learn more and commoditise the features, the cost does come down. A lower price point, I think that helps.”


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