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The road to fully autonomous driving is paved with good intentions and a number of potential bumps. Should the insurance industry expect rising claims costs?
Jack drives at 130 km/h down the A9 German motorway. He maintains a steady speed and a respectful distance to the vehicle in front, moving smoothly amid the dense traffic. Jack is stubborn though and refuses to let another car into his lane, despite the driver’s pleasant smile. Jack doesn’t get facial expressions; they’re not something he has been programmed to recognize. You see, Jack isn’t human at all: Jack is a prototype, semi-automated Audi car and this is a test drive. Christoph Lauterwasser, managing director, Allianz Center for Technology (AZT) was a willing passenger on the automated test drive, traveling alongside a trained test participant. “And I felt quite safe,” says Lauterwasser.
The likes of Jack are set to become more commonplace on our roads as what was once the realm of science fiction fast approaches reality. The first fully automated cars are due to be introduced around 2021-23 (depending on legal questions and technology). By 2035, around a third of all vehicles are expected to be partially or fully automated, according to a study by the consultancy Oliver Wyman.
It’s been a long journey since Karl Benz introduced the first petrol- or gasoline-powered production car in 1885. We still have a way to go: autonomous driving will be introduced in gradual steps rather than one single action. For the next 20–25 years, traffic will be made up of a mixture of autonomous and human-driven vehicles, as we make the transition to autonomous driving. Rolf Behling, head of automotive engineering, Automotive Innovation Center at Allianz Worldwide Partners, refers to six levels of automation. The first stage is manual driving, while the second is assisted driving. We are currently at the third stage, namely partial automation.
Advanced driver assistance systems, ranging from automatic parking to collision avoidance, are already being incorporated into many brands of cars. As of 2018, we can expect conditional automation, where an automated driving system can take over in specific situations but humans intervene where necessary. This stage will be followed by high automation and the final stage will be full automation with an automated driving system able to handle all aspects of driving under all roadway and environmental conditions.
Behling expects autonomous vehicles initially to be part of fleet vehicles, such as bus companies, or transportation networks such as Uber, which can operate in an environment where the necessary infrastructure can be managed. Allianz’s Automotive Innovation Center is already cooperating with a bus company, which is developing and operating an autonomous bus fleet. Allianz partly insures the test fleet, thereby gaining insights into the development of sensors and software. Private vehicles will then follow.
However advanced the technology, surely we can’t allow a computer to decide how to act in a life-or-death situation? Should it swerve to avoid a child running into the road or protect the car’s occupants? Clearly, there are a number of thorny ethical dilemmas that need to be addressed before vehicles are given full autonomy. Germany has even set up an ethics commission dedicated to such issues.
What about the safety concerns: surely even the most sophisticated software isn’t infallible? Potential safety hiccups for autonomous cars include sensors affected by bad weather or a car’s vision being obstructed by obstacles, such as buildings at an intersection. “What would happen, for example, if there is heavy snow on the road, hiding the road markings?” says Lauterwasser. More intelligence is still needed for an automated car to understand such situations before it is introduced into the mass market.
Motor insurance also has to deal with the changing landscape. According to Carsten Krieglstein, head of liability at Allianz Global Corporate & Specialty (AGCS), autonomous-driving technology will likely contribute towards a decline in car ownership, in favor of motor fleets, carsharing and driverless taxis as part of mobility concepts. Insurers may move away from providing millions of single annual motor insurance policies to drivers towards providing large policies purchased by manufacturers, fleet owners and operators instead.
For sure, claims complexity will increase with autonomous driving technology, says Wolfram Schultz, global practise group leader liability, heavy industry and manufacturing, AGCS. In the future, it won’t just be about the driver, the car owner and the mobility provider, but also about the original equipment manufacturer, the first-tier suppliers, the suppliers of hardware and software, network provider, data centers and other parties involved.
There will be an increasing shift to product liability for motor manufacturers, requiring insurers to develop technical expertise and not rely only on historic data and driver profiling for pricing. The insurance industry should expect rising claims costs, says Schultz. “Fully autonomous cars have so many sensors and technology that need to be readjusted and checked that even small claims could cost a lot more than at the moment. Because of the high level of technology involved, the small car workshop around the corner will not be able to deal with those readjustments anymore, as it can’t afford the testing and adjustment equipment. This, besides the cost of materials, will additionally drive claims costs.”
For fully automated driving, the legal environment may change to allow a vehicle to be liable for an accident. The Vienna Convention on Road Traffic, an international treaty on road traffic and safety, was amended in March to incorporate driver assistance technologies, but still specifies that the driver must remain in control and responsible for any damage. “In the near future, we will still have the concept of the driver and that only makes sense if the driver is capable of driving the vehicle,” says Lauterwasser.
For now, drivers need to keep their hands on the steering wheel and their eyes on the road.
The story is an edited version of an article that will be published in the 25th edition of PROJECT M, a magazine by Allianz on asset management and insurance.
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