Tag Archives: Driverless Cars

Driverless Cars Will Fuel Surge In Product Liability Coverage

According to Law360, a surge in demand for product liability insurance will become a trend as advances in autonomous car technology continues to increase. These autonomous cars are removing humans from the equation, resulting in liability for accidents being shifted away from the drivers and toward the manufacturers of driverless vehicles and their hardware and software systems.

Questions regarding who would be held liable in crashes involving self-driving cars arose after a fatal accident in May involving a Tesla Model S that was equipped with partially autonomous braking and steering features. Although Tesla did state that the Model S brakes were to blame for the crash, not the autopilot feature, this event continues to attract concern from regulators and consumers.

“Experts say that as autonomous cars become more sophisticated and require less human input, the manufacturers of self-driving vehicles and their components will face more liability for accidents while individual drivers will face less.”

Subsequently, personal auto insurance pricing is expected to decrease significantly due to the decline in driver liability, while auto manufacturers and suppliers will see an increase in price for their product liability coverage.

“The entire auto insurance industry may be radically changed,” Pillsbury Winthrop Shaw Pittman LLP partner Peter Gillon said. “Drivers are the real risks these days and not the cars. The more you take driver error out of the equation, the more you are looking at an auto insurance market based on safety system performance and product liability.”

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Auto Insurers Warn that Driverless Cars May Affect Profitability

While driverless cars could be hitting the roads in as little as five years from now, many auto insurers are worried about the far-reaching implications this autonomous technology could have on their industry’s bottom line. According to the Insurance Information Institute (III), the industry brought in $107.4 billion in passenger-car auto insurance premiums in 2013, the latest year for which figures are available.

In a March 3rd Wall Street Journal article, “The Driverless Car, Officially, Is a Risk,” it was reported that three insurance suppliers as well as an auto parts manufacturer have already cautioned investors in their most recent annual reports that the dawn of the self-driving vehicle and its technology may greatly affect their business model in the future.

Companies usually regard their annual report’s risk-factor disclosures as a place to point out potential difficulties and disruptions and to protect against their liability—not as a prediction of what’s to come. But the fact that driverless cars have been mentioned in several annual reports is telling.

According to the WSJ article, Cincinnati Financial Corp., which produces about a quarter of its premiums from commercial and consumer auto policies, warned its forecasts could be flawed due to “Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products.”

In addition, Mercury General Corp. said that “the advent of driverless cars and usage-based insurance could materially alter the way that automobile insurance is marketed, priced, and underwritten.” The company provides most of its auto coverage in California.

Industry analysts believe a variety of consequences could result by taking the driver out of the equation:

  • Insurers may sell fewer individual policies
  • Insurers may have to cover fewer accidents
  • Technologically-advanced cars may cost more to repair
  • Some of the expense from consumer auto insurance may shift to commercial liability policies as more automakers and software firms face litigation for accidents
  • Larger policyholders could have more bargaining power than many small ones, potentially putting more pressure on premium revenue

The Insurance Information Institute also addressed this topic on its website. According to the III’s recently-updated report, driverless cars are viewed by the organization as one natural outgrowth from a multitude of advances in safety technology.

Numerous developers of driverless cars are concerned that regulatory matters and costs could delay their launches to market, but in any event, these technologies are still moving forward.

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Filed under Fla. Stat. 627.736 (2012)