The first time I got behind the steering wheel of a car, I was in awe of the power and autonomy it could provide. But as we know from Spider-Man, ‘With great power comes great responsibility’. The potential for me to get it wrong and cause major injury or even death when driving is the reason why I take the responsibility of driving so seriously. Insurance companies recognise the potential for damage as well, which is why your car insurance is often more expensive than your house insurance, even though a car is often less than a tenth of the cost of a house.
Self-driving cars, or autonomous vehicles, are going to change the face of insurance. Currently, the liability still clearly resides with the driver of the car, but at some point, that liability will shift to the technology driving the car. Now, instead of rating on the risk of the driver, insurers are going to have to rate on the risk of the algorithms behind the autonomous vehicle. In other words, they’re going to be rating technology and computer programmes. How can insurance companies do this without having to employ a number of computer engineers with deep knowledge of artificial intelligence and other technologies required by the autonomous vehicle?
There are a number of organisations out there that are working on creating standards for autonomous vehicles. There has been some great work by the likes of the Association of British Insurers, Thatcham, and the British Standards Institute. However, these are often working in silos and for specific markets only. My proposal is that an independent body should create an international standards checklist against which manufacturers of autonomous vehicles must assess. This checklist will need to cover the following aspects:
- Technical, such as having redundant cameras and sensors in case of failure
- Legal, such as compliance to the nation’s laws for vehicles on the roads
- Ethical, such as prioritising human life over property
Insurance companies can then hire a specialist third party to go in and audit the vehicle manufacturers to ensure their compliance to the standards. There’s already a precedent for this kind of model in the card payments world. There, they have a standard called Payment Card Industry Data Security Standard (PCI-DSS). Any entity that wants to directly handle payments by a credit or debit card must meet the twelve main controls as specified in this standard. They prove this compliance by hiring a third party to audit them, and if they are compliant, they will be issued an Attestation of Compliance.
Insurance companies currently assign risk rating scores to autonomous vehicles, but it’s a bit of a dark art. There is no public source of information identifying how insurance companies are assessing the risk of certain autonomous vehicles. And even worse, there’s no transparency about what these scores are. Instead, they tell the manufacturer the rate of how much it will be to insure their vehicles, none of which is made public.
The results of the compliance against a checklist can be published, much in the same way that in the UK, restaurants have their health and safety scores on their front doors. This will enable people to make more informed decisions about which autonomous vehicles they want to buy.
As a consumer, wouldn’t you want to know if one autonomous vehicle has a higher risk score than another? I know I would like to buy the safer one, even if it’s slightly more expensive. And even if I choose to buy the cheaper car with a slightly worse risk score, at least I would know the exact trade-offs I’d be making.
As responsibility shifts to manufacturers, the whole insurance model could be disrupted. For example, an autonomous vehicle manufacturer could bundle insurance as part of buying or leasing their cars. They could do this either through a partner, or they could have the capital to underwrite it themselves. This is notwithstanding the fact that insurance is bundled with the car with corporate car leases. Insurance companies will no longer be competing for individual drivers but for large contracts with organisations. This standards checklist will help set expectations across the board and ensure fair comparisons are being made when competing for these contracts. To provide a competitive advantage, some insurance companies might develop an internal capability to assess compliance to the standards.
With every change in society, there have been growing pains and learning points. With the advent of autonomous vehicles, we’re at another turning point. As such, it would be good to build upon the existing work and industrialise the individual initiatives for the benefit of all.