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InsurTech: A Legal and Regulatory View pp 271–290Cite as

Will Autonomous Cars Put an End to the Traditional Third Party Liability Insurance Coverage?

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Part of the book series: AIDA Europe Research Series on Insurance Law and Regulation ((ERSILR,volume 1))

Abstract

It happened. Self-driving cars left the field of imagination and became a reality. They can be seen not only in the news but also in some countries already in the streets. After millions of kilometers of driving tests, together with large investment in this new technology coming from several companies such as Tesla, Volvo, Ford and GM, no doubt that this upcoming reality will reduce the number of accidents in the very near future, making autonomous cars much safer than those driven by humans. A report from consulting firm McKinsey & Company, estimates a reduction of 90% of the accidents that would save about USD 190 billion in cost of roadway crashes just in the US.

However, until we have a world with only driverless cars on the streets, we will be experiencing a mixed environment, where misfortunes can still happen, as shown in the accident with a Tesla vehicle equipped with the Autopilot technology that ended up by killing Joshua Brown, a 40-year old from Ohio, back in May 2016. Therefore, if accidents can still happen, who should be liable when an autonomous car is involved and which insurance policy will respond to cover the extent of the damages? In other words: When there is no human behind the wheel and the machine simply chooses the path of those involved in a car accident, will the owner of the vehicle still be held liable or will liability be transferred to the equipment manufacturers when the system fails?

Autonomous cars technology will definitely change the focus of an insurance coverage that involves billions and billions of dollars in premium and indemnities every year: Motor third party liability. Currently, most car accidents are caused by human mistakes; therefore, the person that has caused the damage is obliged by law, in most jurisdictions, to pay for the consequences. However, when it comes to self-driving cars, after an accident, there will be enough discussion on liability field to define who should be held responsible and consequently car insurers might shift their traditional business model. The transition from human driver controlled vehicle to autonomous machines that circulate in public streets still lacks supporting legislation and clear liability definition rules. This paper aims to explore the legal implications of driverless cars and impacts on liability, from an insurance perspective, and discuss possible future scenarios for the motor third party liability insurance coverage.

I dedicate this article to my husband Denis, who contributed with his critics and comments, always making me grow as a professional, and to my little Alice who was still kicking inside my belly at the time I wrote it and who will be able to experience this new world of autonomous vehicles as a reality.

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Notes

  1. 1.

    Bertoncello and Wee (2015), McKinsey & Company Automotive & Assembly.

  2. 2.

    Daimler, “Company History”. https://www.daimler.com/company/tradition/company-history/1885-1886.html.

  3. 3.

    Mentioned by Smith (2014), p. 464.

  4. 4.

    Convention on Road Traffic, done at Vienna on 8 November 1968. “Article 8. DRIVERS. 1. Every moving vehicle or combination of vehicles shall have a driver. 2. It is recommended that domestic legislation should provide that pack, draught or saddle animals, and, except in such special areas as may be marked at the entry, cattle, singly or in herds, or flocks, shall have a driver. 3. Every driver shall possess the necessary physical and mental ability and be in a fit physical and mental condition to drive. 4. Every driver of a power-driven vehicle shall possess the knowledge and skill necessary for driving the vehicle; however, this requirement shall not be a bar to driving practice by learner-drivers in conformity with domestic legislation. 5. Every driver shall at all times be able to control his vehicle or to guide his animals.”

  5. 5.

    Idem. “Article 13. 1. Every driver of a vehicle shall in all circumstances have his vehicle under control so as to be able to exercise due and proper care and to be at all times in a position to perform all maneuvers required of him. He shall, when adjusting the speed of his vehicle, pay constant regard to the circumstances, in particular the lie of the land, the state of the road, the condition and load of his vehicle, the weather conditions and the density of traffic, so as to be able to stop his vehicle within his range of forward vision and short of any foreseeable obstruction. He shall slow down and if necessary stop whenever circumstances so require, and particularly when visibility is not good”.

  6. 6.

    In this sense, see Antje von Ungern-Sternberg, “Völker-und europarechtliche Implikationen Autonomen Fahrens”, p. 5. “Das Wiener Übereinkommen lässt an mehreren Stellen die traditionelle Vorstellung erkennen, das sein Kraftfahrzeug durch einen Fahrer geführt wird. Zunächst definiert das Abkommen bei den Begriffsbestimmungen:

    Art. 1 Begriffsbestimmungen

    v) “Führer” ist jede Person, die ein Kraftfahrzeug ode rein anderes Fahrzeug (Fahrräder eingeschlossen) lenkt oder die auf einer Strasse Vieh, einzeln oder in Henden, oder Zug-, Saum- oder Reittiere leitet”.

  7. 7.

    Informal document No. 2, Economic Commission for Europe, Inland Transport Committee, Global Forum for Road Traffic Safety. https://www.unece.org/fileadmin/DAM/trans/doc/2017/wp1/ECE-TRANS-WP1-2017-Informal-2e.pdf.

  8. 8.

    Informal Working Group of Experts on Automated Driving.

  9. 9.

    SAE International is the US based Society of Automotive Engineers.

  10. 10.

    As we will see in the automation classification in Sect. 2.2, SAE Level 5 is the one that is fully automated with the machine performing all activities and therefore there is no need for a wheel, or a driver.

  11. 11.

    The Vienna Convention was ratified by most of the continent.

  12. 12.

    Schreurs and Steuwer (2016), p. 165.

  13. 13.

    Luperto and Porrini (2005), p. 3.

  14. 14.

    Luperto and Porrini (2005), p. 3.

  15. 15.

    Bryant Walker Smith writes in the conclusion of his article “Automated Vehicles Are Probably Legal in the United States” (2014), p. 516, that “Key issues include the precise definition of these human-machine systems, the concept of control under the Geneva Convention, the potential for future regulation by the National Highway Traffic Safety Administration, and the application of myriad state laws concerning drivers and driving behavior. Five near-term recommendations might provide some initial clarity without placing law too far ahead of technology.

    First, regulators and standards organizations should work to develop common vocabularies and definitions that are meaningful in both law and engineering and accessible to the public and the media.

    Second, the United States should closely monitor efforts to amend or interpret the Vienna Convention as an example for or caution regarding any potential effort to clarify the Geneva Convention.

    Third, NHTSA should provide guidance about the likely scope and schedule of any initial regulatory action it may take with respect to automated vehicles.

    Fourth, states should closely examine their vehicle codes to determine how those codes would or should apply to automated vehicles both with and without an identifiable human operator. (…)”, p. 516.

  16. 16.

    See website of National Highway Traffic Safety Administration in https://www.nhtsa.gov/technology-innovation/automated-vehicles-safety.

    • Stage 0: No automation at all, the human driver does everything.

    • Stage 1: An automated system installed in the car can sometimes assist the human driver and conduct some parts of the driving activity (e.g. cruise control and park assistance).

    • Stage 2: Slightly differs from Stage 1, here an automated system installed in the car can conduct some parts of the driving activity but the human driver shall still monitor the surroundings and perform the main driving activity.

    • Stage 3: In this stage, rather than only one activity, the automated system can do both, conduct part of the driving activity and monitor the surroundings in some occasions. Anyhow, the human driver must be prepared to take back control when needed.

    • Stage 4: At this point the automated system can perform all the tasks from Stage 3 and the human driver does not necessarily need to take back control, but it is important to notice that the automated system has limits of operation and certain conditions and/or surroundings can represent restrictions to the full operation of the system.

    • Stage 5: Stage where the expression “autonomous car” can finally be used. Here the automated system performs all the driving tasks and there is no need of a human to be behind the wheels.

  17. 17.

    Hugh Durrant-Whyte, Fellow, IEEE, and Tim Bailey, “Simultaneous Localisation and Mapping (SLAM): Part I The Essential Algorithms”.

  18. 18.

    Hall (2018).

  19. 19.

    Surden and Williams (2016), p. 130. Autonomous vehicles use sensors or radar sensors to gather information about the nearby environment and this information is sent to the vehicle’s onboard computers. In this sense, the authors continue to explain with citation of Richard Wallace & Gary Silberg, KPMG & CTR for auto Research, “Self-Driving Cars, The Next Revolution, Center for Automotive Research” (2012): “In sum, many discussions of self-driving technology focus on sensors, but it is important to emphasize the degree to which self-driving functionality often depends upon pre-built digital maps. Different research strategies rely upon pre-built maps to a greater or lesser degree. In general, when a vehicle can combine past information from pre-built digital maps along with live information from its sensors about its surroundings, this is often the most effective strategy for achieve highly reliable autonomous driving”, p. 140.

  20. 20.

    KPMG (2018).

  21. 21.

    National Conference of State Legislatures, “Autonomous Vehicles Self-Driving Vehicles Enacted Legislation”. http://www.ncsl.org/research/transportation/autonomous-vehicles-self-driving-vehicles-enacted-legislation.aspx#enacted.

  22. 22.

    National Highway Traffic Safety Administration.

  23. 23.

    Kohler and Colbert-Taylor (2014), p. 108.

  24. 24.

    Wood et al. (2012), p. 1426.

  25. 25.

    Schreurs and Steuwer (2016), p. 160.

  26. 26.

    New Hampshire does not have a compulsory insurance liability law and Virginia requires drivers to have insurance or register an uninsured vehicle for a significant fee.

  27. 27.

    Department for Transport, “The Pathway to Driverless Cars: Summary report and action plan”, p. 20, highlights UK as being a premium location to develop automated vehicles: “We believe the UK is uniquely positioned to become a premium location globally for the development of these technologies. Those wishing to conduct tests are not limited to the test track or certain geographical areas, and do not need to obtain certificates or permits. Provided they have insurance arranged, they are not required to provide a surety bond”. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/401562/pathway-driverless-cars-summary.pdf.

  28. 28.

    KPMG (2018), p. 21.

  29. 29.

    UK Connected & Autonomous Vehicle Research & Development Projects 2018, p. 8. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/737778/ccav-research-and-development-projects.pdf.

    The Centre currently focuses on three areas: Regulation, Research and Development and Testing Infrastructure. There are several projects they are involved in, among them, there is one named after “Venturer” that aims to investigate the barriers to the adoption of connected and autonomous vehicles in the UK. Its objectives include the development of an understanding of the public acceptance, and also legal and insurance blockers to autonomous vehicles. It intend to test cases developed by social, legal and insurance experts using a fully immersive simulator and controlled road network. See page 12.

  30. 30.

    UK Connected & Autonomous Vehicle Research & Development Projects 2018, p. 2. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/737778/ccav-research-and-development-projects.pdf.

  31. 31.

    Road Traffic Act 1988. “143 Users of motor vehicles to be insured or secured against third-party risks. (1) Subject to the provisions of this Part of this Act – (a) a person must not use a motor vehicle on a road [or the public place] unless there is in force in relation to the use of the vehicle by that person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act, and (b) a person must not cause or permit any other person to use a motor vehicle on a road [or other public place] unless there is in force in relation to the use of the vehicle by that other person such a policy of insurance or such a security in respect of third party risks as complies with the requirements of this Part of this Act. (2) If a person acts in contravention of subsection (1) above he is guilty of an offence. (3) A person charged with using a motor vehicle in contravention of this section shall not be convicted if he proves – (a) that the vehicle did not belong to him and was not in his possession under a contract of hiring or of loan, (b) that he was using the vehicle in the course of his employment, and (c) that he neither knew nor had reason that there was not in force in relation to the vehicle such a policy of insurance or security as mentioned in subsection (1) above. (4) This Part of this Act does not apply to invalid carriages.

    144. Exceptions from requirement of third-party insurance or security. (1) Section 143 of this Act does not apply to a vehicle owned by a person who has deposited and keeps deposited with the Accountant General of the [Senior Courts] the sum of [£500,000] at a time when the vehicle is being driven under the owner’s control.”

  32. 32.

    See discussion in Sect. 2.1.

  33. 33.

    The Drive, May 12th, 2017, “German Green-Lights Self-Driving Cars with New Law”. http://www.thedrive.com/tech/10215/germany-green-lights-self-driving-cars-with-new-law.

  34. 34.

    Technology News, August 23rd, 2017 “Germany draws up rules of the road for driverless cars”. https://www.reuters.com/article/us-autos-autonomous-germany/germany-draws-up-rules-of-the-road-for-driverless-cars-idUSKCN1B31MT.

  35. 35.

    Gesetz über die Pflichtversicherung für Kraftfahrzeughalter, that means law for compulsory insurance for car owners.

  36. 36.

    Minimum amount established for coverage is 7,500,000 Euros for bodily injury and 1,220,000 for material damages.

  37. 37.

    Autovista Group, April 3rd, 2018, “France to amend legislation for autonomous vehicle trials”. https://www.autovistagroup.com/news-and-insights/france-amend-legislation-autonomous-vehicle-trials.

  38. 38.

    Loi no. 58-208 du 27 février 1958 Institution d’une obligation d’assurance en matière de circulation de véhicules terrestres a moteur. “Art. 1. – Tout personne civile ou morale, dont la responsabilité civile peut être engagée en raison de dommages corporels ou matériels causés à des tiers par un véhicule terrestre à moteur, ainsi que par ses moteurs ou semi-remorques, doit, pour faire circuler les-dits véhicules, être couverte par une assurance garantissant cette responsabilité […]”.

  39. 39.

    Law no. 85-677 dated July 5 1985, “Loi n°. 85-677 du 5 juillet 1985 tendant à l’amélioration de la situation des victims d’accidents de la circulation et à l’accélération des procédures d’indemnisation”.

  40. 40.

    Automotive News Europe, August 15th, 2018, “Spain works toward framework for autonomous driving”. http://europe.autonews.com/article/20180815/ANE/180809786/spain-works-toward-framework-for-autonomous-driving.

  41. 41.

    Fines can reach up to 3000 Euros plus all the costs of the accident together with other sanctions established by the decree. The amounts of the mandatory coverage established by the Decree 8/2004, dated October 29 is 70,000,000 Euros per claim, related to personal injuries and 15,000,000 Euros for material damages.

  42. 42.

    Legislative Decree 8/2004 dated October 29 approves the text of the law on civil liability and insurance regarding the circulation of motor vehicles. A translated version of the original text would be: “Article 4. Territorial scope and quantitative limits. 1. The compulsory insurance provided for in this Law shall guarantee the coverage of motor third party liability for vehicles with habitual parking in Spain, through the payment of a single premium, throughout the territory of the European Economic Area and of the States adhering to the Agreement between the national insurance offices of the Member States of the European Economic Area and other associated States. This coverage shall include any type of stay of the insured vehicle in the territory of another State Member of the European Economic Area during the term of the contract. 2. The amounts of the compulsory insurance coverage will be: a) Personal damages, 70 million euros per claim, whatever the number of victims. B) Material damages, 15 million euros per claim. The above amounts will be updated according to the European consumer price index, in the same percentage as the European Commission for the review of the minimum amounts set out in Article 1, section (2) of Council Directive 84/5/EEC, of 30 December 1983 on the approximation of the laws of the States Member relating to liability insurance resulting from the circulation of motor vehicles (…)”.

  43. 43.

    KPMG (2018), p. 13, “The Dutch ecosystem for AVs is ready. The intensively-used Dutch roads are very well developed and maintained and other indicators like telecoms infrastructure are also very strong. In addition, the Dutch government Ministry of Infrastructure has opened the public roads to large-scale tests with self-driving passenger cars and lorries”.

  44. 44.

    Global Legal Monitor. “Netherlands: Legislation to allow more testing of driverless vehicles”. http://www.loc.gov/law/foreign-news/article/netherlands-legislation-to-allow-more-testing-of-driverless-vehicles/.

  45. 45.

    Experimenteerwet Zelfrijdende Auto loses legal restrictions so that manufacturers have more opportunities to conduct elaborate tests.

  46. 46.

    See in www.davi.connekt.nl. “DAVI implements automation technology in real cars that can be driven on existing roads in normal traffic”.

  47. 47.

    Funkhouser (2013), p. 440.

  48. 48.

    The New York Times, March 19th, 2018, “Self-Driving Uber Car Kills Pedestrian in Arizona, Where Robots Roam”. https://www.nytimes.com/2018/03/19/technology/uber-driverless-fatality.html.

  49. 49.

    Gurney (2013), p. 247 makes the following distinction between the drivers: “1. The Distracted Driver (…) is the autonomous car user who is not paying attention; it could be someone reading a book like Sarah, using a cell phone, eating a snack, or any other situation. Essentially, the Distracted Driver purposefully engages in a task other than driving, thus relying on the autonomous vehicle completely. 2. The Diminished Capabilities Driver (…) is the person whose driving capabilities are diminished for some reason; it could be an elderly person like Richard, an intoxicated person, or a minor. This person typically would not be driving because of his or her diminished capabilities and would have to rely on others. Thus, the Diminished Capabilities Driver could benefit greatly from the convenience and independence an autonomous vehicle provides. 3. The Disabled Driver (…) is the person who cannot drive a traditional vehicle because of a physical disability, such as blindness or an amputated limb. Thus, the Disabled Driver relies entirely on the autonomous nature of the car in the event of a computer malfunction. 4. The Attentive Driver (…) is the user who watches the road and surroundings in the same way he or she would while driving a traditional vehicle. The Attentive Driver may not trust the autonomous ability of the vehicle such that he or she constantly checks that the car is driving correctly, or the Attentive Driver may simply not have any other tasks to address while in the vehicle. The key is that the Attentive Driver has the potential to foresee and prevent accidents, unlike the Distracted, Diminished Capabilities, and Disabled Drivers”, pp. 255–257.

  50. 50.

    Gurney (2013), pp. 255–257.

  51. 51.

    Bose (2015), p. 1344.

  52. 52.

    Marchant and Lindor (2012), p. 1326.

  53. 53.

    Gurney (2013), p. 271.

  54. 54.

    Bose (2015), p. 1338.

  55. 55.

    New Atlas, June 8th, 2016, “UK company launches insurance policy for autonomous cars”. https://newatlas.com/adrian-flux-driverless-car-insurance/43739/.

  56. 56.

    Marchant and Lindor (2012), p. 1328.

  57. 57.

    Marchant and Lindor (2012), p. 2012.

  58. 58.

    Gurney (2013), p. 272.

  59. 59.

    Road Traffic Act, 1930 “Chapter 43. An Act to make provision for the regulation of traffic on roads and of motor vehicles and otherwise with respect to roads and vehicles thereon, to make provision for the protection of third parties against risks arising out of the use of motor vehicles and in connection with such protection to amend the Assurance Companies Act, 1909 (…)”.

  60. 60.

    Dated 16 September 2009, relating to insurance against civil liability in respect of the use of motor vehicles, and the enforcement of the obligation to insure against such liability.

  61. 61.

    The amendment focuses on two aspects: Insufficient protection of victims of motor vehicle accidents and differential treatment and freeriding behavior negatively affecting policyholders.

  62. 62.

    Deloitte (2016), p. 7.

  63. 63.

    Deloitte (2016), p. 8.

  64. 64.

    Deloitte (2016), p. 8.

  65. 65.

    Munich Re (2016), p. 9.

  66. 66.

    Munich Re (2016), p. 9.

References

Legislative Instruments

  • 1968 Vienna Convention on Road Traffic dated November 8, 1968

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  • Law no. 58-208 dated February 27, 1958, France

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  • Law no. 85-677 dated July 5, 1985, France (“Badinter Law”)

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  • Road Traffic Act 1988, Parliament of the United Kingdom

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  • Road Traffic Act, 1930, Parliament of the United Kingdom

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  • Royal Legislative Decree 8/2004 dated October 29, 2004, which approves the revised text of the Act on civil liability and insurance in the circulation of motor vehicles

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  1. General Reinsurance AG, Rep. Office, Sao Paulo, Brazil

    Viviane Mardirossian

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Correspondence to Viviane Mardirossian .

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  1. Department of Legal Studies, Catholic University of the Sacred Heart, Milano, Italy

    Pierpaolo Marano

  2. Law School, University of Exeter, Exeter, UK

    Kyriaki Noussia

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Mardirossian, V. (2020). Will Autonomous Cars Put an End to the Traditional Third Party Liability Insurance Coverage?. In: Marano, P., Noussia, K. (eds) InsurTech: A Legal and Regulatory View. AIDA Europe Research Series on Insurance Law and Regulation, vol 1. Springer, Cham. https://doi.org/10.1007/978-3-030-27386-6_13

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