Attorneys Heather Fine and Vlada Tasich from the law firm Marshall Dennehey Warner Coleman & Goggin examine the expected impact of autonomous vehicles and how it will change the risk environment for insurers.
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The Insurance Law Podcast
The Approaching Wave of Autonomous Vehicles Drives New Risks to Insurers
Intro: This is the Insurance Law Podcast, brought to you by Best’s Recommended Insurance Attorneys.
John Czuba: Welcome to the Insurance Law Podcast, the broadcast about timely and important legal issues affecting the insurance industry. I am John Czuba, Managing Editor of Best’s Recommended Insurance Attorneys.
We are pleased to have with us today attorneys Heather Fine and Vlada Tasich. Heather and Vlada are shareholders in the Product Liability Practice Group in the Philadelphia office of Marshall Dennehey Warner Coleman & Goggin.
Heather represents automotive manufacturers, regional product manufacturers, food service retailers and retail corporations and complex product liability and mass tort defense matters. Through her national practice she manages all aspects of complex product liability cases from inception through to verdict and appeal. She is a member of the American Bar Association and the Defense Research Institute.
Vlada Tasich defends matters involving all aspects of motor vehicle design and manufacturing, as well as appliances, consumer and electronics, residential and industrial fires, durable medical equipment, industrial equipment, exercise equipment and more. He is a member of the Product Liability Advisory Council and the Defense Research Institute.
And thank you both very much for joining us today.
Today’s discussion examines the expected impact of autonomous vehicles and how it will change the risk environment for insurers and Heather will be addressing our first question.
Heather, can you explain to us a little bit about what types of autonomous vehicles are currently on the road and what insurers can expect to see in the next few years?
Heather Fine: Sure. Well, what I can tell you is that the National Highway Traffic Safety Administration or as we like to refer to it, the NHTSA has developed a list of six levels of autonomous vehicles. So most of what you are going to see on the road today is at level zero, that’s no automation. The driver is responsible for all the driving activities. That’s typically what you are going to see today, it’s what I have.
Level 1, that’s driver assist. This is referred to as the hands-on autonomous level. It includes cars that have some assistive technology, typically such as lane assist or parking assist. The driver is going to remain responsible for most driving actions and is always expected to keep their hands on the wheel.
We then have level 2, that’s partial automation. This is the next level of autonomous driving technology. Drivers are still required to typically have their hands on the wheel and remain attentive, but the car is going to take control of more of the driving activities.
You have got driver functions such as acceleration and steering that can be automated, but the driver is required to monitor the vehicle’s actions at all times. An example of this would be Tesla’s current version of autopilot.
You have got Level 3 after that, conditional automation. This level allows the drivers to have their hands off the wheels for much longer periods of time and they are not required to have their eyes on the road the whole time. The driver must however be capable of retaking the wheel at any time. In other words, they can’t be asleep. The US doesn’t have any of these types of vehicles on the roadway yet, but a version of the Audi A8 is available in Europe.
You have got Level 4, high automation. Here the driver is not required to take any action while driving, but they can if they so choose. So if driver interaction becomes required, if some event is approaching, the vehicle is supposed to be able to pull off to the side of the road safely until the driver can take over.
And then there is Level 5, and that’s the fully autonomous level. The driver is no longer a driver, but really they have become a passenger. This type of vehicle will not have a need for a steering wheel or any sort of pedals or other driving controls, and obviously we have a way to go before that technology is available.
John Czuba: Thank you Heather. Vlada, what are some of the issues insurers are looking at with the introduction of autonomous vehicles to the roadways?
Vlada Tasich: We can talk about a number of issues John. One is who is going to be the insured. According to NHSTA data, you have got 94% of all serious accidents being caused by human error. But if the car has more responsibility for the driving, how do you allocate that risk?
Now, in line with what Heather has said, we are all still likely decades away from fully autonomous cars being on the roadway, but even when that becomes a reality, there will still be a risk present to ensure, because you just can’t predict every single driving scenario.
And you are also — we have to keep in mind that you are also going to have a transition period where you have autonomous vehicles sharing the road with vehicles that lack that level of automation.
There is talk in the industry that some of the risks will be shifted to the manufacturers of the crash avoidance technology or even licensures of the software that actually drives that technology within the autonomous vehicle.
Municipalities raise another issue. Municipalities may also face greater liability depending on the infrastructure of the roadways. Autonomous vehicle technology captures and analyzes that type of information and data in order to work.
We also are seeing different countries taking different approaches, at least initially, to insurance for autonomous vehicles.
In the UK, for example, they have got an Autonomous Electric Vehicle that specifically shifts portions of the liability risk, not to the manufacturers who just spent millions to develop autonomous technology, but the vehicle owners themselves by having specific coverage on the vehicle to include instances of accidents that occur while operating in autonomous mode.
Certainly there are still going to be many aspects that still need insurance, including coverage for physical damage in a crash, environmental damage or death.
John Czuba: Thank you Vlada. Heather, what are some ways an insurer can evaluate risks?
Heather Fine: So with autonomous technology, insurers are actually going to have much more data to analyze. The types of cars that we are going to be seeing, they will have telematics that may be able to provide significant information about the driver’s activity, such as whether their hands were on the steering wheel before a crash and for how long.
There is also technology that’s being developed and in progress that can allow monitoring and where the driver was even looking before the accident occurred. But keep in mind, this data more likely than not will be subject to extensive privacy considerations and it remains to be seen whether or not it will be available for any sort of accident reconstruction and liability allocation.
The insurers are going to be able to look at the accident data that’s generated and it will help them to better determine how much the crash avoidance technology is affecting the frequency of accidents, which will certainly be helpful.
Insurers are going to face challenges though in terms of the data privacy regulations and what they are going to be permitted to access on the vehicle after the crash occurs.
John Czuba: Vlada, where do you see some of the costs of the industry changing?
Vlada Tasich: Well, it’s anticipated that autonomous technology should reduce the number of accidents that are caused by inattention, drowsiness, impaired drivers, among other reasons. If autonomous vehicles do reduce the number of accidents as they are expected to, the cost of liability claims should go down.
Insurers should also be able to expect a reduction for joint insurance claims. Autonomous vehicles will have a wealth of data about the events leading up to, during, and after a crash, such that it’s going to be harder for drivers to invent or embellish the reporting to their insurer after an accident.
John Czuba: And Heather, what are some of the other costs insurers can expect from a property damage perspective?
Heather Fine: Well, of course with the good comes some of the bad and when you think about it, autonomous driving technology that’s being implemented is very complex. The programming, the machinery, it’s all intricate and it’s going to be expensive to repair.
For example, if you have got a fender-bender that used to involve replacement of a front bumper, while that’s expensive enough on its own, it can transform into a much more significant repair cost depending on what software is embedded into or connected to that bumper. You might not just be replacing the structure, but all of the expensive technology that goes with it. And then there is calibration that you are going to need to consider, such as the need to recalibrate a vehicle’s lane assist features when the wheel alignment is done.
So there are going to be a number of different added costs in terms of property damage.
John Czuba: And Vlada, what are some of the trends in the AV field that the industry is talking about and that insurers should be aware of?
Vlada Tasich: Sure John. So I think they have shown a decrease in personal auto ownership over the years. There is a high percentage, especially with the younger drivers relying on services such as Uber or Lyft or car sharing arrangement; I am sure we have all taken an Uber or a Lyft one place or another.
Fleet vehicles, such as over-the-road, long distance trucks, they are expected to be some of the first adopters of the higher levels of autonomous technology. And that makes sense when you think that at least theoretically, it’s easier for a tractor-trailer to navigate a long stretch of cross-country highway than it would be for say a New York City taxi.
Another trend that’s being discussed and getting a lot of attention is the hacking of autonomous vehicle technology, that remains a concern. There has been much made in recent years regarding how easy it can be for automated systems to be overtaken, leaving vehicle occupants unable to control their car, even if they attempt to take the wheel. Each of these topics are certain to generate further debate in the insurance industry and other industries and the cost benefit of the autonomous vehicle technology and how to best care for it.
John Czuba: Heather and Vlada, thank you very much for joining us today.
Vlada Tasich: Thanks for having us John.
John Czuba: That was Heather Fine and Vlada Tasich from the Philadelphia office of Marshall Dennehey Warner Coleman & Goggin. And special thanks to today’s producer Scott Richards. And thank you all for joining us for the Insurance Law Podcast.
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