Widespread access to advanced autonomous vehicles remains a futuristic scenario, but that future – which will have a significant impact on the insurance industry – is drawing ever closer. Developments in AV technology have already begun to change vehicle manufacturing and insurance considerations1, which is reflected in the new industry agency vocabulary for these emerging trends. New liability issues have also emerged as technical errors may need to be taken into account in addition to driver errors.2 These phenomena have started to spark new ideas about who wears which insurance. In addition, both state and federal laws have begun to deal with the new technology, with a variety of state and federal legislative activities ongoing. The uniformity of legislation, or the lack of it, is sure to have an impact on the growth of AV technology and the insurance sector. In addition, regulation of data and privacy can have implications for insurance coverage. Auto insurances can see interesting changes.
What is autonomy: New nomenclature could reflect a new insurance paradigm
The new AV discourse demonstrates this new paradigm. The Society of Automotive Engineers describes six levels of automation in relation to driver engagement. These range from level 0, purely human driving, to level 5, no human involvement. The intermediate stages vary in the way the AV is driven, under which circumstances and the required human supervision
Take a look at the current state of vehicle technology that insurers are in. Most vehicles are considered level 0. Some publicly available vehicles offer level 1 automation that provides either (1) steering or (2) braking and acceleration assistance, but not both at the same time. 4 Companies offer level 2 vehicles – “Partial driving automation” skills that control steering, acceleration and braking under certain circumstances, but require the driver to remain attentive, often with their hands on the steering wheel. To date, no vehicle sold to consumers in the US has automation levels 3 to 5, which means that a person no longer has to actively supervise the driving.5 Some companies such as Waymo (which offers driverless taxi services via an app) and Nuro ( that provides driverless delivery services and was featured in the advertisement for Domino’s Pizza) have truly driverless vehicles, but these AVs do business in limited circumstances and locations. 6
The AV industry has brought us to the cusp of a paradigm shift
As AVs reach Level 3 and beyond, liability and coverage issues can become increasingly complex. Even in a Level 3 AV, where an autonomous system takes over all driving in certain situations, the driver must be ready to take the lead on request.7 In these situations, commentators argue that in the event of an accident, human supervision is in the game and personal car insurance-relevant.8 However, as human supervision is waning, product liability can become increasingly important, as is the case with vehicle malfunctions.9 If driving behavior changes, insurance can follow suit.
Tesla – whose vehicles offer semi-AV functionality – has experimented with special insurance programs. In October 2017, Tesla partnered with Liberty Mutual to launch a Tesla vehicle-tailored auto insurance product called InsureMyTesla.10 In 2019, Tesla changed gear with an in-house Tesla insurance program in partnership with the State National Insurance Company. The insurance program, open to Tesla vehicle owners, is currently only available in California, although Tesla has announced plans to expand later in 2021
For its part, Waymo announced a partnership with Trv in December 2017 to insure its passengers. 12 Trv, an insurance startup, enables companies to offer their customers embedded insurance products, such as: B. Waymo provides travel-based insurance coverage.13 It is reported that Trv would offer Waymo passengers insurance for lost or damaged property and travel-related medical expenses.14 Although Trv is still promoting its partnership with Waymo, Waymo’s app recently advised that Passengers can take out flat-rate accident insurance through Liberty Mutual. 15
State legislation has started to create new insurance frameworks
As AVs evolve, laws and regulations at the federal and state levels seem to have an impact on the insurance industry. The Hawaii Legislature recently found that 29 states and DC have passed laws and governors in 11 states have passed executive ordinances on AVs.16 It is important to monitor such regulations and their differences.
While auto insurance regulation is currently primarily a function of state law, the National Highway Traffic Safety Administration (NHTSA) has issued guidelines for states regarding AV liability and insurance regulations. The NHTSA’s considerations include: (a) sharing liability between AV owners, operators, passengers, manufacturers and other entities in the event of a crash; (b) determining which parties should take out vehicle insurance; and (c) applying laws that assign tort liability.17 In addition, the NHTSA suggests that companies requesting inspection of AVs on public roads must demonstrate the ability to satisfy damages judgments, citing those of American Association of Motor Vehicle Administrators Recommended Minimum Insurance Requirement of $ 5 Million. 18
In terms of liability, since higher-level AV equipment is not yet available to consumers, many existing state AV laws regulate manufacturers and commercial service providers who are allowed to test AVs on public roads.19 According to NHTSA guidelines, states such as New York and Washington called upon the inspection agency to maintain a $ 5 million insurance policy. 20
States like California, which allow AVs to operate for test and non-test purposes, appear to require AV manufacturers to have an insurance policy of $ 5 million in both contexts. 21 States like Nevada have an insurance requirement of $ 5 million for testing, 22 however have other requirements in commercial contexts, such as $ 1,500,000 per accident while an AV operates as part of a transportation network company (TNC), also known as a ride-sharing company.23 However, other states like Arizona simply provide that the company the. tests or operates AVs meet applicable insurance requirements. 24
Which companies need to get insurance vary in similar ways by state and context. Certain states seem to offer flexibility in certain situations. For example, in Nevada, a company that tests AVs on a freeway is required to provide proof of insurance, but for a monitored AV provider that operates a vehicle for a TNC, TNC insurance can be covered by one or a combination of policies through one or a Combination are provided by the TNC, the driver and the monitored AV provider.25 In Florida, an AV used as part of a TNC must be covered by a special insurance policy, either from the AV owner, the TNC, or a combination of both are maintained.26 Separate, Florida, allows low-speed operation of AVs that cannot be inhabited by humans.27 Such AVs may be covered by a policy issued to either the AV owner, the owner of the teleoperation system, the remote one owned by a human operator or a combination thereof. States like Texas just seem to make sure the AV maintains liability insurance.28
Federal law could potentially introduce radical changes to auto insurance: government prevention, cybersecurity, and privacy
While AV law has developed more slowly at the federal level, a bill called Safely Ensuring Lives Future Deployment and Research in Vehicle Evolution Act or Self Drive Act was reintroduced in the US House of Representatives in June 2021 after opposition in the Senate in 2017 not gaining momentum upon reintroduction in 2020.29 Among other things, the bill prevents states from maintaining regulations governing the design, construction, or performance of AVs unless they meet the standards required by the bill, and directs the Secretary of Transportation to: a “highly automated” vehicle advisory board “within the NHTSA.30
Some provisions of the Self Drive Act will interest insurance industry stakeholders – even if the bill says relatively little about AV insurance, other than that its pre-emptive provision should not prohibit government regulation of insurance.31 For example, Section 5 would make or import “any highly automated vehicle, vehicle that performs partial drive automation, or automated driving system, unless that manufacturer has developed a cybersecurity plan. “32 According to Section 5, such cybersecurity plans would address the mitigation of reasonably foreseeable vulnerabilities through cyberattacks, as well as preventive and corrective actions against such vulnerabilities, including Measures to protect critical controls and systems. This cybersecurity plan requirement is noteworthy as various commentators have claimed that networked AVs could enable malicious cyberattacks.33 This is why many experts believe that the demand for cybersecurity insurance with AVs will increase in the market, and some have suggested that auto insurance policies Cybersecurity tabs could include: 34
The Self-Drive Act would also require AV manufacturers to develop data protection plans based on certain criteria. Commentators noted that AV data could interest auto insurers in their own use and potential monetization.35 Accordingly, insurance industry players have raised concerns about the possibility of different state data standards and stated that state standards could be useful.36
- The development of AVs can lead to changes in the auto insurance industry.
- New car insurance models have accompanied novel AV developments.
- The increasing number of states enacting AV regulations could play an important role in the future of auto insurance.
- Auto industry stakeholders will want to see if the self-driving law is more popular this time around.