Getting a handle on driverless cars

Driverless cars continue to be in the spotlight in 2015. In January, Google announced it anticipated putting self-drive cars on the road in the US by 2017, while in July last year Mercedes Benz launched its prototype driverless truck, ‘Future Truck 2025’, set to be on the highways in ten years’ time.

The UK is keen to come on board, and compete with manufacturers such as Google in the US and Volvo in Sweden, to become a global leader in the development of autonomous vehicles.

Legal implications

The UK government has plans to invest £19m in trials of autonomous cars in several UK cities, including Milton Keynes and Coventry, which are now likely to start in April/May 2015.

On 11 February 2015 the UK government announced plans for these trials and unveiled a report outlining plans for new legislation by summer 2017. This legislation will consider the complex issue of liability for accidents involving driverless vehicles and safety requirements. It is anticipated the new UK legislation will also modify the Highway Code.

This announcement follows a six-month review into the legal, practical and safety implications of driverless cars in the UK. A code of practice is expected in spring 2015 to allow for the testing of driverless vehicles on UK roads.

The UK government has concluded that there is “no barrier to testing driverless technology on UK roads”, although there was a distinction made between ‘highly’ automated and ‘fully’ automated vehicles.

It is important to note that widespread use of fully autonomous vehicles is some time away. Google’s talk of driverless vehicles being on the roads soon only relates to pilot tests. In respect to this, in the US, the National Highway Traffic Safety Administration has established an official classification for autonomous vehicles, where level 0 relates to a vehicle completely under the driver’s control (allowing some automated systems such as cruise control or park assist) and level 4 relates to fully ‘driverless’ vehicles capable of completing a journey with no passenger inside.

Driverless vehicles will likely have a huge impact in terms of driver safety; at the moment, over 90 per cent of accidents are estimated to be attributed to driver error. The obvious risk to the insurance industry is the impact the inevitable reduction in accidents will have on the level of motor premiums.

This reduction in accidents could, in turn, potentially have a knock-on effect for all personal injury lawyers as the fewer accidents that occur on our roads, the fewer personal injury claims that will be pursued.

Some commentators have also predicted that use of driverless cars may decrease outright car ownership as the new vehicles will facilitate car sharing, leading to purchase of fewer premiums. However, conversely, the convenience of using such vehicles may make car ownership more popular, and it is anticipated an increase in car sharing will create a new market trend of shared insurance products, offering new opportunities in terms of the types of policies offered by insurers.

Insurance packages

Insurers will face challenges developing insurance packages to cover an emerging market of autonomous vehicles. First, the cost of purchasing driverless cars, in addition to the cost of covering relatively untested technology, is likely to be prohibitive.

Google has admitted that it has yet to determine how it will make a profit on these vehicles, but one would expect the substantial costs of developing such cutting-edge technology to be passed on to the end consumer.

Second, assessing the risks of autonomous vehicles is exceedingly difficult. The reinsurance market has traditionally used historic customer data to assess risk, but the move from human-controlled to fully autonomous cars may eventually render these methods of assessment obsolete.

A key challenge is that the legislation around liability in the event of an accident involving a partially or fully autonomous vehicle is unclear. At present, the Road Traffic Act 1948 requires the driver to be in control of their vehicle at all times, and many countries’ motor laws incorporate the Vienna Convention on Road Traffic 1968 and the Geneva Convention of 1949, which have similar provisions.

As a result of vehicle developments, the UK government has plans to bring in new legislation relating to insurance policies and MOTs by 2017, but it is anticipated that drivers will still be held liable in the event of accidents. This reflects the fact that, in the near future at least, vehicles on our roads will be at least partially controlled by a human, but over time there will likely be a move towards manufacturers taking on a greater burden in terms of liability as telematics become more sophisticated and cars more autonomous.

There is potential for several parties to be involved in the event of an accident: the driver, car manufacturer, and the manufacturers of the various technologies used to control the vehicle. It remains to be seen whether legislation can keep pace with these developments.

The complexities surrounding liability will be a challenge for personal injury lawyers who will be at the forefront of implementing the changes and the new legislation in practice.

Lawyers will be the ones who will be required to interpret the new legislation when considering what are likely to be multifaceted liability disputes. This will be especially true in catastrophic claims where there will be a lot of money to be saved if liability can be rebutted either in full or in part. This challenge for personal injury lawyers is likely to be further complicated by the fact that there will be a period of time when the legislation will be in its infancy and interpretation is unlikely to be straightforward.

There is also likely to be a period where the legislation finds its feet and judicial interpretation will be required to provide greater certainty to the legal and insurance sectors.

In addition, there will be a significant period of time, estimated to be 15-20 years, in which vehicles with several different levels of autonomy penetrate the market while ‘traditional cars’ fully operated by humans remain on the roads.

Indeed, traditional cars may never disappear as many people enjoy the freedom of driving. A collision involving several types of vehicles and telematics devices could result in highly complex multi-party litigation, the costs of which will ultimately be borne by the policyholder. Again, it will be for the personal injury lawyer to assess these disputes and advise their clients accordingly, and it is therefore imperative that all personal injury lawyers ensure they are kept fully abreast of the developments in this area.

Question mark

At present, there is a question mark over the safety of the vehicles being developed and whether they would create a lower risk for insurers. The UK has been identified as an ideal market for further testing of driverless cars due to its level of traffic congestion, in contrast to areas such as California where the vehicles have been tested previously, but this in itself will create challenges in terms of vehicle and pedestrian safety.

A connected network of driverless cars could result in a safe and organised traffic flow, and be of particular benefit in terms of the logistics of fleet haulage. However, this technology could potentially be susceptible to cyber-attack, which could hypothetically result in mass catastrophic accidents with thousands of vehicles being driven off the roads simultaneously.

This serves as a warning at a time when proposed changes to the Data Protection Act have underlined the importance of insurers marshalling and monitoring the security of a vast amount of telematics data. However, a huge market for cyber-insurance will be created as insurers better understand the risks, and opportunities, created by the new technology. This, in turn, may ultimately create a new specialism of PI lawyer.

Since much of the telematics equipment used in vehicles is in the early developmental stages, a further challenge is created for insurers in assessing the risks and benefits of investment. It is clear that insurers will need to develop an understanding of this equipment as it evolves.

The sale of telematics-based insurer Insure the Box to Aioi Nissay Dowa, a Japanese insurer which is effectively a captive insurer for Toyota, highlights that collaboration with manufacturers will be a key step in helping insurers develop an understanding of this equipment, identify new markets for growth, and maintain an involvement in the motor market. Motor insurers’ primary profits could shift from personal consumers to large commercial products as the industry’s focus moves towards product liability cover.

As Simon Douglas, AA insurance director, has noted, insurers will need to take a fresh approach. The government’s plans to invest in research in this field is a positive step, as it will help manufacturers and insurers better understand the outcome of putting these vehicles on the road.

A bleak outlook is often predicted for motor insurers in the wake of this exciting new technology. However, if insurers are prepared to change and adapt, then a change in the way motor insurance is assessed and sold will offer many new opportunities for insurers who take an innovative approach and act quickly. These opportunities must also be welcomed by personal injury lawyers. SJ

Ruth Graham is a partner at BLM