Sta Hungry Stay Foolish

Stay Hungry. Stay Foolish.

A blog by Leon Oudejans

Driverless car insurance

28 September 2016


In 1897 Gilbert L. Loomis is said to be the first person to buy car insurance (source). Technically he used a “horse and carriage” policy as car insurance did not yet exist in those days. Accidents by/with cars however frequently happened. In 1927, Massachusetts passed the first law making it mandatory to have liability car insurance (source).

Today, we are again in a similar situation. Accidents with driverless cars (eg, Google, Tesla) are likely to end up in courts all over the world (eg, China). If a human was unable to cause the accident then the car manufacturer and/or the software developer may be held liable. Google’s financial situation is however very favourable compared to the one of Tesla.  

The difference between a “horse and carriage” policy and car insurance is rather small compared to the new situation. Humans cause random accidents. Driverless cars operate on default operating software. The probabilities with respect to driverless car accidents are very different. Existing car insurers may not even be interested in such potentially extreme probabilities. 

It is quite conceivable that the probabilities of driverless car accidents will be far lower than existing car accident probabilities, especially once all cars are driverless. It is also conceivable that car operating software will contain coding errors. These errors will then be included in all driverless cars. The probabilities of driverless car accidents may be far higher in such an instance. Significant product liability errors are rarely easily acknowledged by manufacturers.

The various global driverless car accidents will soon require existing car insurers to reconsider their car insurance coverage and terms with respect to cars that offer an autopilot function. If existing car insurers would stop offering coverage then car manufacturers must offer alternatives or end this potential technology breakthrough. 

I think, feel and believe that global court cases and subsequent international legislation will force autonomous car manufacturers to include car liability insurance as part of the car purchase price. Only driverless car manufacturers are able to assess the reliability of their car operating software. Existing car liability insurers will never be fully able to assess that risk.

Today’s technology developments are partially financed by liability insurers without their explicit consent. I doubt that these insurers will consider subrogation and the right of recourse at driverless car manufacturers. Investopedia: “Subrogation is the right for an insurer to legally pursue a third party that caused an insurance loss to the insured. This is done as a means of recovering the amount of the claim paid by the insurance carrier to the insured for the loss.”

Today, driverless car manufacturers are quite eager to put the blame on the driver or anything else but the car. Nevertheless, the timing of some car software updates is interesting (eg, link 1, link 2, link 3). Without the implicit protection of existing car liability insurers, start-up driverless car manufacturers would most likely not even be able to flourish and survive. 

The journey of a thousand miles begins with a single step. Quote by Lao Tzu.

Gino Vannelli – Black Cars (1984) – artist, lyrics, video, Wiki-1, Wiki-2


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