Does Insurance Cover Self-Driving Cars?

While autonomous vehicles (AVs) are still in their infancy, car insurance companies are already providing coverage for drivers who make use of self-driving car technology. As this technology continues to develop and becomes more commonplace, the insurance industry may need to adapt to appropriately address the new range of benefits and risks that driverless vehicles pose.

Keep reading to learn more about self-driving car insurance including how self-driving cars could impact auto insurance prices and what information you need to know before you start using AV technology.

Key Takeaways The existing car insurance industry may be best equipped to manage the risks associated with self-driving cars, although insurers may need to adjust their underwriting methods and the coverage types they offer over time. While automated vehicles are expected to lower the rate of car crashes and subsequent car insurance claims, they will also be expensive to repair and require more money per claim, so it’s unclear how they will affect auto insurance prices. Drivers interested in AVs should consider potential insurance, liability and safety concerns as more driving assistance technologies become available. Car manufacturers could eventually be found liable for crashes involving autonomous cars depending on the level of vehicle automation.

How Will Self-Driving Cars Impact Insurance?

Self-driving cars will likely need to be insured just like conventional vehicles, meaning car insurance companies may have to adapt by creating new coverage types and underwriting methods. The Travelers Institute has argued that the current car insurance industry would provide the best risk transfer mechanism for AVs since insurance companies already have the expertise required to resolve complex claims and consumers are generally familiar with how auto insurance works. In addition, insurers could inform how public policy surrounding AVs ought to be shaped.^[1]

The alternative to insurance for self-driving cars would be a product liability approach, which means the manufacturers of the AV technology would be held liable in the event of an accident. However, the Travelers Instituted has asserted that this approach isn’t ideal since compensation requests could be stuck in court for several years. This approach could also keep consumers from being compensated after crashes that were unrelated to any defects in the design of the AVs.^[1]

Auto insurers are able to bridge the gap between consumers and manufacturers thanks to subrogation, which is the right insurance companies have to collect damages on your behalf. Because of subrogation, insurance carriers can pay out claims quickly, with reinsurance granting them their own financial safety net, then sue product manufacturers if necessary to recoup their losses.^[1]

State Insurance Requirements

For the insurance industry to be able to handle the differing risks posed by self-driving vehicles, state governments may need to adjust their minimum required coverage limits. Almost every state requires drivers to maintain some liability insurance, with the most common minimum limits being $25,000 in bodily injury liability coverage per person, $50,000 in bodily injury liability coverage per accident and $25,000 in property damage liability coverage.

However, driverless cars with advanced technology will generally be more expensive to repair or replace, meaning individual crashes will likely result in more costly damages even if the crashes themselves become less common.

As a result, states may eventually need to enforce higher minimum coverage limits, especially for property damage liability coverage.^[1]

Will Self-Driving Cars Bring Down Insurance Costs?

It is currently unclear whether self-driving cars will make car insurance costs go down. The Insurance Institute for Highway Safety (IIHS) estimated in 2020 that AV technology could prevent about one-third of all car crashes.^[2] As AV technology advances, it may eventually bring down the overall number of collisions even more, which should theoretically bring down auto insurance premiums.

At the same time, it will cost more money to buy new driverless cars or replacement parts after an accident. In addition, they will likely need to be repaired by specialized technicians who may charge more for their services. These factors should theoretically cause insurance rates to increase.

As AVs make their way to the market, you should also consider that their impact on premiums could vary from person to person. For example, someone with a poor driving record may see a bigger drop in their insurance prices upon purchasing a self-driving car compared to someone who has proven to be a safe driver.

Are There Risks To Owning a Self-Driving Vehicle?

While self-driving cars could end up having significant advantages when it comes to driver safety, they also have their own set of disadvantages that drivers should consider before switching to vehicles with automated driving features.

Insurance

AV owners shouldn’t expect to pay less for driverless car insurance until there is more evidence that AVs actually get into car accidents at a lower rate than other vehicles. A 2015 study failed to definitively prove whether AVs are safer or more dangerous than traditional cars but determined the best estimate at the time was that self-driving cars had a higher crash rate than conventional vehicles.^[3]

Liability

In the event of a car accident, liability may be determined based on the extent to which the vehicle was automated. The National Highway Traffic Safety Administration (NHTSA) has identified the following six levels of vehicle automation:^[4]

• Level 0: The driver is fully in control of the vehicle but the vehicle can provide momentary driver assistance if necessary such as lane departure warnings or automatic emergency braking.
• Level 1: The driver is almost fully in control of the vehicle but the vehicle provides continuous driver assistance such as adaptive cruise control or lane-keeping assistance.
• Level 2: While the driver is expected to remain fully focused on the road, the vehicle continually provides additional assistance when it comes to steering, accelerating and braking.
• Level 3: The car is conditionally automated, meaning it actively drives itself but the driver must be available to take over if requested due to something like a system failure.
• Level 4: The car is highly automated, meaning it performs all driving tasks without the need for any human intervention but only functions within limited service areas.
• Level 5: The car is fully automated, meaning it performs all driving tasks without the need for any human intervention regardless of location.

In accidents involving vehicles that fall under levels zero through two, the at-fault driver will likely be held liable. Similarly, the person in the driver’s seat could be held liable for an accident caused by a level three car if they failed to take over driving when requested. However, the liability for accidents involving level four and five cars will likely fall on the manufacturers since passengers will not be expected to take over driving these vehicles under any circumstances.

Keep in mind that vehicles that fall under levels three through five are not yet available on the consumer market.^[4] As a result, drivers should expect to bear the liability in any accidents involving automated driving technology for the time being.

Identifying People and Objects

AVs can be dangerous because they have had issues properly distinguishing people from other objects. For example, a self-driving Uber struck and killed a pedestrian while she was crossing the street in 2018 because the vehicle was unable to identify pedestrians unless they were near a sidewalk. As a result, the vehicle failed to correctly classify the woman as a pedestrian and respond appropriately before hitting her.^[5]

Ideally, the artificial intelligence used in self-driving cars should be able to recognize and respond to potential hazards with better speed and accuracy than humans. However, as it stands, manufacturers may still need to make more progress before AVs can consistently respond to situations as well as humans.

Cyber Attacks

As vehicles begin to rely more on high-tech computers, it’s possible that they could become more prone to cyber attacks. Naturally, it would be dangerous for owners of self-driving cars if bad actors could hack into their cars and take control remotely, so AV manufacturers will need to be proactive in their approach to cybersecurity.

Distracted Driving

Autonomous driving features encourage drivers to turn their focus away from the road, which can in turn lead to more collisions, especially for vehicles that fit into automation levels three and below. For example, in the self-driving Uber accident mentioned above, the backup driver could have prevented the collision but failed to brake in time because she wasn’t paying attention to the road.^[5] Until cars are fully automated and lack the capacity to make errors, people will still need to remain vigilant behind the wheel to prevent distracted driving crashes.

How Much Will Self-Driving Car Insurance Cost?

We don’t know for sure how much insurance for autonomous vehicles will eventually cost since high-level AVs are not yet available to the public. The best comparison we may currently have is the price of Tesla Insurance, which costs $1,452 per year through Tesla if you maintain a standard Safety Score of 90.^[6] Of course, this premium takes your driving behaviors into account, so it likely won’t reflect the rates for a fully autonomous vehicle.

Self-driving car insurance rates will likely depend less on your personal characteristics and focus mostly on factors like your location, the make and model of your car and the coverage types and coverage limits you select. You should note that AV owners will likely want to purchase comprehensive insurance even though it isn’t required by law since it can cover non-collision losses to their vehicles that couldn’t be addressed through a product liability lawsuit.^[1]

What Automakers and Tech Companies Currently Test Self-Driving Cars?

Numerous automakers have begun experimenting with self-driving cars or incorporating AV technology into their vehicles including the following:

• Ford
• General Motors
• Mercedes-Benz
• Nissan
• Subaru
• Tesla
• Volvo

Will a Standard Car Insurance Policy Cover an Autonomous Vehicle?

A standard car insurance policy should already cover vehicles with driver assistance technology. As more self-driving features are steadily introduced over time, insurance policies should continue to provide coverage for these vehicles, especially as long as AVs and non-AVs have to share the road. However, insurance companies may eventually need to adjust standard insurance policies to account for the different risks posed by AVs compared to non-AVs.