Autonomous vehicles: Auto liability shift to manufacturers

It is exciting to see technology advance and on the horizon consumers will have the option to purchase or hail a cab that is an autonomous (self-driving) vehicle.  There will be huge benefits and improvements to the quality of travel, safer roads, lower deaths via auto accident, and more time available for productive contributions to society.  I never thought I would be alive to see it, but that’s the beauty of technological progress.

The introduction of these self-driving cars has also raised the question of liability in the event of an accident or damage.  For example, with autonomous vehicles how will auto liability shift if you are no longer driving the vehicle?  You didn’t program the software or make the vehicle, so why should you be liable for an accident?

New technology

  • This technology will have tremendous long term benefits to society – the rate of death per day via vehicle accidents should drop.  This safety and improvement to public longevity will help move up the average life span.  There is huge societal benefit to safer and healthier travel.
  • The other societal benefit is that people can be more productive while traveling.
  • The average house won’t need to have a car sitting at home in the driveway or at the office in a parking lot, you can have the car drop you off at work, then pick up wife to drive her to the store, then take kids to the soccer practice.  Using the most efficient route.  Allowing for efficient energy use.
  • This traffic has also proposed to decrease traffic and congestion on roads.
  • The Consumer desire is there and the technology will outpace the consumers dreams.
  • The introduction of autonomous vehicles could reduce US motor premiums by 20% by the year 2035, and more than 40% by 2050, according to a report from Aon.

Today’s liability

  • In today’s system with current technology, when you drive your vehicle or while it is in your driveway you have Personal liability for the automobile.  As a renter or owner, while it is in use you carry personal liability.
  • The shift to Manufacturer- The autonomous vehicles manufacturers have already agreed to accept the liability for auto accidents, as the fault of the technology, with no human error involved.
  • Differences – This is a monumental shift in liability from user back to the manufacturer.

What this means for consumers

  • If you shift to an autonomous vehicle, you are likely to require less limit of auto insurance, most likely it would still be smart to have umbrella, however, the costs associated will most likely drop as Auto liability frequency is diminished.
  • Human error may be more costly – As this technology is released there will be increases in cost to repair with advanced technology.  A damaged light-bulb or fender is much more expensive when it has a multi-directional camera and computer chip in it.  This increase in loss cost is counter to our recommendation of reducing premiums due to loss costs reduction. 
  • Will certain coverage like UM/UIM Coverage be more expensive ?
  • The coverage form and how to read your personal auto policy will change.
  • If Insurance costs are being reverted back to the manufacturer, when will you pay for this?  For example, when you buy a soda – the product recall and liability associated with selling the soda are all built into the price.  Will the manufacturer have a separate line item for insurance costs, at the time of purchase of the vehicle or at each ride sharing purchase?  Where will insurance costs be built into the system? Into MSRP of the vehicle?
  • What happens when the insurance costs change year over year in the market?  Will the vehicle or ride price change?


  • We have a lot of questions, unfortunately not many answers for insurers or consumers as the technology is still developing and the courts have not opined yet.  Only time will tell.
  • Maybe congress or political leaders will help play a role in defining the landscape (ha-ha… probably not!)


What this means for insurers?

  • Is this systemic with other product lines?  Will Mortality tables shift due to safer driving? If auto fatality frequency is down or eliminated  – Are people living longer and costing insurers more in long term benefits than previously estimated?
  • Which insurers are big enough to ensure driver-less cars?
  • Will this mean a shrinking auto insurance market?
  • Will this mean a shrinking umbrella market?
  • What will be the impact to pricing tools and/or various product lines market share – i.e. umbrella premiums?

What does this mean for auto industry?

  • Will all consumers buy a new autonomous car?
  • How long will it take consumers to feel comfortable with the technology?
  • How often will you need a new car?
  • If you own a low tech car,  are consumers prepared for increased insurance premiums – due to human error surcharge? Can they afford to upgrade?
  • Will vehicle manufacturers self insure this new exposure or use risk transfer and insurance to protect themselves?

About the author

Arnold Smith

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