The imminent arrival of connected and automated vehicles, also known as CAVs, will force insurers to review their pricing models. The Canadian Council of Insurance Regulators (CCIR) released these findings in an issues paper following discussions on CAVs and their impact on the auto insurance market.
In order to manage the risks associated with CAVs effectively, policy-makers and regulators may be forced to shift from an individual liability regime based on driver fault or negligence to a product liability regime, CCIR says.
Insurers will need to adapt their models to the technology present in the vehicles and to recognize improved performance of the technology over the years. Risks will need to be assessed carefully. “The mechanisms by which CAV liability should be evaluated, and responsibility assessed, are complex issues involving trade-offs,” the CCIR concludes.
Hurdles in adapting current legislation may result in years of uncertainty for drivers and injured people as the use of CAVs becomes more widespread.
A single policy to cover everyone?
Insurance Bureau of Canada (IBC) has asked, as part of the CAV discussions, whether the development of a single insurance policy is feasible in all Canadian provinces. Most respondents felt that a single policy covering driver negligence and automated technology would be a good solution for Canada. However, there were mixed views as to whether such a policy could be applied in all Canadian provinces, particularly in Québec.
The CAV could change the way insurance liability is determined in most Canadian provinces with a common law system of driver liability. In contrast, Québec uses a no-fault system. When fully automated vehicles take to the road with “users” rather than “drivers” on board, liability for an accident could fall on the manufacturers rather than the user-drivers if, for example, the accident is caused by failure of the software required to operate the CAV, or by programming choices.
IBC's proposed framework would also cover people injured in a collision caused by a cyber breach. The framework does not specify the levels to which it refers when it talks about covering “automated technology.” However, it foresees that the insurer will be able to recover a certain amount from the party responsible for the vehicle malfunction, reduced by a deductible. This may be the manufacturer if the technology used in the CAV is responsible for the collision or intrusion. Alternatively, the owner/operator could be at fault for having failed to maintain safety-critical software.
Determining the premium for CAVs requires the collection of a huge amount of data. Technology plays a critical role in CAV safety and insurance costs. Manufacturers and software vendors must share data with insurers when an automated vehicle is involved in an accident, most survey respondents agree.
Currently, insurers are often unable to determine the complex nature of the technology embedded in vehicles and how it is deployed. Thinking and research on CAVs must not occur in silos, the CCIR adds.
Some of these vehicles are already being tested on public roads in Canada. Insurance regulators have begun to consult on the matter. The CCIR intends to continue the dialogue with CAV designers and the legal and insurance sectors to explore the multiple issues and risks involved and to jointly identify future regulatory needs.