“Connected,” or driverless vehicles will be a reality in the near future (see previous coverage on litigation related to hacking vehicles and data breach concerns related to smart vehicles). Not only are automobile manufacturers and government entities preparing for connected vehicles, government officials are now suggesting auto manufacturers and white hats, or good hackers, collaborate to resolve security issues presented when technology takes the wheel from humans. Specifically, reports indicate the Federal Trade Commission commissioner, Terrell McSweeny, suggested the following during a recent conference regarding a white hats-auto industry partnership:
The auto industry, in my view, would be well-served by following the lead of the information technology industry, which has developed ways to work with hackers, rather than against them. For years, technology companies fought a losing battle in security by threatening hackers, and now many firms have established bounty programs and conferences where researchers are invited to find and report flaws in programs and products. They recognize that bringing researchers to the table and crowdsourcing solutions can be an effective way of staying ahead of cyberthreats…
If it was not already evident that connected vehicles will soon be a part of our lives, reports indicate that the National Highway Traffic Safety Administration, the federal agency responsible for vehicle safety, recently expanded its definition of the term “driver” beyond humans to include a computer that controls a vehicle.
Just as the importance of cyber insurance has started to become understood in the context of liability and property insurance, technology has started to push on another line of coverage: automobile liability insurance. The insurance industry has already identified the following risks related to connected vehicles:
- Increased property liability claims if the on-board computer fails;
- Increased costs if drivers blame the equipment for an accident rather than their own conduct; and
- Higher repair/replacement costs related to driverless car equipment that will help connected vehicles navigate.
The need for auto liability insurance to evolve became more prominent this summer when there were reports that Google’s self-driving cars were involved in small “fender-benders.” It is worth noting that this small incident should not impact the development of this technology since Google’s self-driving vehicles are logging about 10,000 miles a month. This equals the amount of time spent on the road by a typical American driver in a year.
While the auto industry considers where technology is going to take vehicles in the near future, it may be worthwhile for the insurance industry to consider what insurance will look like for connected vehicles. Auto coverage available today factors in risk caused by human error while operating vehicles and, while the risk related to human error may be limited, the insurance industry will face new risks related to connected vehicles. Therefore, the insurance industry will need to continue to develop insurance products that keep pace with technological advances in the automotive industry.