World’s first self-driving car insurance policy becomes a reality

Drivers everywhere were aghast last year when hackers managed to remotely take control of a Jeep on a highway and crash it into a ditch. Thankfully, no one was hurt because it was all part of a controlled experiment to illustrate the potential dangers of software sabotage in self-driving cars.

But just the idea of a hacker controlling a self-driving vehicle from afar played into people’s fears about autonomous cars. The story predictably got a lot of media buzz.

Meanwhile, the insurance industry has been quietly fretting about the advance of self-driving cars. That’s because — the Jeep experiment not withstanding — the number of accidents could fall by 80% from current levels when more autonomous vehicles are on the road.

The reality is an overwhelming majority of crashes are caused by human error. So when you take humans out of the equation, insurers suddenly may not have much of a business model! Yet few insurers have been willing to put their money where their mouth is and attempt to set insurance rates for self-driving cars.

Until now…

A British insurer is stepping into the great unknown by underwriting what’s being called the first ‘driverless car policy’ in the world! 

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What does an insurance policy for driverless cars cover?

U.K. insurer Adrian Flux unveiled the driverless car insurance earlier this month in a bid to grab some publicity and have first-mover advantage in this nascent auto/digital insurance space.

‘As [we] continue to invest in driverless research in preparation for the growing market for autonomous vehicles in the near future,’ general manager for Adrian Flux general manager Gerry Bucke remarked, ‘we wanted to help provide confidence and clarity around the ongoing debate of ‘who is liable?”

So what exactly does a policy like this cover? In addition to standard coverages like comprehensive and collision, the Adrian Flux policy protects owners of self-driving cars in the U.K. from the following:

• Loss or damage to your car caused by hacking or attempted hacking of its operating system or other software
• Updates and patches to your car’s operating system, firewall, and mapping and navigation systems that have not been successfully installed within 24 hours of you being notified by the manufacturer
• Satellite failure or outages that affect your car’s navigation systems
• Failure of the manufacturer’s software or failure of any other authorized in-car software
• Loss or damage caused by failing when able to use manual override to avoid an accident in the event of a software or mechanical failure

No word yet on when such a policy will make its way to the United States, but you can bet it’s coming!

What long term impact will self-driving cars have on insurance rates?

The move to an accident-free future has been coming in small increments for many years. Many cars already have collision-avoidance features like blind-spot detectors and front-end crash-warning systems. Next up will be anti-lock braking systems coming standard on every new car within six years.

But the real leap in auto safety will come when self-driving cars begin to take more market share over the next 25 years or so. KPMG estimates the number of accidents could fall by 80% from current levels.

Insurance, however, may take a bit longer to catch up. While Adrian Flux’s move in Britain is an early foray into this market, more numbers will be needed before insurance rates can be accurately set.

‘Even if (driver-less cars) were introduced tomorrow, it will take 20-plus years’ to have enough data to set actuarial tables, Jim Fiske, a senior VP at Chubb, told USA TODAY.

So for now, we’ll watch and wait as we keep you up to date with the latest on insurance policies for self-driving cars!

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