Car Insurance for Self-Driving or Autonomous Vehicles

Autonomous or self-driving vehicles are the future, as all major automobile manufacturers are progressing rapidly in this field. There is a rising demand for self-driving cars as they feature the latest technologies to increase passenger safety and mobility. However, like all motor vehicles, autonomous cars also need car insurance that provides coverage against unforeseen risks like road accidents, injuries, and vehicle damage. Please read the information below to learn more about self-driving cars and why they need car insurance.

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How do Self-driving/Autonomous Cars Work?

Unlike normal vehicles, autonomous cars don't even require driving as they function with a mix of the newest tech, such as Artificial Intelligence, sensors and cameras. The car pilots itself through traffic with data from these technologies without any input from a human driver.

Driverless Car Insurance

Unlike conventional cars, driverless cars do not require human intervention, so traditional car insurance policies are not a viable option. In India, car insurance providers must rethink their existing policies and risk factors to stay ahead of the game and be ready to meet the insurance demands of driverless cars.

1. Absence of Specific Regulatory Framework

   The Motor Vehicles Act, 1988 of India as of now, does not contain regulations regarding autonomous vehicles and even regulators such as the Insurance Regulatory and Development Authority of India (IRDAI) have not formed any exclusive guidelines on insurance of autonomous vehicles.

2. Shift in Liability from Driver to Manufacturer

   Worldwide, discussions are underway to shift the accident liability from drivers/owners to manufacturers or software companies in case of autonomous vehicles. However, in India, there does not exist any such shift yet and the driver/owner remains responsible for accidents.

3. Cybersecurity and Data Privacy Concerns

   The high connectivity of autonomous vehicles renders them vulnerable to cyber-attacks. Recognising this, India is introducing AIS 189, a cybersecurity standard aimed at protecting vehicles from cyberattacks.

4. Emergence of Usage-Based Insurance Models

   The IRDAI has permitted insurers to introduce innovative add-on covers like 'Pay As You Drive' and 'Pay How You Drive'. These models base premiums on vehicle usage and driving behaviour, which could be particularly relevant for autonomous vehicles.

5. Need for New Risk Assessment Models

   Conventional underwriting is based on drivers' conduct and accident record that may not hold true for self-driving cars. New risk assessment models need to be created by insurers that take into account attributes like software quality, sensor accuracy and even cybersecurity.

6. Potential for Lower Premiums with AVs

   Autonomous vehicles (AVs) have the potential to reduce human errors, majorly due to which accidents happen. With these vehicles in India, it could lower accident rates, and as a consequence, insurance premiums. However, this depends on the road & traffic conditions, which still pose challenges in India.

Car Insurance Premium Calculation for Autonomous Cars

Insurance premium calculation for driverless cars in India is still a hypothetical exercise, as fully autonomous vehicles are not yet available in India. But with Insurance Regulatory and Development Authority of India (IRDAI) now bringing technology-driven insurance models, the stage is set for future premium formulation to be based on autonomous cars.

1. Vehicle Specifications and Insured Declared Value (IDV)

   • Premiums are influenced by the car's make, model, variant and the cost of repair or replacement. The car's Insured Declared Value (IDV) also influences premium calculation.
   • Advanced autonomous vehicles, equipped with sophisticated technologies like LiDAR, AI processors and high-end sensors, are likely to have higher IDVs, leading to increased premium amounts.

2. Level of Automation

   Autonomous vehicles are categorised into levels based on their automation capabilities and need for driver interference. These vehicles are categorised as

   • Level 1 - Has features like Cruise Control & Navigation.
   • Level 2 - Includes additional features like Speed Control, Park Assist, etc.
   • Level 3 - Partial self-driving(subject to certain conditions)
   • Level 4 - Self-driving on city streets and highways. Drivers can take control at any time.
   • Level 5 - Fully automated. May not even require a steering wheel and acceleration/braking pedals.

3. Usage-Based Insurance (UBI)

   • UBI models, such as 'Pay As You Drive' (PAYD) and 'Pay How You Drive' (PHYD), utilise telematics devices or mobile apps to monitor parameters, such as kilometers driven, speed & braking patterns, and acceleration.
   • For autonomous vehicles, such data can help insurers assess risk more accurately and offer personalised premiums.

4. Tech Features and Safety Systems

   • Advanced Safety Features - such as lane-keeping assist, automatic emergency braking, and adaptive cruise control - can help reduce accidents.
   • Car Insurance companies might offer reduced premiums if the vehicle has these devices, considering the lower risk.

5. Repair and Maintenance Costs

   • Autonomous vehicles, with their complex systems and components, may incur higher repair or maintenance costs and need expert technicians.
   • These potential expenses are taken into account by insurers when they set premiums in order to provide sufficient coverage.

6. Data Privacy and Cybersecurity Risks

   • Autonomous vehicles rely heavily on data exchange and connectivity, making them susceptible to cyber threats.
   • Cybersecurity features and vulnerabilities for the car might be taken into account by insurers for deciding premiums.

Cons Associated with Insuring Autonomous Vehicles

Insuring autonomous vehicles in India is a complicated matter as insurance providers have to consider technological, legal and infrastructural factors. Some issues that insurance providers can likely face for providing insurance for autonomous cars are:

• Ambiguity in Liability: Autonomous vehicles are not a separate entity under the Motor Vehicles Act 1988. In case an accident occurs, there is an ambiguity about who must be liable - the vehicle owner, the car manufacturer or the software provider.
• High Repair and Maintenance Costs: Autonomous cars are packed with high-tech components such as sensors and AI systems. These components are expensive and are often difficult to procure for repair or replacement.
• Cybersecurity and Data Privacy Risks: Driverless vehicles are susceptible to hacking because they require uninterrupted access to the internet. Potential threats include hacking, data breach and unauthorised control of the vehicle.
• No History to Assess Risk: Regular car insurance works by using data and algorithms to determine the risk to set the premium rates. The relatively new nature of autonomous vehicles means there isn't enough historical data about these cars which makes premium calculation difficult for insurers.
• Traffic Regulation and Infrastructure: India's current road and traffic infrastructure is not ideal for autonomous vehicles. Also, there are no specific regulations governing autonomous vehicles. This creates uncertainty for insurer providers and manufacturers.
• Economic Impact on Insurers: If accident culpability shifts away from drivers to driverless cars, insurers potentially could see fewer claims and a decreased revenue stream. This could potentially change the market from a model of personal auto insurance to one of product liability insurance.

Conclusion

Autonomous vehicles are the future of driving as they offer many advantages. Commuters can travel safely without physical strain as these cars do not need human intervention. This possibility is an excellent advantage for people with mobility issues due to physical limitations. However, like all vehicles on the road, autonomous cars risk getting damaged in a road accident or due to a mechanical breakdown. A comprehensive car insurance policy offering financial coverage for unexpected incidents can benefit the car owner.