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Posted in Market developments, UK

UK: Driverless Cars – steering us to a radical reform of insurance law and practice

It was announced this morning that the UK government is to outline measures permitting the trial of driverless cars on public roads by next year.  Until now, the legal and insurance implications of allowing such cars on public roads have been a barrier to carrying out such trials.  A lot of thought has been given to these issues but in the light of a general consensus that it will be many more years before driverless cars are a reality on our roads.  This morning’s announcement signals a need to accelerate the detailed consideration (at both policy level and insurer level) of how the new and emerging risks might be dealt with.

To date, the discussion in the UK has centred around issues which will be relevant if the current motor insurance regime remains unchanged.  For instance, analysts have predicted a huge decline in accident frequency, leading to a reduction in premiums, and the increased availability of accurate real-time data on the cause of accidents, leading to the eradication of fraudulent claims.

There are, however, a number of broader issues in the insurance context which will have to be grappled with.

The most significant of these is who will bear the risk of any accident involving a driverless car.  The advent of driverless car technology will mean that in many accident cases, no driver will be at fault.   The fault may lie with the manufacturer of the car or the operator of the controlling system.  We may therefore see a shift of the requirement to have liability insurance from individual drivers or users to the manufacturers and systems operators, or the introduction of more “no fault” or strict liability insurance regimes, which pay out regardless of whether an “at-fault” party is identified.

Another prediction is that there will be a change to the way in which cars are owned, with vehicle sharing and short-term rentals becoming more common.  This will drive a move away from individuals insuring their own property on a personal basis to commercial policies being required.

A further matter to consider is how current law would be applied in the new world.  For instance, how would the case law relating to S.143 of the Road Traffic Act 1988 (which requires any person “using” a car on a road to insure against third party risks) be applied to driverless cars?  The current authorities on the subject state that “use” in this context implies an element of controlling, managing or operating the vehicle.  This currently usually means the owner or the driver.   One can easily imagine future debates on who is “using” the car where there is no owner, no driver and an operating system being run from overseas.

It is inevitable that we will see a radical change to current UK motor insurance law and practice in the next decade.