The future is already here – it’s just not very evenly distributed yet.

William Gibson’s famous quote is truer nowhere than the field of self-driving cars. Scarcely imaginable outside of science fiction a decade ago, they have already clocked up well over a million kilometres of driving on public roads.

Google is currently the front-runner, but there are many other firms travelling in the same lane, with BMW, Audi, Mercedes-Benz and even Uber among the competitors.

Cars capable of driving entirely autonomously are expected to be available for sale within five years and their advent means motor
insurance will never be the same.

Motor is by far the biggest segment of the Australian insurance market, with domestic motor policies accounting for more than $6 billion in premium, and commercial policies worth approximately $2 billion more.

Driverless cars are an enormous threat to that, for the simple reason that drivers are responsible for more than 90% of all accidents.

On the road

Taylor Fry research shows that growth of the motor market has already been substantially slowed by technological advances, with safer vehicles leading to a significant reduction in claims frequency, although that has been partially offset by an increase as claims sizes have increased, thanks to more expensive componentry.

Self-driving car statistics

Egil Juliussen, the Principal Automated Driver Systems Analyst for global tech consultancy IHS, says self-driving cars will bring numerous benefits to drivers and pedestrians.

“Accident rates will plunge to near zero for self-driving cars, although other cars will crash into self-driving cars, but as the market share of self-driving cars on the highway grows, overall accident rates will decline steadily,” he says. “Traffic congestion and air pollution per car should also decline because self-driving cars can be programmed to be more efficient in their driving patterns.”

A precipitous drop in the frequency claims has huge ramifications for the industry, but there is also the question of who will be liable for those accidents that do continue to occur.

At this point in time, only a few cyber criminals are skilled enough to hijack a vehicle using only a laptop.

Taylor Fry Director and Senior Actuary Kevin Gomes says there are many potential options. “Would liability fall on the car manufacturer, the technical systems manufacturer, the network supplying GPS information, or will the occupant still be deemed as having ultimate responsibility for the vehicle’s operation?” he says. “If manufacturers are considered liable, we could expect an increase in the number of product liability claims – and an increase in premiums.

“Any alterations to the concept of liability which stems from system failure that result in accidents will carry across to CTP insurance. If manufacturers are deemed liable, the concept of driver fault may come under pressure and some of the Australian CTP schemes may need to change.”

Ghosts in the machine

But while computers may be able to remove driver error from the roads, they do of course have their own vulnerabilities. The increasing number of cars offering high-tech driver assistance – such as automatic parking, adaptive cruise control or collision avoidance – means they are vulnerable to hacking. And the scale of the vulnerability will only increase as drivers cede more control to a computer behind the wheel.

Zurich recently released a report entitled Smart Cars and Connected Vehicles, which states that even in 2011 researchers had been able to remotely take control of a vehicle through its telematics system.

Google breakout

“Fortunately, at this point in time, only a few cyber criminals are skilled enough to hijack a vehicle using only a laptop,” the report states. “However,as automobiles become more thoroughly wired into the ‘Internet of Things’, it will become increasingly simple for criminals to wreak havoc on the roadways.”

Last year, the Guardian obtained an FBI report that found the US law enforcement agency was worried that driverless
technology could prove advantageous to criminals and terrorists in less high-tech ways. Among the scenarios canvassed were the prospect of getaway car drivers having free reign to open fire on pursuers, as well as cars loaded with explosives being programmed to drive at high speed into a specific location.

The roads home

Despite that, there are already autonomous vehicles on our soil. Since 2008, Rio Tinto has been using enormous automated trucks on mines in the Pilbara. The trucks, most of which weigh as much as six fully loaded jet-liners, have clocked up more than one million kilometres.

Of course, plenty will have to change before self-driving cars are zipping down Australian streets. For one, it is still illegal for a driver to remove both hands from the wheel while on a public road.

But the advantages of self-driving cars mean their widespread adoption appears inevitable. And that means change for the insurance industry.

“Driverless cars are a game-changer,” says Taylor Fry Director Kevin Gomes. “Insurers will have to make considerable adjustments to adapt to a world with driverless cars.”