How equipped is the current car insurance landscape for dealing with accidents involving self-driving cars? Ryan Stein from the Insurance Bureau of Canada (IBC) weighs in and shares a two-part framework for how insurance laws can be updated.
- IBC recommends a two-part framework for updating car insurance laws to handle the adoption of self-driving cars: A single insurance policy covering both conventional and automated cars and a data sharing policy to identify the cause of accidents.
- Self-driving cars will create challenges for insurance companies and will in particular introduce new driving risks, such as cybercrime and hacker risk. However, they will also create opportunities for insurers to better meet consumer needs.
Insurance companies need a strategy to insure self-driving cars, with Ryan Stein
Welcome back to Accenture Insurance Influencers podcast where we interview some of the industry's experts on trends that shape the industry's future: artificial intelligence (AI), innovation and tools to enable fraud prevention. Our first guest is Ryan Stein, CEO of Vehicle Insurance and Innovation at the Insurance Agency in Canada (IBC).
In the last section, Ryan explained that there is an assumption based on our existing car insurance – that people are wrong. But as soon as an automatic vehicle falls into a car accident, it gives rise to the possibility of not just a vehicle insurance claim, but a product liability claim. In this section, we discuss the IBC's proposal on how to bridge that gap, enable innovation and protect consumers from long-term patent processes.
The following transcripts have been edited for length and clarity.  In our latest episode, you talked about the need for insurance companies to proactively look at updating car insurance laws before automated vehicles hit the roads. Why is it important?
If you wait for a lot of automated vehicles on the road, it is far too late. It is important to start looking at these problems as these vehicles start to come from the assembly line one by one.
You do not want people who are injured in a collision to go through a long-standing claim process – and by the way, nobody wants to be in a claim situation to start with – so you want the laws to make it so fair and as fast as possible. And when you see a new type of risk, in this case automated vehicles and the threat of people having to go through product liability disputes, you want to address it rather than later.
In the United Kingdom government adopted legislation to address this exact issue. They realized that people should start using automated vehicles and when there is a collision, it will not be as clear anymore. Was it the person who caused it? Was it the technology that caused it? Was it a combination of both? And the whole process of figuring out the cause and compensating the injured would be much more complex, and they didn't want people to sit through what could look like an endless process.
So, the UK government approved a law that created a single insurance policy covering a claim or covering if the automated vehicle caused the collision, regardless of whether it was the person driving it or the automated technology.  And what does that mean for someone who is in an accident involving an automatic vehicle?
This means that the injured person must only show that they were injured and that the automatic vehicle was caused by the accident. They do not need to enter the negotiations as to whether it was the person or the technology, because then you would have different insurance companies that represent all the interests involved.
How it works: if an automated vehicle causes an accident, the insurer in the automated vehicle pays the claim to the injured person and compensates them. If it turns out that the technology caused it – and not the person who owned the vehicle – the insurance company that paid out, the claim could try to recover its payment from the vehicle manufacturer or technology provider. This is where the product liability discussion takes place.
One insurance policy allows you to separate the injured from the product liability discussion. You compensate them and they continue with their lives, and then the insurance company and the vehicle manufacturer or the technology supplier count exactly what the reason was. If they need to transfer money between the two, they will.
It is ultimately an attempt to fix this damage problem. You do not want people who are injured to be in a prolonged and cost-effective dispute over product liability. The single insurance is aimed at it, and the IBC's working group and the IBC as a whole believe that there is a lot of merit there. And the proposal we put forward in our paper, it has some differences but is modeled on the UK solution.
I understand that IBC looked at some other options as well. What were some of the other methods you considered?
The first was just the status quo, keeping the legislation regulated as it is. And our workgroup decided it wasn't enough – that people would get stuck in complicated and long-lasting product liability disputes, and that was just not acceptable. The general insurance policy should be about fair and rapid compensation.
Then they looked at full-field insurance. This means that there is no more responsibility. People do not match each other more. You collect if you are injured. You get all your medical and your reimbursement expenses for your own insurance company – and in an automated world, it makes a lot of sense. If you remove the entire suing aspect, you will get rid of that product liability problem, and people will only be compensated by their own insurance companies.
In a world where all vehicles are automated, no insurance can make much sense. But in a world where these vehicles will come from the assembly line one at a time, it is not pointless. Firstly, you do not want to force the type of insurance that is not wrong at all and secondly, there will still be many people running conventional vehicles. So you need an insurance policy that works for both conventional and conventional vehicles and automated vehicles.
So it is assumed that there are two reasons why our members are the insurance policy.
- One, it is a way to make sure that people who are injured must not be caught in a prolonged and expensive product liability claim or disputes against a supplier of vehicle manufacturers. That these people can go through the typical car collision requirements. It's important, it's number one.
- Two, it can work with existing car insurance available on conventional vehicles now. So people who have conventional vehicles will still be able to purchase the same type of policy that has no liability protection and some coverage for medical benefits and income compensation.
Right. And so is the first part of the framework, which is the only insurance policy. The second part required a data sharing arrangement with vehicle manufacturers, owners and insurers. What does that mean?
These vehicles collect a lot of data, and after a collision some of these data will surely determine what the cause of that collision was. So we believe that vehicle manufacturers should share a prescribed set of data that would help determine what the cause was. So, for example, was the vehicle's automatic status on or off? What was the vehicle speed? Collision place? And they would share vehicle owners or people involved in the collision and their insurance companies.
If you can figure out the cause, you can begin to solve the damage and make sure that anyone who is injured or needs to repair his vehicle can be compensated quickly. And in the simple insurance model that we talked about, if the cause was technically related, there is an opportunity for the insurer who paid the claim to recover some of the payments from the vehicle manufacturing technology suppliers.
Knowing if the vehicle is in automated mode or not, the person may have taken control or not – it helps everyone to determine exactly what the reason was and then facilitate any recovery procedures between the insurer and the vehicle manufacturer or technology provider.
Are insurance companies equipped to implement this two-part frame now? Or are there opportunities to look at investing in?
I believe that insurance companies usually handle claims in very complex situations. And they are also excellent for using and analyzing data. Although there will be some procedural changes, if a provincial or state government is to implement unit insurance policy and data sharing, insurance companies must adjust their practices accordingly. But I think they already have the ability to do it quite effectively.
That's good news. I believe that insurance companies can look at automated vehicles and autonomous vehicles that share the same challenge and opportunity. I wonder if you could talk to both of them.
There are many changes that will happen:
- There will be fewer collisions, but the technology in these vehicles will make repairs and replace them more expensive.
- There will be new risks associated with driving, including software and network error programming, hacking, and cybercrime, failure to install updates.
- Vehicles record a lot of data that help determine the price of the risk or insurance policy and then
- And then the whole big change we've been talking about, which is the technology that plays a greater role in the responsibility of collisions, and people play less role.
I look at these as changes, but they are also opportunities. And insurance companies need to develop auto insurance that deals with hacking and cybercrime elements, or programming and network failures, and all new risks. It's a challenge trying to meet that consumer need, but it's really an opportunity.
Vehicle automation has a lot of potential to really improve road safety. It is a great advantage for the insurance industry, but more importantly the public. The more these vehicles get on the road and make our roads safer, the better it is for everyone – and that is the real possibility.
Thank you, Ryan. As you say, automated vehicles pose some challenges to existing insurance agents, but they also create some pretty convincing opportunities. Thank you for having had time to talk to me today.
Thank you for having me.
In this section of Accenture Insurance Influencers' podcast, we talked about: 19659024] IBC's two-part car insurance law update framework to accommodate self-driving vehicles: a single vehicle insurance policy ( conventional and self-driving) as well as a data sharing policy between insurers, regulators and stakeholders.  Self-driving cars introduce new driving risks, such as cybercrime, hacking and failure to install updates. At the same time, these risks provide opportunities for insurers to better meet consumer needs.
For more guidance on self-driving cars:
In the next section, Ryan will explain why it is so important for insurers to proactively engage governments and regulators on issues such as self-driving cars. He will also share general principles for updating laws to meet new technologies and trends.
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