What assumptions are included in our car insurance, and how do self-driving cars exercise them? Ryan Stein from the Insurance Bureau of Canada (IBC) looks at the consequences of self-driving cars on today's car insurance laws.
- In this section of Accenture Insurance Influencers Podcast, we speak with Ryan Stein from the Insurance Agency in Canada (IBC).
- Currently, people account for 90 percent of vehicle accidents – an assumption that is incorporated into car insurance around the world.
- Our current car insurance is not equipped to handle self-driving cars. If the car manufacturer or technology is considered to be responsible for an accident, injured parties may stop negotiating product liability insurance, which is more complicated than car insurance.
- Car insurance was challenged by the sharing economy and insurers can learn from that experience in order to proactively redefine car insurance for the arrival of self-driving cars.
Introduction to Accenture Insurance Influencers Podcast
Insurance has not changed much in 200 years, but everything about it has. The land under the insurers' feet changes every day and poses challenges and creates opportunities.
We are pleased to announce the launch of Insurance Influencers podcast from Accenture. In season one, we address some of the major issues about the insurers' minds. How does artificial intelligence (AI) change insurance? How can insurance companies innovate more effectively? And how can technology enable anti-fraud?
Which self-driving cars mean for insurance, with Ryan Stein
Our first guest is Ryan Stein, managing director of car insurance and innovation at the IBC Insurance Agency. . First, we talked to Ryan about self-driving cars and why they do not fit into today's car insurance laws. Then, Ryan discussed an IBC working document describing a two-part framework for how insurers, governments, and regulators can update insurance laws to accommodate self-driving cars. Finally, we looked at general principles to ensure that insurance laws are equipped to follow up on new technologies.
The following transcripts have been edited for length and clarity.  Tell me about the Insurance Bureau of Canada (IBC). What is its role in the insurance industry in Canada?
IBC is the national industry organization for Canada's property and non-life insurance company. We work with our members to investigate the political and legislative environment and see if there are ways to improve it for the benefit of insurance customers across the country.
I look forward to asking you about autonomous vehicles and what it means for the insurance industry. I want to start with what people mean when they talk about autonomous vehicles. I understand that there are actually five selected levels. Can you fill in our listeners who are not familiar with them already?
The five levels of autonomy in the vehicle – you can actually say there are six, because there is the level zero zero from the Society of Automotive Engineers.
- Level zero is not an automation. The driver is in full control of the vehicle all the time.
- Level 1 has little driver assistance, such as speed or cruise control.
- Level two can take control of both the vehicle's speed and lane position in certain situations – for example of a motorway.
- Level three is limited self-driving, so the vehicle can be in full control in certain situations. It can monitor the road and traffic and can also inform the driver when he or she must take control of the vehicle.
- Level four is completely self-driving under certain conditions. It can be a certain area, certain weather conditions or some roads where the vehicle can handle all driving functions.
- Level five is full self-driving. The vehicle can do quite a bit without the man having to take control.
IBC recently published a paper on what you call automated vehicles. I have also heard the industry referring to autonomous vehicles. Are these essentially the same?
Yes and no. Autonomous means pretty much that the car is driving itself. I like to use the word "automated" because you can talk about vehicles that still require people to play some control in the run. They have automatic functions, but they may not be completely autonomous.
It takes us to the insurance industry and some of the assumptions in the insurance industry that automated vehicles may not fit into. What are some of the underlying assumptions that we have built into our current car insurance?
The main assumption is that human error is the main cause of collisions. The law of liability, liability law and the liability insurance that people buy are all based on this view that people cause collisions. And that's because right now people are responsible for over 90 percent of the collisions. So it makes sense that car insurance laws – and the coverage that comes from them – will all be based on that.
These assumptions about car insurance have been in place for a while and the latest innovations have challenged them. So, for example, sharing economy, sharing and image sharing. How were these a challenge for the personal car industry?
Prior to the sharing economy, the insurance laws were written in a very specific way. Basically:
- A person owned a vehicle.
- That vehicle is mainly used for personal or commercial purposes.
- The owner of that vehicle was the one who bought the coverage.
Every vehicle had quite a lot of policy on it, and that policy would be personal or commercial – even if you were able to buy optional products if you used your vehicle for commercial purposes sometimes.
Then came the sharing economy and the sharing services and lines began to blur between personal and commercial. People used their vehicle for route sharing. The competition parts wanted to be able to offer a second policy for these vehicles to cover the tour, because when the app for competition sharing is on until the app for the competition sharing is off. But people who signed up for route sharing services do not really want to go out and buy a separate policy, or perhaps the insurance company that sold their personal policy did not offer this route sharing policy. So, for the other policy to be provided by another entity – the roaming company, not the individual vehicle owner – you needed laws and regulatory changes.
And now, in order for you to have two policies on a vehicle, you needed rules or processes to handle claims. If a collision occurred with one of these vehicles, it was easy to find out which insurance company is paying. Was the app on or off? After identifying it, you can proceed with the claim process. So it was an example of insurance laws that need updating to accommodate another type of vehicle use in another type of business model.
Right. And it strikes me that there are many similarities with what we are looking at now with automated vehicles. Many conversations have been about the transition from a personal car policy to one of the product responsibility. Unnamed: If there is an accident, and there was a car that could drive itself, was it the driver or was it the manufacturer? Can you talk about some of the other consequences for insurance?
Right now, people account for more than 90 percent of the collisions and all car insurance laws and coverage are based on that. So now, if it is a collision, people go to their own insurance company and they get some benefits, and if they need more and they are not responsible for the collision, they have the opportunity to exercise a claim or sue the person responsible. With vehicle claims, there are tens of thousands of them a year, and you figure out, okay, what caused and where is wrong? However, there is so much that is paid for the claim.
But in a world where it was not the person who caused the collision – if it was the wrong technology, then you are outside car insurance disputes. Now you look at product liability disputes against the vehicle manufacturer or the technology supplier. It is much more complicated and takes much longer than your typical vehicle damage.
If you have people who are injured in a collision caused by an automatic vehicle, they will get some coverage from their own insurer, but if they need more, they have to go up against a supplier of vehicle manufacturers. It is no longer a vehicle claim for vehicle owners, which means that the person can now wait much longer to be compensated.
And from a public perspective: Car insurance is highly regulated, and at IBC we believe in the laws that underlie it should ensure that people who are injured have access to fair and quick compensation. We see automated vehicles that challenge the car insurance laws that have been around for decades, and we think there is a need to update them. They should reflect the risks of automated vehicles so that you do not have injured people having to proceed through costly prolonged product liability disputes.
That's a good point, Ryan. Thank you for making the time to talk to me today.
It was my pleasure.
In this section of Accenture Insurance Influencers podcast, we talked about:  Six levels of driving automation, as defined by the Society of Automotive Engineers
For more guidance on self-driving cars:
In the next section, Ryan will share one two-part frame that IBC developed for automated vehicles and how it addresses the possibility of injured parties who must negotiate product liability insurance. And we'll talk about the challenges and opportunities that self-driving cars make for insurers.
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