Nascent insurance markets in everything

…at least one insurer seems to sense an opportunity where others fear to tread. In what appears to be an unprecedented move, a British insurance company has begun offering a special policy designed for autonomous and partly automated vehicles. In theory, you could use this on your Google driverless car or your Tesla that’s equipped with autopilot.

Unfortunately, it’s only available in Britain. But the policy protects against all of the usual things you would find in your typical car insurance — damage, fire, theft. And it also goes further, covering accidents caused by malfunctions in the car’s driverless systems even if the passenger has failed to use a manual override. It covers any havoc that hackers may wreak on a car’s operating system. It applies to cars even if they haven’t been updated to the latest software. And it even covers mishaps that may occur if your car loses satellite or other crucial connectivity.

From Brian Fund here is the full story.

Comments

Cowen didn't read what's covered by the policy, which is limited to damage resulting from someone hacking into the car's software, updates to the software that failed to install, satellite failure, software failure, or failure "when able" to use the manual overdrive. Of course, self-driving cars aren't likely to be damaged or cause damage for any of these reasons. More likely is road rage as a manually driven car runs over a self-driving car that is traveling at 25 mph because it won't go any faster, the driver of the manually-driven car screaming "get out of the way, you self-indulgent asshole!"

Sometimes, the impulse to tell others how wrong they are is much larger than curiosity......fail!

Norfolk-based Adrian Flux, which has 600,000 customers, said that with the potential reduction in accidents, the new policy could be cheaper than standard ones, although other factors, such as location and overnight parking, remained important.Bucke said: “We already provide discounts for cars fitted with assistive technology, such as autonomous braking, as it has been proved to reduce accidents, and therefore claims.”

The driverless policy has additional features to a standardone. Customers will be covered for loss or damage in case of: failure to install vehicle software updates and security patches, subject to an increased policy excess; satellite failure or outages affecting navigation systems, or failure of the manufacturer’s vehicle operating system or other authorised software; loss or damage caused by a failure to manually override the system to prevent an accident should the system fail; and loss or damage if the car gets hacked.

https://www.theguardian.com/business/2016/jun/07/uk-driverless-car-insurance-policy-adrian-flux

I have no problem with people believing in self-driving cars, or believing in leprechauns for that matter. But staking the nation's transportation future on Google's pipe-dream of being able to transport people to the businesses that advertise with Google is preposterous, not only for that reason but because the limited speeds of self-driving cars means they will never be an acceptable method of transportation. I understand that for many readers of this blog public transport is considered an abridgement of freedom, but sometimes it becomes necessary to be blunt. Of course, the advantage of traveling in a self-driving care at 25 mph is that nobody is likely to get hurt in an accident. Adrian Flux is right about that.

It only drives at 25 where that is the speed limit.

If the speed limit is 65 it will travel at 65.

I was talking with an economist who had been given one of the latest models of the self-driving Teslas to play with for a while, and he said you could convince it to get up to 80 on the highway

There was a time when cars couldn't drive above 25 mph. That is the nature of technology. The status quo is rarely the limit of what is possible. I'm sure self driving cars will be able to go much faster in the future.

"It covers any havoc that hackers may wreak on a car’s operating system. It applies to cars even if they haven’t been updated to the latest software."
And if my cars develops consciousness and rebels against Mankind, will this situation be covered too?

Naw, that's Act of God, obviously. /ducks

Only because those eggheads want to play God. I had a Lada and it, although a sordid Communist, was trustworth. Now, I think my new car is plotting against me.

It looks like the insurance company is "insuring" items or failures for which the car owner might have a claim against the manufacturer; in other words, the insurer would simply claim subrogation and stand in the shoes of the consumer to sue the manufacturer. Some insurance.

It's annoying for a consumer to sue the manufacturer, fair trade off ya?

Not only that, but this is pretty standard for insurance, isn't it?

Insurers don't say "We'll pay" they say "You won't pay." They will often go after a furnace manufacturer if a defect burns your house down, or your brake mechanic if his work was shoddy.

It will be interesting to see what the trial lawyers can do with this.

So far as I can tell the standard U.S. policy covers everything they talk about. Bodily Injury and Property Damage cover your liability in case you are found at fault in an accident and there is no exception for driverless technology. Otherwise you wouldn't be covered if, say, cruise control failed.
Collision and comprehensive cover your own car if it is damaged.
I don't think the UK is all that different. So I'm not sure what the purpose of the policy is.

Will normal insurers agree to cover driverless cars?

They do. Nothing in any insurance contract I've seen excludes a driverless car. Why would they - there is no such thing.

Typically in the UK anyway the driver is insured not the car. The insurance is valid if the policyholder or another named driver on the policy is driving the car. The policyholder is also covered third party while driving any car. If someone other than the policyholder or other named driver is driving then the insurance doesn't apply.

Self-driving cars are a boon for insurers -- think of all the litigants when the car inevitably causes harm: the occupant, the person who programmed the fateful trip, the owner of the car, the owner of the software in the car, the programmer of the software in the car, the car manufacturer, the person responsible for software updates, other service providers such as the GPS system or Google maps,...

Self-driving cars will be a niche for lawyers.

I'd expect the opposite, assuming the technology works out. The car manufacturers will effectively take over the insurance business. It will be an extra source of profit for them.

"I’d expect the opposite, assuming the technology works out. The car manufacturers will effectively take over the insurance business. It will be an extra source of profit for them"

1) 'assuming the technology works out': like the economist in the joke 'assuming a can opener'?

2) are these the same US car manufacturers that had to be saved by the government eight years back? You do know that insurance in the USA is regulated at the state level, right? how do you believe this is going to happen?

3) an 'extra source of profit'? something tells me you haven't thought this through. there is no 'Venn Diagram Overlap' between the capabilities required for bending metal versus those for assessing actuarial risk.

UPSHOT: 'driverless cars': the 3-D printing of 2016. you read it here first on Marginal Revolution!

We don't need to assume the technology "works" (whatever that means to you). If the chance of a problem is more on the software side, and less on the "is this person a good driver" side, it's going to be more efficient to push the cost towards the manufacturer. Which of course will be baked into car purchase (or more likely, rent/hour or rent/mile) prices. Or even into gasoline/electricity prices. Bottom line, if the actuarial cost starts depending far less on the actual driver's skill but more basically on how much driving happens and who is managing the hardware/software, there are a lot of other places the "insurance" incidence could fall. Saying this (which seems obvious to me) doesn't require any particular opinion on how safe/effective driverless cars will be (*).

(*) Yet, the idea that - absent a global nuclear war or plague - driverless cars won't be 100x safer than any person, and yes driving at the same or great speed and throughput, by 2035 - at the latest - seems like a lunatic position. But even if you disagree with that (really??), whatever you think about the prospects, the insurance issues are trivial given economic reasoning 101 (or greater). There's 0 chance that liability incidence will be anything more than a trivial, transient, obstacle. Maybe something _else_ stops the driverless-car future from happenig, but it's 100% safe to say that liability and insurance issues are not going to be more than the tiniest, most transient, obstacle - at most.

2) I don't think it's fair to evaluate those companies on such a general basis when looking at how they got caught off guard in the largest economic turbulence since the Great Depression. However, it does suggest that some regulation would be needed to ensure that they could not be a source of systemic risk if they were to extend their roles so significantly into insurance. In fact, that might be a good reason to not allow them to get into insurance.

Unless someone cares to special-case software-driven vehicles, liability need work no differently than horse-drawn vehicles: the operator is liable for the actions of their semiautonomous agents.

The problem is, this does nothing to cap jury awards, and they can still award arbitrarily high punitive damages "to teach them evil robot companies a less about *are children!!!11*".

How the heck do you insure against "a jury awarding the entire value of your company"?

Not have juries. An insurance case will under no likely circumstances have a jury. In any event except in cases of libel or slander the jury wasn't responsible for determining the penalty just the verdict, the court determined damages.

Section 69 of the Senior Courts Act 1981 provides that trial shall be by jury on the application of a party where the court is satisfied that there is in issue, a claim of fraud against the party; or a claim in respect of libel, slander, malicious prosecution or false imprisonment unless the court is of the opinion that the trial requires any prolonged examination of documents or accounts or any scientific or local investigation which cannot conveniently be made with a jury.

For any other case the court can, and in practice virtually always will, refuse an application for a jury trial. By 1988 less than 1% of civil cases in England and Wales were heard before a jury these were principally defamation cases.

The Defamation Act 2013 abolished the right to a jury for slander and libel. Due in part to the excessive damages sometimes awarded. This was almost universally welcomed.

The 1981 act superseded the section 6 Administration of Justice (Miscellaneous Provisions) Act 1933 which had first abolished the right to a jury in most civil cases. The 1933 Act had also retained the right to a jury in cases of Seduction and Breach of promise of marriage both torts had been abolished in 1970 rendering those provisions obsolete. The 1933 Act provided that: "but, save as aforesaid, any action to be tried in that Division [Queen's Bench] may, in the discretion of the court or a judge, be ordered to be tried either with or without a jury." The Act brought a de facto end to civil jury trials in England and Wales save for the causes where the right was guaranteed.

"1) ‘assuming the technology works out’: like the economist in the joke ‘assuming a can opener’?"

Umm, no. Not the same at all.

"2) are these the same US car manufacturers that had to be saved by the government eight years back? "

Tesla and Google? No, wrong again.

"3) an ‘extra source of profit’? something tells me you haven’t thought this through. there is no ‘Venn Diagram Overlap’ between the capabilities required for bending metal versus those for assessing actuarial risk."

Hmmm, yes here you have a good point. On the other hand, GM was known for quite some time as a financing company with a car company attached. Nearly all their profits were from financing the cars. But, of course, that led to bankruptcy.

"UPSHOT: ‘driverless cars’: the 3-D printing of 2016. you read it here first on Marginal Revolution!"

The economic rationale for 3-D printing has always been questionable, the economic rationale for autonomous cars is pretty straight forward.

Any chance they'll put toilets in automated and autonomous cars?

I think you'd need to upgrade to the autonomous RV for that one.

Britain never ratified the 1968 Vienna Convention on Road Traffic, which stipulates that there must be a driver in the front seat of a car. The trials of autonomous cars on public roads in the UK have been of driverless pods. The legal situation is driverless cars are legal and you can now get insurance for them which would cover the car running without any qualified driver.

Let's see: cars going an (almost) infinite number of speeds, to an (almost) infinite number of destinations, and it all works perfectly. Right. Just like those academic macro models.

Which is the same as now; except that some of the cars will have robot chauffeurs. It seems to work.

"...and it all works perfectly. "

That's not the bar. The bar is how it works now with humans driving.

What does this mean for the trucking industry? Not sure what share of their costs driver labor is, but I'd expect they'd adopt it in a heartbeat if it could save them much money. Is it assumed self-driving technology will be pretty easily applied to rigs that haul freight, or are there any reasons to believe that uptake will be slow or won't happen there? I think there are least a couple million truck driving jobs in the US, so that could be a big deal.

It means one driver can ride herd on more freight, but it doesn't push the driver-to-freight ratio to zero. The driver is still needed to pump gas, provide a certain degree of security, and handle certain roles in pickup and delivery.

It's surprising to me how many crazy people there are on the internet.

What does this mean for the trucking industry? Not sure what share of their costs driver labor is, but I’d expect they’d adopt it in a heartbeat if it could save them much money. Is it assumed self-driving technology will be pretty easily applied to rigs that haul freight, or are there any reasons to believe that uptake will be slow or won’t happen there? I think there are least a couple million truck driving jobs in the US, so that could be a big dea

What does this mean for the trucking industry? Not sure what share of their costs driver labor is, but I’d expect they’d adopt it in a heartbeat if it could save them much money. Is it assumed self-driving technology will be pretty easily applied to rigs that haul freight, or are there any reasons to believe that uptake will be slow or won’t happen there? I think there are least a couple million truck driving jobs in the US, so that could be a big dea zincirli vinç

hidrolik yük asansörü What does this mean for the trucking industry? Not sure what share of their costs driver labor is, but I’d expect they’d adopt it in a heartbeat if it could save them much money. Is it assumed self-driving technology will be pretty easily applied to rigs that haul freight, or are there any reasons to believe that uptake will be slow or won’t happen there? I think there are least a couple million truck driving jobs in the US, so that could be a big dea

What does this mean for the trucking industry? Not sure what share of their costs driver labor is, but I’d expect they’d adopt it in a heartbeat if it could save them much money. Is it assumed self-driving technology will be pretty easily applied to rigs that haul freight, or are there any reasons to believe that uptake will be slow or won’t happen there? I think there are least a couple million truck driving jobs in the US, so that could be a big dea caraskal

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