Fasten your seat belts: Driverless cars to rev up the insurance industry

19 Jul 2017

Image: hidekatsu/Shutterstock

Matheson’s April McClements and Aoife McCluskey discuss how Ireland’s insurance landscape will have to change as autonomous cars roll in.

The era of driverless cars or fully autonomous vehicles (AVs) is near and will dramatically transform how we drive. The technology is well advanced and we already see automated features built into new cars, such as automatic braking, adaptive cruise control and lane-drift prevention.

The test driving of fully AVs (ie those that require no human intervention other than setting the destination and starting the system) has been underway for a number of years. It is anticipated that fully AVs will be on the market as early as 2020.

This new era of autonomous driving will challenge many industries, perhaps the most significant being the motor insurance industry. Reports say that 90pc of accidents are caused by driver error and fully AVs will decimate accident frequency. Undoubtedly, accidents will continue, but they will have different causes; for example, bad weather, animals running onto the road or the technology in the car failing.

The immediate challenge for the insurance industry is to establish what the role of motor insurance will be in this new era.

How will AVs navigate the Irish legal landscape?

The existing Irish legislative and regulatory framework for motor insurance in Ireland is driver-centric and needs to adapt for the era of AVs. At present, under the Road Traffic Act 1961, driving is defined as “managing and controlling” a vehicle. This is not appropriate for AVs where the technology, and not the driver, controls the vehicle. Motor insurance is compulsory in Ireland and drivers must, at a minimum, have third-party cover in place.

As AVs will likely, at least in the short term, have both manual and computer control, it is easily foreseeable that both personal motor insurance and product liability insurance may be required. When accidents occur, it will be necessary for insurers to determine whether it was the technology of the AVs or the individual driver that was in control. Claims could therefore be made against a driver, owner of the AV, AV manufacturer or technology suppliers, such as software designers or programmers. From an injured party’s perspective, this could result in protracted and costly litigation in order to secure compensation.

‘When accidents occur, it will be necessary for insurers to determine whether it was the technology of the AVs or the individual driver that was in control’

While there is little discussion in relation to AVs at present in Ireland, in late 2015, the European Commission established a High-Level Group on the Automotive Industry (GEAR 2030) to formulate sector-specific policy recommendations and an action plan for AVs on a harmonised basis. In its discussion paper, Roadmap on Highly Autonomous Vehicles, GEAR 2030 outlines how, in the short term, the legal position for liability in relation to vehicles with higher levels of automation would not be significantly different to those driver-centric provisions presently in place. The paper does, however, accept that liability in respect of AVs (ie totally driverless vehicles) does require clarification. Recommendations are expected later this year and the current target date for the introduction of legislation is 2030.

What is clear is that the Irish legal landscape must keep pace with this cutting-edge technology and consider the various issues that require forward thinking.

Is a new single insurance product the answer?

The motor insurance industry in the UK has faced these difficult issues head-on and has been collaborating with the technology developers in order to fully understand the risks and design appropriate new products. Considerable progress has been made and, in February 2017, following extensive engagement with the motor insurance industry, the UK government published the draft Vehicle Technology and Aviation Bill.

This bill proposes to extend compulsory motor insurance to cover AVs when they are operated in automated mode via a single insurance product, which would cover an individual driver when driving and the AV when in automated mode. It provides that where “an accident is caused by an autonomous vehicle when driving itself”, and the vehicle is insured, the insurer is liable for that damage. It will, in effect, be the insurer who steps into the shoes of the AV manufacturer, avoiding the need for claimants to make complex product liability claims against AV manufacturers.

While arguably akin to strict liability, the insurer would then have a right of recovery against other parties, such as the AV manufacturer responsible for the AV’s failure, or the hacker who took control of the AV (although it is unlikely in practice that an insurer could exercise its right of recovery against a hacker, even if the hacker has been identified).

The insurer’s liability under the draft bill does provide for an exclusion for damage suffered by an insured person where the accident is a direct result of alterations made by the insured person, or made with their knowledge, which are prohibited by the policy; or as a direct result of a failure to install software updates to the AV’s operating system.

The motor insurance industry in the UK has largely welcomed the proposals and it is certainly consumer-friendly, as claimants can gain quick access to compensation, and a full apportionment of liability will take place in the background between the insurers and AV manufacturers.

It remains to be seen what position will be adopted in Ireland. The legal landscape will require adaptation to allow for AVs. However, as long as traditional motor vehicles remain on Irish roads, the existing position will need to be retained.

By April McClements and Aoife McCluskey

April McClements is a commercial litigator who specialises in insurance disputes, and is a partner in the insurance and dispute resolution team at Matheson. Aoife McCluskey is a senior associate, and litigation and dispute resolution solicitor at Matheson.

A version of this article appeared in the International Law Office Insurance and Reinsurance alert (13 June 2017) and on