It wasn’t too long ago that self-driving cars were strictly the domain of sci-fi movies and cartoons. But much like portable computers and pocket-sized telephones, self-driving cars are now very real — and soon enough, they’ll be here to stay.

While fully self-driving vehicles aren’t yet available in Canada, the Ontario government has now given manufacturers and researchers the green light to begin testing them on public roads without anyone in the driver’s seat. Yes, that means that any time now, you could look over at the vehicle next to you and see that there’s no one behind the wheel…

There’s no doubt that the introduction of self-driving vehicles will lead to changes in several industries — not to mention changes in our day-to-day lives. So, how exactly will the insurance industry and customers be affected once they start hitting the Canadian market? Here’s what you need to know.

A quick note before we get started…

While the term “self-driving” may seem to imply that a vehicle can operate fully autonomously, with no driver behind the wheel, it’s not as simple as that. While there aren’t any fully autonomous (or truly self-driving) vehicles on the Canadian market right now, there are a number of vehicles that have some autonomous features (like adaptive cruise control and self-parking, for example). There are six levels of autonomy used to classify vehicles, with level zero having no autonomous features and level five being fully self-driving under all conditions. For the sake of the rest of this article, we’ll use “self-driving” to refer to level five vehicles that operate fully autonomously, with no driver required.

How will self-driving vehicles affect car insurance?

It’ll likely still be a couple of years before fully self-driving cars become available to Canadian consumers, but testing is quickly ramping up. As a result, insurance companies are starting to take a look at the potential risks fully self-driving vehicles could present. The biggest questions surround liabilityopens a pop-up with definition of liability (who would be at fault for a collision?) and safety (are autonomous vehicles “smart” enough to adapt to different weather conditions or recognize a bike, for example?).

The introduction of fully automated vehicles will affect the car insurance industry in several ways. First of all, it’s likely that the costs associated with resolving disputes over who is at fault for collisions will go up, which will contribute to increases in car insurance premiums. The Insurance Bureau of Canada (IBC) predicts four more ways the industry will be affected:

  1. There will be fewer collisions, but claims will cost more for insurersopens a pop-up with definition of insurers because the technology used in autonomous vehicles is expensive to repair or replace. The cost of autonomous technology present in modern vehicles is already contributing to industry-wide increases in car insurance premiums, but with the introduction of fully self-driving vehicles, it’s likely that claims costs will continue to rise.
  2. Using a vehicle will come with new risks, including software or network failure, hacking and cybercrime, and failure to install or update software.
  3. Vehicles will be able to monitor and record data about a vehicle’s activity, which will be more reliable than human-reported or human-collected information used for assessing risk, setting car insurance premiums, managing claims, and detecting fraud.
  4. Claims may take longer to process as responsibility for collisions shifts towards automated vehicle manufactures instead of drivers.

What if you’re injured in a collision with an autonomous vehicle?

Right now, car insurance policies are built around the fact that most collisions are caused by human error or negligence. As we hand the control of vehicles over to automated technology, it’s safe to assume that more collisions will be caused by product malfunction instead of human error. This means that many claims will involve lawsuits and disputes between car insurance companies and vehicle manufacturers, which will result in significant delays in resolving claims. If you’re injured in a collision with an automated vehicle, you may have to wait longer to receive compensation than you would if you were in a collision with a regular vehicle.

The IBC recommends three major changes that would help make sure people injured in collisions with self-driving cars are compensated fairly and quickly:

  1. Insurance companies need to provide a single insurance policy that covers both driver negligence as well as the vehicle’s automated technology. This would allow the automated vehicle’s insurance company to compensate injured people if the vehicle caused a collision, regardless of whether the human operator was in control or the automated technology was in control at the time.
  2. There should be a data-sharing arrangement between vehicle manufacturers, vehicle owners, and insurers. This would help determine the cause of a collision, whether the vehicle was in manual or automated mode at the time, and how the vehicle operator was interacting with the automated technology.
  3. New federal vehicle safety standards for vehicle technology and cyber security should be developed.

If you’re interested in learning more about the IBC’s take on self-driving vehicles and how they may affect the insurance industry and customers alike, check out the full report.

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