Look, no claims!

ON THE list of industries set to be disrupted by autonomous cars, the motor-insurance business can claim a high place. The regime of compulsory insurance in rich countries, with the insurer of the at-fault driver paying for damage, is reasonable in a world where 90% of accidents are caused by human error. But autonomy is supposed to mean that accidents drop by up to four-fifths, and those that occur may not be a human’s fault. The motor-insurance market may shrink by 60% by 2040, according to KPMG, an accounting firm.

Lawyers and insurers concur that liability will move from private car-owners towards manufacturers for crashes when a car is in autonomous mode. But under the current legal system in Britain and America an owner might still be blamed for an accident in self-driving mode if, say, he neglected to install the latest software update, says Richard Farnhill of Allen & Overy, a law firm. A manufacturer might equally well try to shift the blame to a components supplier.

The best way to avoid endless blame-shifting and litigation may be what lawyers call a “strict” liability regime that automatically places responsibility on the owner. The insurer would keep an important role, of ensuring speedy victim compensation and assigning blame to the manufacturer or other at-fault parties. But that approach would still mean lower risk, and hence lower premiums, for insurers.

That regime also assumes that private car ownership remains widespread. But autonomous cars in the future may well be owned and operated in fleets, perhaps by a souped-up Uber or by car manufacturers. Personal motor insurers would be out of luck. Only those who specialise in commercial fleet insurance would do well. Some manufacturers would simply “self-insure” and assume liability. Volvo, Google and Mercedes have said they will do so with their self-driving cars.

Hélène Chauveau, head of emerging risks at AXA, a French insurer, reckons that the persistence of existing risks, like manufacturing defects, and the emergence of new threats like hacking, will leave a role for insurers. Yet generally, notes Anand Rao of PwC, an accounting firm, they have been slow to react to faster-than-expected technological progress. There are no actuarial tables, it seems, to help insure against that.