Are autonomous vehicles less risky than human-driven vehicles?

By Henry Gale

June 17 - (The Insurer) - Early deployments of self-driving vehicles show their propensity to cause insurance claims is significantly different to that of human drivers.

Autonomous taxis are already roaming the streets of several U.S. cities and have shown promise in off-road industrial settings too.

As the need for insurance grows, underwriters are investigating how the differences between human-driven and autonomous vehicles (AVs) translate into pricing.

FREQUENCY

One of the largest AV technology companies, Alphabet’s Waymo, has driven more than 50 million miles without a human driver. Last December, it released research with Swiss Re comparing its third-party property damage and bodily injury claims to human driver benchmarks.

Waymo experienced nine property damage and two bodily injury claims (four of which are not yet resolved and could close without payment) over 25.3 million miles of autonomous driving between January 2018 and July 2024.

According to baselines for the overall driving population calculated by Swiss Re, an equivalent amount of driving exposure in the same regions would be expected to produce 78 property damage and 26 bodily injury claims.

Waymo also outperformed Swiss Re’s baseline for newer models of vehicles, which tend to include enhanced safety features. Those vehicles would see 63 property damage and 21 bodily injury claims over the same distance, significantly more than Waymo’s automated driving systems.

SEVERITY

While autonomous driving technology may reduce the number of accidents and insurance claims, AV-related claims could be more expensive.

One contributor to claim severity is repair cost. AVs require certain advanced and expensive components other vehicles do not.

A July 2024 paper from the University of San Francisco’s “Autonomous Vehicles and the City Initiative” tallied the costs of hardware such as processors, sensors and cameras essential to AVs. It found base components would cost between $14,320 and $101,000 depending on a vehicle’s specific features, with a midpoint of $57,660.

Beyond the essentials, other components AV manufacturers might use, such as interfaces for humans to engage with autonomous systems, would add another $6,000 to $63,000. These costs are all in addition to the base cost of the vehicle itself.

Of course, the additional repair costs associated with AVs will not only be picked up by their insurers. For as long as autonomous and human-driven vehicles use the same roads, traditional motor insurers may see higher claims costs when their policyholders cause collisions with AVs.

Another factor in the cost of claims is litigation. Hayley Budd, Apollo Underwriting’s class leader for innovation, said in a recent Gallagher Re report that insurers are keeping an eye on how AV claims interact with the U.S.’s increasingly litigious culture.

“Given the financial resources of those developing this technology and backing it with investment, some insurers hypothesise that they may become targets for plaintiff lawyers in the U.S., pursuing punitive damages,” Budd said.

“What might be a $4 million to $6 million payout for a human driver could turn into a billion-dollar lawsuit for an AV company.”

WILD CARDS

Starting with existing motor insurance models and adjusting for the differences in frequency and severity of certain losses will not be enough to price AV risk, with other factors also at play.

AVs’ reliance on connectivity exposes them to cyberattacks. While some cyber risks such as data breaches are relevant to internet-connected vehicles driven by humans, attackers could cause physical accidents with self-driving cars.

Possible scenarios include manipulation of sensor data to mislead a vehicle’s control system or malicious actors managing to gain remote control of the vehicle itself.

Even for familiar causes of loss, the patterns of when and where claims are most likely could also change with AVs.

“With traditional motor policies, nighttime driving is regarded as much riskier,” said Budd. “But with AVs, the opposite is true, because the sensor technology works better in the dark.”

This week, The Insurer is considering how autonomous vehicles could change the motor insurance market. Read yesterday's piece on those already providing AV insurance, and look out for articles on product innovation and the impact on motor insurers in the coming days.