Blogs/Vlogs

Is the insurance industry geared up for automotive tech?

17 July 2017

Cars can now be operated from mobile phones and software upgrades completed over the air. But the increased connectivity – especially with autonomous vehicles communicating with one another – also increases the risk of being hacked.

The implications of this are twofold: firstly, there is a risk of significant personal data being stolen due to mobile phones holding a host of confidential data; even more so now with features such as Apple Pay. And secondly, there are significant safety issues if the key functions of a car can be controlled or overridden by another party who is external to the vehicle.

The question is, then, who is ultimately liable for loss of personal data or in the worst case an accident caused by your car being hacked?

Manufactures are likely to be hit if their cars are found to be insufficiently secure from a hacking point of view and it is unclear how or if insurance policies will evolve to cover such losses. This risk may be considered minor in comparison to the question of who is liable if an autonomous car causes an accident, and it may potentially lead to insurance companies requiring owners to pay for over the air security updates on all vehicles, new or used, in order to remain covered.

Due to reduced input from drivers, insurance premiums are then likely to be skewed even more so towards the type of vehicle or the manufacturer, rather than the driver. This, in turn, could lead to manufacturers opening themselves up to significant claims if an accident is due to a design fault or failure of the autonomous tech.

Autonomous vehicles do however potentially remove the risk of human error and therefore manufacturers may argue that insurance premiums should be adjusted to account for its cars being safer. This is also supported by a recent report from the National Highway Traffic Administration which found that crash rates for Tesla vehicles have plummeted 40% since the ‘Autopilot’ feature was first installed in 2015.

Either way, the insurance industry has a lot to consider over the next few years as automotive tech continues to develop at such an incredible rate.

If you have any questions with regard to the content discussed in this blog, please contact me or another member of the national automotive team.

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