Motorists, states set to pay for self-driving car crashes

James Fernyhough
17 Jan 2019
AFR

As automated vehicles move from science fiction to reality, one insurance provider is warning motorists and state governments could soon be footing the bill for the failures of multinational car manufacturers such as Google and Tesla.
The warning comes as the National Transport Commission grapples with the problem of how to design a compulsory third-party insurance regime in a world where there will not always be a human behind the wheel to take the blame for a crash.
Most third-party insurers are lobbying for the rules simply to be rejigged so they cover all incidents, regardless of whether the fault lies with a human driver or an automated driver system.
Insurers are discussing whether automated vehicles, like Google’s Waymo driverless car, should be included under the current third-party cover. Supplied
However, the Insurance Commission of Western Australia, the state-controlled provider of compulsory third-party insurance in WA, has vigorously opposed this solution.
Commission secretary Kane Blackman said motor accident injury insurance (MAII), the compulsory element of car insurance, was designed to cover human negligence, not manufacturer negligence and product liability.
To extend it to manufacturer negligence “would transfer private-sector liabilities to motorists and MAII scheme underwriters … and result in an unquantified subsidy provided to multinational vehicle and technology companies,” he said. In the case of his commission, this would mean the West Australian government taking on the risk.
“We see the risk of a driver causing a crash and a machine causing a crash as separate, and therefore a new insurance product for automated vehicles is required. That product can be provided by the private sector who will likely be providing cyber insurance products as well,” Mr Blackman said.
This position puts the WA government alone among insurers, most of whom support including driverless cars in existing third-party policies.
Cecilia Warren, director of research and development at insurer IAG, said although the emergence of self-driving cars would create new liabilities, she said it should not be the customer’s job to discover who was liable, but the insurer’s.
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“Insurers have for hundreds of years been supporting people to recover after a claimable event and then managing behind the scenes. We still believe there will be risks on the road, so let’s keep the schemes designed around people to make it as easy as possible to recover after something as awful as a collision on the road,” she said.
“What we don’t want is a scenario where a customer has to line up to make a claim against a global manufacturer.” She noted there were no domestic vehicle manufacturers.
Ms Warren said a range of potentially liable parties could emerge with the arrival of automated cars – not just car manufacturers, but suppliers, telecommunications companies, local road authorities and councils – increasing the complexity for customers looking to make a claim.
Mr Blackman said he did not propose customers should attempt to recover costs from global manufacturers, but forcing local insurers to do so was also unviable because recovery rates for third-party insurance claims in WA were less than 1 per cent.
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He said this situation had safety implications: “If you separate manufacturers from responsibility for their products, you’re disincentivising them so they’re no longer responsible, and they don’t have to provide safe products.”
The rule change
In October, the NTC, the statutory body responsible for co-ordinating national roads policy, released a discussion paper proposing possible changes that would bring automated vehicles under the insurance regime.
Every state and territory requires motorists to have MAII, although each differs slightly. In Victoria, WA, Tasmania and the Northern Territory, the state governments underwrite MAII, while in NSW, Queensland, South Australia and the ACT policies are underwritten by the private sector.
In some states, policies require the insured party to be at fault, while others (Victoria, Tasmanian and NSW) provide some cover when no one is at fault. Only the NT operates an entirely no-fault regime.
Policies assume cars are controlled by a human, meaning they do not allow for driverless technology. The NTC proposed six options to bring driverless cars under the MAII regime.
In their submissions, most insurers supported option three, which recommended MAII rules “be amended to remove barriers to accidents/injuries caused by ADSs [automated driving systems]”.
“Injured people would have access to compensation and benefits regardless of whether the injury was caused by an automated vehicle whose ADS was engaged,” the NTC stated.
Speaking on behalf of private insurers, the Insurance Council of Australia supported this proposal, saying it was “the most suitable model through which reform should be implemented”.
“At this early stage we believe existing MAII schemes have the framework necessary for people to have timely access to treatment, care and financial support and should merely be expanded to cover injuries caused by an ADS,” the Insurance Council said.
Insurance giants QBE, Suncorp and Allianz backed this stance. IAG also supported option three, but said over time a more nuanced approach may be needed.
“We believe a staged approach that removes today’s barriers, whilst giving opportunity for the future to be shaped by continuous learning from today’s trials to help build to a future which is truly designed to keep the safety of people at the heart of any future scheme design,” IAG said.
The NTC will make its recommendation to government in May.