Self-driving Liability Coverage

You hear about how technology is disrupting entire industries, but one that sees disruption coming most clearly is the auto insurance companies. Eventually, perhaps within ten years, automobiles will be driving themselves, and the common assumption is that there will be fewer accidents. But what, exactly, will the industry be insuring: drivers or computer code? How likely will accidents be with this new technology? How much will each accident cost in repairs and human medical expenses?

Today, actuaries can estimate how many billions of miles will be driven by American automobiles, and how many accidents and fatalities will result. The current statistic in America is one fatality for every 94 million miles driven. There are breakdowns by age, gender and location. Actuaries know that certain people are more likely to be involved in wrecks, and engage in riskier behavior, than others.

But they have no idea, currently, how to assess the difference in potential accident rates between a self-driving Tesla, a Lexis and a Sonata. All they know for certain is that Tesla’s Autopilot has driven owners and their families 130 million miles—with one fatality so far. One would assume that the software and sensing equipment are going to improve over the coming decade. But insurance companies also believe that each accident will cost more due to the high-tech parts needed for auto-driving.

Currently, the insurance industry takes in $200 billion worth of premiums. Estimates vary, but up to 80% of that amount could disappear in the driverless car revolution—with a comparable reduction in payouts for accidents. Insurance executives, however, are becoming creative, putting new cyber coverage on the drawing board that would protect the car’s software and pay if you’re somehow hacked while driving. The coverage could also pay for new downloads to your car’s computer.

Meanwhile, how will the insurance company determine who, or what, is at fault in an accident? Was the car being controlled by the driver, or was it operating on its own? Most of today’s automobiles now have a “black box” under the steering wheel which monitors the driver’s activity. These will be enhanced to determine how long it took the computer to transition control of the car to or from the driver, and when that transition occurred, if at all. It could also monitor the health of the car’s computer, and could stop the car if it detects malware, a hacker—or a drunk individual trying to take over manual control.

Empyrion Wealth Management (“Empyrion”) is an investment advisor registered with the U.S. Securities and Exchange Commission under the Investment Advisers Act of 1940. Information pertaining to Empyrion’s advisory operations, services and fees is set forth in Empyrion’s current Form ADV Part 2A brochure, copies of which are available upon request at no cost or at The views expressed by the author are the author’s alone and do not necessarily represent the views of Empyrion. The information contained in any third-party resource cited herein is not owned or controlled by Empyrion, and Empyrion does not guarantee the accuracy or reliability of any information that may be found in such resources. Links to any third-party resource are provided as a courtesy for reference only and are not intended to be, and do not act as, an endorsement by Empyrion of the third party or any of its content. The standard information provided in this blog is for general purposes only and should not be construed as, or used as a substitute for, financial, investment or other professional advice. If you have questions regarding your financial situation, you should consult your financial planner or investment advisor.