Science fact or fiction

Two major applications, that of autonomous cars and unmanned aerial systems (UASs), are the focus of Lloyd’s latest report, Autonomous Vehicles – Handing Over Control: Opportunities and Risks for Insurance. The use of autonomous technologies in these two sectors could represent the biggest change to vehicles since the motorcar replaced the horse and cart, it says.

However, transport is not expected to be the only beneficiary. Technological advancements in robotics and artificial intelligence are opening up a wide range of potential applications because autonomous machines can potentially carry out tasks more safely and efficiently than humans.

Replacing humans

It is still very early days for the application of autonomous and unmanned technologies, but such devices are already being used for a wide range of hazardous or labour intensive activities, explains Michael Maran Chief Science Officer at Catlin. For example, autonomous vehicles are already being used to survey tunnels, take samples in volcanoes, explore the deep ocean, and even carry out scientific research on Mars, he says.

“Unmanned aerial vehicles and autonomous cars are the headline applications for this technology, but the implications could be far reaching,” says Maran.

Key role for insurers

Insurance industry expertise in risk management and mitigation will be a factor in the adoption of autonomous and unmanned technology, according to Lloyd’s report.

“Insurance is key to helping society integrate new technology safely,” says Nick Beecroft, Manager, Emerging Risks & Research at Lloyd’s.

Where regulation and safety standards are yet to be developed, insurers can encourage prudent progress by making their own risk assessments and providing policies for responsible operators, the report says. For example, underwriters at Lloyd’s wrote one of the first motor insurance policies in 1904 and the first aviation cover in 1911, long before today’s liability regimes were put in place.

New risks and challenges

While the potential for change is great, incorporating autonomous or unmanned vehicles into existing legal and regulatory frameworks presents a major challenge, according to the study. For example, liability will be a key issue because autonomous and unmanned vehicles involve the transfer of control from direct human input to automated or remote control.

“In many cases the technology is there to create fully autonomous vehicles, but the legal and regulatory environment needs to be developed further, and public trust will also need to be fostered,” says Maran.

Understanding issues of liability will be key for insurers, according to Ingmar Posner, Associate Professor in the Department Of Engineering Science at Oxford University. In some cases technology is moving faster than regulation and law, raising questions over who is liable if an autonomous machine causes damage to a third party, he says.

“Whoever cracks the issue of liability first will have an edge in the insurance industry,” says Posner.

The sky’s the limit

This is very much the case with unmanned aerial systems (UAS), where the application of unmanned technology has so far been limited, at least in part, by existing rules and regulation, says Jay Wigmore, an aviation underwriter with Kiln.

However, smaller line-of sight UAS are finding more commercial applications, and were recently used to film the Winter Olympics in Sochi earlier this year and are also being used for border patrols and by emergency services, he says. Increased public trust in the technology, combined with changes in regulation, could one-day conceivably see larger autonomous aircraft carry cargo or even passengers, believes Wigmore.

Lloyd’s underwriters, including Kiln, are already insuring UAS, and are lending their expertise to regulatory discussions in the European Union aimed at gradually accommodating the new technology, he explains.

Safer driving

Autonomous technology is also finding its way into our cars, with the potential for improved safety and fuel efficiency, as well as enabling more cars to use the roads, according to David Powell of the Lloyd’s Market Association.

“Truly driverless cars are a long way off, but the different technologies that will enable limited self-driving vehicles are coming soon, and could lead to a significant reduction in road traffic accidents,” he says.

Many of the routine claims that currently drive the cost of motor insurance will reduce or almost disappear entirely, explains Powell. The resulting decreased exposure for insurers would probably require underwriters to change the design and pricing of motor insurance products, he says.

“Insurers that are best able to measure improvements in risk and identify the benefits of new safety technology will have a commercial advantage,” predicts Powell.

New tools and approaches

The application of autonomous technologies could one day touch many lines of insurance, explains Beecroft. “Machines are becoming more intelligent and aware, and are able to take on an increasing number of functions that were previously the preserve of humans,” he says.

The development of autonomous technology is linked to wider trends in digital technology and the explosion in data and information, which should give insurers access to much more information on risk in the future, explains Beecroft.

“Autonomous vehicles should mean that insurers will be able to get a more comprehensive and detailed picture of risk, as well as benefiting from improved safety as the human error element of risk is reduced,” says Beecroft.