California DMV Releases First Testing Regs for Driverless Cars

Google driverless car during testThe California Department of Motor Vehicles (DMV) released its first proposal regulating the testing of driverless cars on public roads this week, opening a comment period that ends with a public hearing at the state capitol next month.

For their part, members of the California auto insurance industry remain staunch advocates of autonomous automotive technology, according to Pete Moraga, spokesman for the Insurance Information Network of California (IINC).

But Moraga also said that the DMV’s latest proposal touches off more questions about market readiness for the technology, the risk of crashes and post-crash liability.

One firm certainty is that major companies are pushing hard to bring the technology to market; Capital Public Radio (CPR) said testing driverless cars could be “cruising California roads by spring.”

But one question, Moraga told Online Auto Insurance News (OAIN), is when that push ends with consumers behind the wheel of a car they don’t have to drive themselves.

In Testing, Autonomous Cars Require Multi-Million Dollar Coverage

California’s latest proposal will allow companies to test driverless cars on public roads as long as the liability for the vehicles is covered at a minimum $5 million.

Moraga told OAIN that the multi-million dollar liability minimum “may be warranted” during testing, though the sky-high figure raises “one of the other main concerns” when it comes to insuring driverless cars: affordability for the average driver.

“How do you price a policy for an autonomous car without an actuarial history of claims?” said Moraga. “We don’t know what the number and severity of claims will be … But how do you get the average driver to be able to afford a policy with that type of coverage, or will the threshold be that high?”

According to the DMV’s proposal, driverless car liability must be covered by “a surety bond,” “instrument of insurance” or “certificate of self-insurance” when it is being tested on public roads.

Moraga said that it is unlikely that traditional insurers will “step up to the plate in the testing phase.”

“I don’t know of any that would,” he told OAIN. “Because of the high risk involved, most traditional insurers would probably not want to assume that risk. A high-risk insurer like Lloyd’s may assume it, but it would be a pretty expensive policy.”

To obtain a permit to conduct testing of driverless vehicles, a company must obtain the Manufacturer’s Testing Permit under the Autonomous Vehicle Tester Program and pay a $150 fee, according to the DMV, which said the one-year permit will allow testing of up to 10 such vehicles with 20 test drivers.

The Liability Question

According to Moraga, the insurance industry had one of its most in-depth discussions about the driverless car October’s annual conference of the State Insurance Trade Association (SITA), where regulatory officials joined with academic and technology experts in a panel discussion on the topic.

Panelists addressed a question that lies “at the heart of auto insurance,” Moraga told OAIN.

“Who’s at fault?” he asked about a driverless car crash.

But with autonomous technology still in the infancy of testing phases, that liability question still hangs without an answer, according to Moraga, who listed a number of parties who could share fault for a crash (or completely bear it themselves):

  • “The manufacturer of the car for faulty integration of the systems”
  • “The software company for glitches in the software”
  • “The person in the car that should’ve seen the problem approaching”

“These are issues that will have to be understood if insurers are to create policies for these vehicles,” he said.

The industry should find those issues pressing, according to consultancy firms and experts.

In 2012, Celent published a study titled “A Scenario: The End of Auto Insurance” that describes “a provocative but plausible scenario” in which “robot cars” drastically cut into the number of crashes—and end auto insurance as the industry knows it today.

In a post, industry blogger Steve Anderson said that precursors to the robot car, like collision-avoidance technology, will have “a much larger, and earlier, impact on claims cost” than driverless vehicles.

“As an industry, we should begin thinking and talking about these issues now,” he said in the Wednesday post. “While this is not a trend we can stop—we can start thinking about how to adapt.”

Industry, Companies Cast Wide Timelines for the Driverless Car

There is no firm timeline predicting a year when a driverless car is unveiled for public use, with so many stakeholders spread across several industries involved in developing the technology behind it.

Moraga said that Anthony Levandowski, product manager for Google’s autonomous car and panelist at the SITA conference, told attendees that “these cars may be rolling out” by 2017.

“For the insurance industry, that’s just around the corner,” Moraga told OAIN. He added that automakers, including Mercedes, apply a different timeline between 2020 and 2022.

In its report, Celent predicted that robot cars would be the “preferred” mode of transportation between 2023 and 2027.

An official with the American Association of State Highway and Transportation Officials told a federal subcommittee last month that introduction into the U.S. vehicle fleet would still mean 20 years before the “the full fleet [is] completely converted.”

The California DMV will finalize rules regulating driverless car use by private owners by Jan. 1, 2015, according to Bernard Soriano, a deputy director with the department.

“California is leading the way in autonomous vehicles and these testing regulations are the first step in making the technology available,” Soriano said in a statement accompany the DMV’s latest proposal. “DMV continues to welcome public comment and ideas on the development of these vehicle testing regulations.”

However, Soriano told CAP that consumers might have to wait until the market debut of driverless cars to get one themselves—and that debut will largely depend on automakers.

Photo courtesy of Steve Jurvetson

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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