State and Federal Regulations Pertaining to Autonomous Vehicles
While autonomous vehicles (AVs) are not yet a regular fixture on the nation’s roadways, policymakers, legislators and regulators have started to establish rules of the road for the use of driverless cars. Initial legislative and regulatory activity has focused on permitting testing of autonomous vehicles on public roadways. A handful of states have enacted laws on the subject and bills are pending in a number of others. As AVs move from the testing phase to commercial use, other states will take steps to authorize their use. Along with this will likely come legislation and regulations addressing how AVs are insured.
Federal Regulation of AV Technology
The National Highway Traffic Safety Administration (NHTSA) released the "Preliminary Statement of Policy Concerning Automated Vehicles" in May 2013. The policy recognizes that AV technology presents enormous potential for improved safety, but notes that further research is required regarding the “technical and human factors issues implicated by AVs.” Significant testing is necessary to ensure that AV technology delivers the improved safety it aspires to provide. The NHTSA proposes that licensing, testing and operation of AVs on public roads are best addressed at the state level, but provides a number of recommended principles for states to apply when regulating these activities.
State Regulation of AV Technology
As of June 2014, California, Florida, Nevada, Michigan, and the District of Columbia have enacted laws addressing the use and testing of autonomous vehicles on public roads. Key components of these laws are requirements for manufacturers to obtain a license to test AVs. Of importance to liability insurers is a financial security requirement which mandates that the manufacturer has proof of insurance or other security sufficient to satisfy liability of up to $5 million. In addition, each state’s law includes a provision that protects the vehicle manufacturer from liability when a vehicle is converted for autonomous driving by a third party.
A component of AV technology that is of particular interest to insurers is electronic data recovery (EDR). EDR devices, or “black boxes,” record data on the operation of a vehicle. Insurers have been proponents of this technology because it is useful in identifying factors that cause an accident. California’s statute requires that AVs approved for testing on public roads be equipped with an EDR device that can capture and store data from autonomous technology sensors for at least 30 seconds before a collision occurs. Insurers will be an important stakeholder in future discussions concerning EDR requirements for AVs when the vehicles become available for public use.
The interplay between AV technology and distracted driver laws is another issue important to insurers. Because AV technology aspires to minimize the risks of distracted driving, such laws may not apply when a vehicle is being operated in autonomous mode. Currently, the "Florida Ban on Texting While Driving Law” includes an exemption that addresses this issue. What effect AV technology will have on distracted driver laws remains to be seen, however it is certain that the insurance industry will be an active participant in discussions.
Insurance Regulations Addressing Driverless Cars
The decrease in frequency and perhaps severity of accidents that AV technology is expected to bring about will present both benefits and challenges to insurers. Fewer accidents mean fewer claims and fewer loss payments. How insurance products covering autonomous vehicles will be regulated will present challenges. Just as insurance regulations today address pricing of policies covering vehicles that include certain safety and anti-theft protections, regulations of this kind for AVs are a distinct possibility.