Autonomous Vehicles: Motor Insurance and Contractual Perspectives

1. 8th AIDA EUROPE CONFERENCE 3/10/2019 BREAKOUT SESSION 3 "Autonomous Vehicles – Motor Insurance and Contractual Perspectives" Dr.KyriakiNoussiaUniversity of Exeter, UK Prof.Dr. Sara Landini, Univ. of Florence, Italy

2. Introduction – Background • 4th Industrial Revolution (Industry 4.0) • placed the system of driving vehicles at a new stage • Human factor • substantially reduced or maybe even eliminated  

3. Introduction – Background • Ways • we direct, possess, are responsible for driving  will alter • Types of risk and the liability for adverse events • change dramatically • Need • new legal regulation and novel ways of risk management, including insurance.

4. Introduction – Background Need  To address the way AI and automation will affect the way we use autonomous vehicles and their insurance

5. Current legal status quo Regulations from countries marked on map below

6. PRELIMINARY SET OF QUESTIONNAIRE QUESTIONS 1/ What are the minimal law regulatory requirements which should exist for AVs / self-driven vehicles? 2/ What are possible developments of whole insurance system in the various legal environments? 3/ What are possible methods of setting up premiums/deposits in those systems ? (flat, variable/telematics) 4/ In your country, do motor insurance policies have special conditions (exclusions, limitations of risk) relating to the risk of road traffic in AVs? If yes, please explain

7. COUNTRIES THAT RESPONDED Germany, Italy, England, Turkey USA Singapore South Africa Israel New Zealand Brazil Peru Chile Japan

8. Brazil, Uruguay, Peru, Chile, Singapore • No specific laws regulating automated vehicles • Motor insurance doesn`t contain special conditions about AV in the General Clauses

9. Japan • More than 20 automated car testing projects on public road • Going on in Japan. • One guideline & One criterion for testing AV on public road • Issued by National Police Agency of Japan.

10. Japan • Traffic Law • There is no special legislation for automated vehicle Level 1 and Level 2. • Level 3, 4 and 5 AV considered and interpreted not covered under the current Traffic Law. • New legislation for level 4 and 5 autonomous vehicles is scheduled after 2020.

11. Japan • Civil liability • Traffic accident liability laws and system in Japan • Automobile Accident Compensation Security Act • – operator of automobile • – liable to compensate for the death or bodily injury caused to any other person arising from the operation of the automobile

12. Japan • Exempt from liability if • 1. The driver did not fail to exercise due diligence • 2. There was intent or negligence on the part of the victim or a third party • 3. There was no structural defect or functional disorder in the automobile. • Property damage is treated differently • driver not be liable for any damage • unless there was intent or negligence

13. Japan • AVs Study Group • There are several study groups on autonomous vehicles and liability. Study Group on liability for AV Level 3 and 4(2020 to 2025). • Report in March 2018 - current liability system is good enough and should be maintained.

14. Japan • AVs Study Group- Suggestions: • Bodily injury caused by hacked cars should be compensated by a pool funded by Compulsory Automobile Insurance premiums • New duties of operators (updating software/programs and repairing the vehicles) should be discussed. • AVs should be able to drive or stop safely even if outside systems or networks go down. • Liability of Level 5 will need to be discussed in the near future

15. Japan The Government Council on Investments for the Future Guidelines for AV (March 2018) 1. Automaker will be responsible if there is a clear flaw in the vehicle’s system. 2. AVs need bare devices record location, steering etc.

16. Japan • Insurance • Several Insurance companies are selling ins. policies for AV testing projects • Optional policies that covers collisions between AVs and property damages not covered by compulsory automobile liability insurance.

17. Germany • Laws dealing with liability of driver driving in autopilot modus • s/he must be ready to take over the car whenever the systems requires her/him to do so or • s/he realizes that there is something wrong with the autopilot • Motor insurance policies • no clauses specifically addressing cars equipped with autopilot and/or accidents caused by a failure of the autopilot or the driver.

18. Poland • No legal provisions referring to common use of AVs • Law on Road Traffic defines AVs • Requires the permission of the public body managing the road to perform tests of AVs • Compulsory liability insurance contract

19. USA • Regulation • There is both federal and individual state regulation AVs • (41) states and the District of Columbia • AV legislation/ executive orders.

20. USA • Regulation - At Federal level • 2017/9 - House of Senates passed SELF DRIVE Act • establishes the federal role in ensuring the safety of highly AVs • Department of Transportation (DOT) requires safety assessment certifications • For the development of a highly automated vehicle or an automated driving system. • The National Highway and Transportation Safety Administration (NHTSA) has released new federal guidelines for Automated Driving Systems (ADS).

21. USA Insurance liability insurance  will shift from personal automobile to products liability Mercedes, Volvo and Waymo agreed to accept full liability for vehicle accidents while their vehicles are using automated technology. Tesla  extending an insurance program to purchasers of Tesla vehicles.

22. USA Insurance AIDA ASTIN suggestion  AV owner/operator need cyber-insurance (data protection)  Also covering property damage or bodily injury from cyber-risks

23. Turkey • Current legislative instruments in place • no provisions specifically drafted to cover AVs • The general conditions (standard form contracts) applicable to motor insurance free from special conditions relating to the risk of road traffic arising from use of AVs

24. South Africa No current laws or proposals for laws  regulate circulation of AVs Re the definition of motor vehicle  No indication as to where AVs will fit in  Road Accident Benefit Scheme Bill  amended to specifically provide for AVs / exclude them

25. Israel • No specific laws for AVs • Regulatory change  closer than ever • Several AV pilot programs  scheduled to launch in Israel 2019 onwards. • May 2018  First regulatory change concerning AVs • Regulation 16a  added to the Israeli Road Traffic Regulations

26. Israel • National Road Traffic Inspector • may exempt an experimenter from traffic regulations • Inspector to consider • Safekeeping of the users of the road and of the participants therein. • Limiting the disturbance of the traffic flow which may be caused by the experiment. • Responding to emergency events which may occur during the experiment.

27. Israel • “Experiment” • use of new technology, or new use of existing technology • to check its functioning in the road

28. Israel • “Experiment” • use of new technology, or new use of existing technology • to check its functioning in the road

29. New Zealand • None specific laws regulating AVs • Legality of AVs  described as a “grey area” although not prohibited by law. • New Zealand government  eager to promote New Zealand as testing ground for AVs • Motor insurance policies • no specific conditions or exclusions for AVs • not yet commercially available in New Zealand. • AV user would need have insurance cover

30. Italy • No legislation for circulation of AVs. • 28 February 2018  Ministerial Decree - Smart Roads Decree • authorising and regulating the testing of AVs and providing for consequent insurance coverage

31. Italy • Smart Roads Decree provides for: • technological and digital adaptation of the road network and infrastructure • a series of conditions and requirements for implementing trial testing; • defines characteristics of AV systems for admission to public road testing; • identifies obligations of the holder of authorization for testing; • a special content for compulsory third-party liability insurance (special (high) ceiling).

32. Italy • AIDA ASTIN aspects to be included in a framework of common rules at European level: • Identification of types of risks to be covered • New risks related to product defects, • New Risks related to electronic technologies (e.g. software reliability, danger of unlawful practices of tampering or hacking by third parties, dangers related to the protection of personal data) • Spatial risks;

33. Italy • New actors: manufacturer, software developer, operators of satellite networks. • Identification of distribution strategies and business models for risk attribution • The product liability model to be evaluated and consider new IT, space risks.

34. England • 8/11/ 2018 the English and Scottish Law Commissions – Analysis of Remote Vehicles • Automated and Electric Vehicles Act 2018 (AEVA 2018) • First piece of major legislation in EU on the insurance consequences of remote vehicles • Act not yet in force  will be implemented whenever the need arises • Supplements the compulsory insurance regime in Road Traffic Act 1988.

35. England • Effect of the 2018 Act • strict liability on insurers of a remote vehicle for loss by accident involving remote vehicle • no human defendant • claim to be brought directly against the insurers • removal of human operation will be replaced with a series of new risks from manufacture and guidance of remote vehicles • new coverage for such risks is required • property damage, covers any damage to property other than the vehicle itself

36. England • Effect of the 2018 Act - Particular Exclusions of Coverage • AEVA 2018, s 2(6), s 4(1) • exclude liability for damage where the insured's person's injuries are the "direct result" of: • (a) software alterations made by the insured person and prohibited under the policy, or • (b) a failure to install safety-critical software updates

37. England • Effect of the 2018 Act - Particular Exclusions of Coverage • An insurer is not permitted to exclude liability for such "cyber risks" under AEVA 2018. • AEVA 2018, s. 3 - reduction of the insurer's liability where the injuries suffered were partly that party's own fault. • AEVA 2018, s 3(2) - insurer is not liable at all for damage if accident was wholly caused by the person's negligence in allowing the vehicle to begin driving itself when it was not appropriate to do so.

38. England • Effect of the 2018 Act - Particular Exclusions of Coverage • AEVA 2018, s 3(2) - insurer is not liable at all for damage if accident was wholly caused by the person's negligence in allowing the vehicle to begin driving itself when it was not appropriate to do so. • This does not apply to any other person who suffers injury, and it is a bar only to recovery by the person in control. • AEVA 2018 imposes liability upon insurers, but permits insurers to recoup its payments from others who may have been responsible for the damage.

39. IDD Impact Client-centric approach Changes to sales process and IT system New professionalism requirements Consumer centric approach – Avs Understanding and pricing the market key for insurers to be able to bring products to the market to meet demand and facilitate the adoption of this new technology. Need for degree of standardisation and regulation in terminology and technologies across the motor industry to ensure integrity across classes of connected and autonomous vehicles

40. IDD Impact Client-centric approach Changes to sales process and IT system New professionalism requirements Consumer centric approach – Avs Understanding and pricing the market key for insurers to be able to bring products to the market to meet demand and facilitate the adoption of this new technology. Need for degree of standardisation and regulation in terminology and technologies across the motor industry to ensure integrity across classes of connected and autonomous vehicles

41. IDD Impact Client-centric approach Changes to sales process and IT system New professionalism requirements Consumer centric approach – Avs Understanding and pricing the market key for insurers to be able to bring products to the market to meet demand and facilitate the adoption of this new technology. Need for degree of standardisation and regulation in terminology and technologies across the motor industry to ensure integrity across classes of connected and autonomous vehicles

42. IDD Impact Client-centric approach Changes to sales process and IT system New professionalism requirements Consumer centric approach – Avs Understanding and pricing the market key for insurers to be able to bring products to the market to meet demand and facilitate the adoption of this new technology. Need for degree of standardisation and regulation in terminology and technologies across the motor industry to ensure integrity across classes of connected and autonomous vehicles

43. IDD Impact Standardisation and regulation may also be required for elements of supporting vehicle connectivity and operating infrastructure Standardisation applies equally to the vast amounts of data that will be collected and generated by driverless cars.

44. New Perspectives For Liability • The Recommendations to the EU Commission on Civil Law Rules on Robotics (2015/2103(INL) stressed on this point: “the more autonomous robots are, the less they can be considered to be simple tools in the hands of other actors (such as the manufacturer, the operator, the owner, the user, etc.); whereas this, in turn, questions whether the ordinary rules on liability are sufficient or whether it calls for new principles and rules to provide clarity on the legal liability of various actors concerning responsibility for the acts and omissions of robots where the cause cannot be traced back to a specific human actor and whether the acts or omissions of robots which have caused harm could have been avoided”

45. New InsurancePerspective • Full automation and liability • Liability of the IA * Corresponsability of producer, owner, user Could IA be considered a legalentity (seeTeubner)? Could be insured? Mutual fund for accidentscaused by IA?

46. Thank you! • Dr.KyriakiNoussia, Univ. of Exeter, UK • k.noussia@exeter.ac.uk • Prof.Dr. Sara Landini, Univ. of Florence, Italy • sara.landini@unifi.it