If no one is behind the wheel in an autonomous car crash, who pays? 

If a self-driving car makes a mistake that results in a crash, is the rider in the car at fault? How insurance agencies may navigate the changing landscape of the auto industry.

In the race to develop autonomous cars, tech companies and car manufacturers might face another hurdle – car insurance.

While many believe driverless cars could reduce the number of accidents on the road, crashes involving self-driving cars still happen, raising questions about liability. Yet, the old convention of auto insurance companies charging the driver at fault to pay for damages will soon no longer work, and car manufacturers are likely to become the culpable party. The shift of burden, experts say, could disincentivize advances of the technology and delay the arrival of an automated future. 

“Everyone wants to have fewer accidents,” James Lynch, chief actuary at the nonprofit organization Insurance Information Institute in New York, tells The Christian Science Monitor. “Public policy would say we want people to buy autonomous vehicles, but simple economics would point to the other direction.”

The rapid development in self-driving cars, which companies proclaim will help eliminate human error that causes the vast majority of motor vehicle crashes, has been raising concerns for many car insurance companies. Facing “existential challenges” from the rapidly changing transportation landscape, which also includes ride-sharing, the auto insurance business could shrink by 80 percent by 2040, Morgan Stanley Research estimates in its Blue Papers released last October.

Why? Current business models of most auto insurance companies rely on the attributes of the driver – including driving records and claims histories – to decide insurance rates. However, without a driver, this model no longer applies. 

Thomas Wilson, chief executive of insurance company Allstate, has admitted emerging technologies present a real threat to current insurance structures. As more self-driving cars appear on the road and human-error crashes diminish over the next decade, he expects the profit margin for automobile insurance to at first increase, but then to ultimately decline as the need to insure drivers disappears.  

“So the fact that there will be fewer accidents in the future, whether the autonomous cars are just better technology, will take a while to come through, it will be offset somewhat by more expensive system replacement in cars and about a good portion of your auto insurance coverage medical costs and so that's not affected by that,” he said at a Sanford Bernstein Strategic Decisions Conference in May 2015.

While the shift won’t come immediately or in a complete form, self-driving cars will still need to comply with individual state requirements in licensing and insurance, according to the Federal Automated Vehicles Policy released last September. But, with limited existing legislations on the issue, Mr. Lynch predicts the manufacturers will likely become the culpable party in action. 

“If you are sitting in the car and you are not touching the wheel, the gas, nor the brake, and all you said is take me from point A to point B, it is pretty hard to say that you, 'driver' of the vehicle, are responsible for what has happened there,” he says. 

States that have passed related legislations, such as Florida, already require the autonomous vehicles, largely still in the beta stage, to be insured by the companies testing the cars on the road. 

"Prior to the start of testing in this state, the entity performing the testing must submit to the Department of Highway Safety and Motor Vehicles an instrument of insurance, surety bond, or proof of self-insurance acceptable to the department in the amount of $5 million," Florida's 2012 law states. 

Yet, the changing model has deeper implications. If automakers were to bear the cost of covering the vehicles liabilities over its lifetime, the price of the autonomous vehicles would go up, which in turn could make purchasing a self-driving car less accessible to average consumers. The lower demand because of high price, in spite of the government’s support, in turn, could discourage automakers from continuing to develop new technologies, Lynch says.

But the liability restriction shouldn’t be an obstacle, says Bryant Walker Smith, a law professor at the University of South Carolina in Columbia who specializes in autonomous driving and the standards.

“I'm somewhat wary of proposals to dramatically restructure liability rules, as diving into these longstanding policy battles could create more problems than it solves,” he writes in an email to the Monitor. “If manufacturers believe that liability issues are deterring or delaying their deployment of new technologies, then they should be able to make that case clearly and concretely. In fact, several of these companies have essentially accepted the existing framework.”

Uber, the ride-hailing company that has been developing and testing self-driving pilots in several cities, apparently is one of them. One of its driverless cars was involved in a collision in Tempe. Ariz., on March 29. 

“Our self-driving cars are insured at levels that meet or exceed state law,” an Uber spokesperson says in an email to the Monitor.

The automated technology, if it really takes hold and leads to a lower number of accidents, would create a win-win situation for everyone, including the public, the insurance company, and the government, according to Lynch. However, a discussion on the liability issue among the automobile industry seems to be largely missing at the moment. 

“[The insurance companies] talk about the potential that this automobile technology could bring, but I have yet to see any manufacturer, or potential manufacturer of vehicles look 20 or 30 years down the line,” he says.

David Strickland, general counsel for the lobbying group Self-Driving Coalition for Safer Streets in Washington, D.C., encourages collaboration. The group represents Waymo (Google's self-driving project), Ford, Uber, Lyft, and Volvo. 

“Self-driving vehicle manufacturers, operators and insurance industries need to work together to efficiently manage risk and liability," he says in an email to the Monitor.