The unstoppable drive of automated vehicles - likely impacts on CTP Insurers
The wheel turns
The age of automated or driverless vehicles is well and truly dawning. The idea of a driverless vehicle ‘chauffeuring’ a human occupant is no longer farfetched. It is not a question of ‘if’ but ‘when’.
Possibly without realising it, we have been in the midst of the automated vehicle age for quite some time. Most new vehicles today have automated features e.g. self-parking, lane-keep assist and of course, cruise control. Prototypes for fully automated vehicles already exist and are used in industries such as farming and mining.
The world’s leading automakers including Ford, GM, Audi, BMW, Tesla, Nissan and Mercedes-Benz have promised to deliver automated cars within the next five years or so. However, experts are divided as to when truly driverless vehicles will be available for on-road purchase. A Finity Report published by the State Insurance Regulatory Authority (SIRA) has suggested that annual sales of automated vehicles will represent 75% of all light-duty vehicle sales by 2035. 
Although fully automated vehicles will not likely be an immediate reality, the National Transport Commission has warned that Australia risks lagging behind in the international arena if we fail to make recommended regulatory changes and this could be a “significant barrier” to the introduction of automated vehicles in Australia.
This article seeks to stimulate discussion among CTP insurers and other stakeholders. It contemplates how automated vehicles will fit within the current and proposed CTP framework in NSW and some possible impacts and considerations for CTP insurers more generally.
Types of automation
In order to understand the impact of automated vehicles, we must first consider the various levels of automation. Australia has endorsed the adoption of the Society of Automotive Engineers SAE International Standard J3016 (SAE standards) which identifies six levels of automation in the interest of international consensus. The SAE standards are as follows:
- Level 0 – No automation.
- Level 1 – Driver assistance.
- Level 2 – Partial autonomy: The human driver retains supervisory control over the automated driving system and the driving environment (e.g. self-parking vehicles, rear-view screens). Many current on-road vehicles already use these systems.
- Level 3 – Conditional automation: The human is not responsible for monitoring the driving environment but must monitor the automated system and resume control if prompted by the system.
- Level 4 – High automation: The system performs all aspects of the driving task (including monitoring the functioning of the system and driving environment); however, capacity exists for human occupant to resume control.
- Level 5 – Full automation: The system performs all aspects of driving with no capacity for the human occupant to resume control.
In this article we refer to automated vehicles at levels 3 and 4.
Benefits of automation
Makers have promised the following benefits of automated vehicles:
- Improved road safety by removing human error from the driving task: Research has indicated that approximately 90% of road accidents are caused by human error and in NSW, the three main causes of injury and death are speeding, fatigue and alcohol. SIRA has estimated that fully automated vehicles will reduce the likelihood of injury as follows: vehicle driver and passenger injuries = 80%, cyclists = 70%, motorcyclists = 40% and pedestrians = 45%. 
- Reduced traffic congestion providing more liveable city environments.
- Increased efficiency and productivity of transport networks: The Sydney Metro rail network currently under construction proposes to use driverless trains to shuttle an additional 100,000 commuters across the city every hour. 
- Increased transport options for people who cannot or do not want to drive e.g. older people or people with medical/health conditions.
- Reduced greenhouse gas emissions.
Likely effects of automation on CTP insurers
1. Reduced CTP premium income
There are currently around 5.2 million registered vehicles in NSW. Lower crash rates and potentially fewer vehicles on the road (due to enhanced transport options) could lead to lower insurance premiums and heightened competition among insurers to maintain premium income. There will be many drivers who continue using vehicles which are not automated with competition for this premium income. Such competition could rely on a safety rating of non-automated vehicles with lower CTP premiums for safer vehicles.
Insurers might consider offering other forms of insurance regarding automated vehicles to address loss of CTP premium income e.g. cyber-security insurance. While automated vehicles offer many benefits, cyber-security is a very real threat which accompanies any automated system. This was already proven in 2015 when cyber-security researchers Miller and Valaesk hacked a Jeep Cherokee’s infotainment system and were able to manipulate the air conditioning, radio, digital display and windscreen wipers while the car was travelling at approximately 112kph. Of greater concern, they were also able to cut the vehicle's transmission causing it to rapidly lose momentum.
2. Increased difficulty in determining fault
In NSW currently there is a statutory modified fault-based CTP scheme of compensation. The question of who has control of an automated vehicle at a given point in time presents significant challenges for determining fault for loss and damage.
In the context of automated vehicles, difficulties will likely arise in establishing whether the automated system or human occupant was in control of driving at the time of the accident and who or what ought to have been in control at that time. For automated vehicles the possibilities for the cause of an accident include:
- The vehicle did not perform as it was designed or expected to: There is the possibility of claims in negligence and/or claims for defective products against the manufacturer/supplier of the automated vehicle under the Australian Consumer Law (ACL).
- The vehicle's software was faulty: The vehicle’s manufacturer may possibly claim against designers of the software supporting the automated system under the ACL.
- The human occupant was at fault (e.g. they did not resume control of the vehicle when prompted): This would involve a claim against the CTP insurer of the at-fault party.
- The vehicle was improperly maintained (e.g. did not install a system update in a timely manner when prompted): Claims in negligence could be made against the owner of the automated vehicle or coverage may extend as it currently does under the CTP policy if this was characterised as negligent maintenance similar to not replacing worn tyres, for example.
The solution to the complex liability issues raised by automated vehicles will require dialogue and input from both regulatory bodies and industry stakeholders. What are the precise circumstances in which a person can reasonably rely on the automated system for all aspects of the driving task? Event Data Recorders (EDRs) or similar technology should be required to record vehicle data to help determine fault in the case of an accident. Insurers and governments can encourage their use by providing lower CTP premiums and registration costs for automated vehicles that have such systems or technologies installed.
Further, with reduced human input in automated vehicles, CTP insurers may need to assess a vehicle’s automated technology as opposed to usual considerations (e.g. driver characteristics and road conditions) in determining risk or liability. Such methods of assessment will likely need to be developed by CTP insurers and will require actuarial input to determine the extent to which an automated vehicle’s system affects the risk of accidents.
3. Increased disputes and claims
Flowing from the above, CTP insurers could face an increase in the number and complexity of disputes regarding liability as it becomes more difficult to determine liability and more potential parties to a dispute (e.g. manufacturers and technology suppliers) are identified. What is the public policy behind the challenge to the software programmers for the automated vehicles in circumstances where, for example, they program the response to ensure the safety of occupants of the vehicle at the expense of the safety of pedestrians or other road users who are secondary considerations? It may be necessary for the Government to establish a body equipped to handle such disputes, which will ever-increasingly become more complex and technical.
As part of the changes under the Motor Accident Injuries Act 2017 (NSW) the Dispute Resolution Service (DRS) will have power to determine liability disputes. How will the DRS resolve disputes on liability expert evidence regarding automated vehicles? As these disputes will likely involve very technical issues relating to the functioning of an automated system, we may require assessors with expert knowledge of the automated technology to deal with these disputes. The people with the necessary expertise may be few while the disputes may be many resulting in delays. The alternative is the current system where assessors and the judiciary are required to decide any number of technical matters without themselves having the specialised knowledge in a particular scientific field.
Additionally, there is the very real possibility of additional claims being brought by a human occupant (no longer a driver) who is injured while travelling in an automated vehicle. If this is a single vehicle accident in which no other vehicle is involved, the human occupant may seek to sue the owner of the automated vehicle and his/her CTP insurer, possibly under ‘blameless accident’ provisions that may apply.
The true extent of the potential claims is unknown and how they are resolved in a timely and cost effective manner will depend upon the development of policy, legislation and specific case-by-case decisions.
4. Possible reduction in fraudulent CTP insurance claims
One possible benefit to CTP insurers of automated vehicles is that their related technologies have the potential to increase the quality and quantity of data available on the cause of a particular crash. This could in turn assist in reducing the incidence and size of fraudulent CTP claims. However, as with anything based upon software technology, the data is susceptible to hacking and alteration requiring ever more sophisticated methods of investigation.
Australia can obtain guidance on possible reforms from other countries addressing the introduction of automated vehicles. The House of Commons in the United Kingdom introduced the Vehicle Technology and Aviation Bill in early 2017, which authorises the establishment of a registry of automated vehicles and deems insurers, or owners of an uninsured vehicle, liable for damage or loss caused by automated vehicles.
As much as possible in Australia, governments across jurisdictions should ensure that there remains consistency in the regulatory framework as any uncertainty will likely stifle innovation and act as a disincentive to the introduction of automated vehicles in Australia.
While automated vehicles are increasingly becoming a tangible reality and promise to deliver many social benefits, they also present a number of complex challenges facing various stakeholders, including CTP insurers. The sooner those challenges are explored and addressed the better.
 Finity Consulting Pty Ltd, The impact of autonomous vehicles on CTP insurance and its regulations (January 2016) State Insurance Regulatory Authority <http://www.sira.nsw.gov.au/__data/assets/pdf_file/0004/102892/Finity-Report-on-Autonomous-Vehicles.pdf>.
 Denise Cullen, ‘The Legal Impact of Driverless Vehicles’ (2017) 33 The Law Society of NSW Journal 40, 40.