ON THE list of industries set to be disrupted by autonomous cars, the motor-insurance business can claim a high place. The regime of compulsory insurance in rich countries, with the insurer of the at-fault driver paying for damage, is reasonable in a world where 90% of accidents are caused by human error. But autonomy is supposed to mean that accidents drop by up to four-fifths, and those that occur may not be a human’s fault. The motor-insurance market may shrink by 60% by 2040, according to KPMG, an accounting firm.

Lawyers and insurers concur that liability will move from private car-owners towards manufacturers for crashes when a car is in autonomous mode. But under the current legal system in Britain and America an owner might still be blamed for an accident in self-driving mode if, say, he neglected to install the latest software update, says Richard Farnhill of Allen & Overy, a law firm. A manufacturer might equally well try to shift the blame to a components supplier.

The best way to avoid endless blame-shifting and litigation may be what lawyers call a “strict” liability regime that automatically places responsibility on the owner. The insurer...Continue reading