Imagine a world where roads are filled with driverless cars, all powered by artificial intelligence—this could soon be our reality with the rise of automated vehicles. In recent years, self-driving technology has made huge strides, thanks to companies like Tesla and Mercedes, who are pushing the boundaries of consumer-ready autonomous cars. While fully self-driving vehicles aren't available to the Canadian public just yet, Mercedes is confident they'll have an SAE level four autonomous vehicle on the market within the next decade. So, what does this mean for the future of car insurance?
What are self-driving cars?
When you think of driverless cars, you might picture vehicles that run completely on their own without any help from the driver. But the reality is a bit different.
According to the Ontario Ministry of Transportation, autonomous vehicles are “capable of detecting the surrounding environment using artificial intelligence, sensors, and GPS coordinates.” In other words, you’ll still need to stay alert and maintain some control of the vehicle, even though you won’t have to handle everything yourself.
These cars rely on a mix of sensors, radar, AI, and machine learning to understand their surroundings and navigate the road. Right now, there are five levels of self-driving cars, each with varying degrees of autonomy:
- SAE Level 1 (Driver assistance)
- SAE Level 2 (Partial automation)
- SAE Level 3 (Conditional automation)
- SAE Level 4 (High automation)
- SAE Level 5 (Full automation)
As technology advances, we'll see cars needing less and less input from drivers. Right now, there aren’t any vehicles on the road that can operate at SAE levels 4 or 5, and you can only buy and drive an autonomous vehicle with SAE level 3 or lower in Ontario and Quebec.
How will self-driving cars affect car insurance policies?
According to a report by the Insurance Bureau of Canada (IBC), they anticipate that self-driving cars will impact car insurance policies in four ways:
- There will likely be fewer accidents, but the advanced technology in self-driving cars will make repairs and replacements more costly.
- Vehicle use will have new risks, like software and network failure, programming choices, hacking and cybercrime, and failure to install or update software.
- Vehicles will record significant amounts of data, which will be more beneficial than human-reported or human-collected information for assessing risk, pricing auto insurance, managing claims and detecting fraud.
- And when it comes to accidents, responsibility will shift from the driver to the automated technology.
How will self-driving cars affect car insurance premiums?
The truth is it's still too soon to say exactly how self-driving cars will affect car insurance rates in Canada. Nevertheless, you can expect that the rise of driverless vehicles in Canada could significantly impact your insurance rates, depending on how common these vehicles become. If you decide to purchase a self-driving car, your premiums might change dramatically, depending on new laws around automated vehicles and within the insurance industry. With widespread adoption, the way fault is determined in accidents could shift, which would affect who is held liable.
Right now, most auto insurance policies are based on the idea that human error is the main cause of accidents. However, as we hand over more control to automated systems, collisions might be the result of product malfunctions instead of driver negligence. This means there’s a chance your insurance premiums could drop if liability shifts to the vehicle manufacturers in the event of accidents and liability claims.
Traditionally, insurance rates have been based primarily on the driver's risk. However, with no human actively controlling the car, insurance companies will need to rethink how they handle potential claims. This could even lead to the development of entirely new insurance products specifically for autonomous vehicles.
As automated vehicles start appearing on Canada’s roads, there’s a growing need to update provincial insurance laws to make sure that anyone injured in a collision involving these cars can be compensated fairly and quickly. Federal vehicle safety standards also need to be revised to account for the increasing role of technology in driving.
What types of coverage will we need with self-driving cars?
While we can't be certain, we feel it's pretty safe to assume that vehicle owners will still need coverage similar to what you have now, such as third-party liability and accident benefits coverage.
While your liability coverage may look different because the fault may lean more toward the manufacturers instead of the driver, it'll still be necessary to have it if your vehicle causes an accident and injures another person or damages their property. The same goes for accident benefits, as they provide coverage for injuries you or your passengers sustain in a collision.
Some parts of Canada also require uninsured motorist coverage, which will still be important if you're involved in a collision with someone who is either underinsured or has no insurance or if you're involved in a hit-and-run. Another one is direct compensation-property damage, which will likely still stick around as it helps speed up the claims process by going through your own insurance company instead of waiting on the other involved party's insurance.
Collision coverage may become more important than ever. While the IBC reports that the risk of collisions will significantly decrease, the cost of advanced technology in self-driving cars will likely make repairs and replacements even more costly than they already are, so you'll want to have that coverage in place to help cover the costs.
The same will likely also go for comprehensive coverage. Again, with the increased costs of repairs or replacements in the event of theft, vandalism, fire, weather damage, or even collisions involving a large animal, you'll want to have comprehensive coverage to help pay for everything.
Are self-driving cars legal in Canada?
Right now, only two provinces in Canada—Ontario and Quebec—allow the general public to use driverless cars. In these provinces, you can buy and drive an autonomous vehicle with SAE level three or lower.
Learn more about car insurance with BrokerLink
While we can't say for certain what types of auto insurance we'll need in the future of self-driving cars, we can be certain that car insurance will continue to be mandatory in Canada. Our experts here at BrokerLink are ready to answer any car insurance-related questions you may have.
You can reach us by phone, email, or in person at any one of our locations throughout Canada. No matter how you choose to get in touch, a BrokerLink insurance advisor will be happy to assist you. We also encourage you to take advantage of our free online quote tool that can provide you with a competitive quote in minutes.
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