Autonomous Vehicles in the UK — Insurance Challenges Ahead

As an FCA-authorised expert broker with over 900,000 policies arranged, WeCovr is at the forefront of the evolving motor insurance landscape. This article explores the profound impact autonomous vehicles will have on motor insurance in the UK, demystifying the challenges and opportunities for drivers, businesses, and fleet managers.

WeCovr explores how self-driving tech could change motor insurance

The rumble of change is on the horizon. For over a century, motor insurance has been built on a simple premise: a human driver is in control. But what happens when the driver is no longer human? The arrival of autonomous vehicles (AVs), or self-driving cars, is set to tear up the rulebook, presenting one of the biggest shake-ups the UK insurance industry has ever faced.

From questions of liability in an accident to the very nature of risk itself, this technological leap forward requires a complete rethink of how we protect our vehicles and ourselves. We'll explore the legal framework being built, the new risks emerging, and how your car, van, or fleet insurance policy will need to adapt.

First, A Refresher: Your Legal Motor Insurance Obligations in the UK

Before we look to the future, it's essential to understand the here and now. In the UK, it is a legal requirement to have at least third-party motor insurance for any vehicle used on roads or in public places. Driving without valid insurance carries severe penalties, including points on your licence, unlimited fines, and even disqualification.

Here’s a breakdown of the standard levels of cover:

For businesses and fleets, the obligations are similar but often more complex. Business car insurance is needed if you use your vehicle for work-related purposes beyond commuting. Fleet insurance is a cost-effective solution for businesses managing multiple vehicles, providing a single policy, renewal date, and point of contact.

Key Insurance Concepts Explained

• No-Claims Bonus (NCB) / No-Claims Discount (NCD): A discount on your premium for each year you go without making a claim. It’s one of the most significant factors in reducing your insurance costs.
• Excess: The amount you must pay towards any claim you make. A higher voluntary excess can lower your premium, but you must be able to afford it if you need to claim.
• Optional Extras: These allow you to tailor your policy. Common extras include breakdown cover, legal expenses cover (to help recover uninsured losses), and a guaranteed courtesy car.

What Exactly Are Autonomous Vehicles? The Official Levels Explained

The term "self-driving" is often used as a catch-all, but in reality, vehicle automation exists on a spectrum. The Society of Automotive Engineers (SAE) defines six levels, which have been adopted globally as the industry standard. Understanding these is key to grasping the insurance implications.

As we transition from Level 2 to Level 3, the insurance landscape changes dramatically. At Levels 0-2, the driver is always liable. At Level 3 and above, the vehicle itself can be considered 'in control', which brings us to a critical piece of UK legislation.

The UK's Legal Roadmap: The Automated and Electric Vehicles Act 2018

The UK government has been proactive in preparing for this shift. The cornerstone of its strategy is the Automated and Electric Vehicles Act 2018 (AEVA). This forward-thinking law was designed to answer one of the most pressing questions: If a self-driving car crashes, who pays?

The AEVA establishes a simple and effective 'single insurer' model. Here’s how it works:

1. The Victim is Protected: If you are injured or your property is damaged by an autonomous vehicle when it is in self-driving mode, you claim against that vehicle's insurer, just as you would today. You will not have to prove whether the human driver or the car's technology was at fault.
2. The Insurer Pays Out: The insurer is liable to pay the compensation for the accident. This ensures victims are not left in legal limbo, trying to sue a global car manufacturer or a Silicon Valley tech company.
3. Insurers Recover Costs: The Act then gives the insurer the right to recover the costs from the party that was actually at fault, most likely the vehicle manufacturer or software developer, under product liability laws.

This clever system keeps the claims process simple for the public whilst creating a legal mechanism to hold manufacturers accountable for the performance of their technology. An updated Automated Vehicles (AV) Bill is expected to pass into law in 2025, further clarifying the legal responsibilities of manufacturers and the definition of 'self-driving'.

The Core Insurance Challenges of Self-Driving Cars

Whilst the AEVA provides a framework, the transition to widespread autonomous driving presents a host of complex challenges for insurers, manufacturers, and drivers.

The Liability Shift: From Driver Error to Product Fault

According to the Department for Transport, human error is a contributing factor in nearly 90% of all road collisions. As autonomous systems take over, this is expected to change fundamentally. Accidents will still happen, but the cause will more likely be a sensor failure, a software bug, or a flawed algorithm rather than a moment of driver inattention.

This represents a monumental shift for the motor insurance UK market:

• From Personal to Product Liability: Insurers have spent a century building sophisticated models to price the risk of individual drivers based on factors like age, experience, and claims history. In an autonomous future, they will need to become experts at pricing the risk of a specific vehicle's make, model, software version, and maintenance record.
• A New Claims Process: Investigating a claim will no longer be about interviewing witnesses and drivers. It will involve forensic analysis of vehicle data to determine if the car or the human was in control, and if the system operated as the manufacturer intended.

The Power of Data: Who Sees It and Who Controls It?

Autonomous vehicles are, in essence, data centres on wheels. They are equipped with an array of sensors—LIDAR, radar, cameras, GPS—and an Event Data Recorder (EDR), similar to an aircraft's 'black box'.

This EDR will be the single source of truth in an accident. It will record crucial information, such as:

• Whether the vehicle was in autonomous mode.
• When it prompted the driver to take back control.
• Whether the driver responded in time.
• Data from all sensors leading up to the incident.

The challenge for insurers, regulators, and the public lies in data access and privacy. Who owns this data? How is it stored securely? How can insurers access it to validate claims without infringing on the owner's privacy? The upcoming AV Act aims to create a robust regulatory framework to manage this, ensuring data is shared securely and only when necessary for accident investigation.

Cybersecurity: The New Ghost in the Machine

If a car can be driven by code, it can also be hacked. The risk of a malicious actor taking control of a single vehicle or, in a worst-case scenario, an entire fleet, is a significant new threat that insurers must underwrite.

Cybersecurity risk will become a key component of a motor policy. Insurers will likely ask:

• How robust is the manufacturer's defence against hacking?
• How are over-the-air software updates managed and secured?
• What is the vehicle owner's responsibility in maintaining software security (e.g., using strong passwords for connected apps)?

We may see the emergence of specific cyber-attack exclusions or, conversely, new policy add-ons that provide explicit cover for incidents caused by a malicious hack.

Soaring Repair Costs and Specialist Skills

Whilst AVs promise to reduce accident frequency, the severity and cost of those that do occur could rise significantly. The sophisticated sensors that enable self-driving are expensive and often embedded in bumpers, wing mirrors, and windscreens.

This increase in repair costs will inevitably put upward pressure on premiums. Furthermore, repairs will require highly skilled technicians and specialist equipment, potentially limiting the choice of approved repairers and increasing labour costs.

How Will Your Motor Policy Change in the Autonomous Era?

Your motor insurance policy in 2035 could look very different from today's. The focus will shift away from the driver and onto the vehicle itself.

• New Risk Factors: Traditional factors like your age, profession, and No-Claims Bonus may become less relevant for pricing the autonomous portion of your journey. New factors will emerge:
  • The vehicle's safety and security rating.
  • The software version it is running.
  • How consistently you apply software updates.
  • The geographical areas where you allow the car to self-drive.
• Hybrid Policies: For the foreseeable future, most vehicles will operate in both human-driven and autonomous modes. Policies will need to reflect this duality, with different risk calculations and potentially different excess levels applying depending on who—or what—was in control at the time of an incident.
• The Future of the No-Claims Bonus: The NCB is a reward for safe driving. But if you haven't been driving, should you be rewarded? The NCB concept will need to evolve. It might be replaced by a 'No-Incident Bonus' or a discount based on maintaining your vehicle's software and systems correctly.

As an expert broker, WeCovr is already working with our panel of insurers to understand these future risks. Our role is to help you navigate this transition, ensuring you have the right cover for your vehicle, whether it’s a standard car today or a Level 4 AV tomorrow. We can also help you secure discounts on other insurance products, such as home or life cover, when you purchase a motor policy with us.

A New Landscape for UK Fleet and Business Insurance

For businesses that rely on vehicles, AVs offer a tantalising prospect of increased efficiency, safety, and productivity. The Association of British Insurers (ABI) predicts that highly automated vehicles could deliver significant economic benefits.

Potential Benefits for Fleets:

• Enhanced Safety: A dramatic reduction in human-error accidents could lower claim frequencies and improve driver safety.
• Lower Operating Costs: Optimised driving patterns could reduce fuel consumption and wear and tear.
• Increased Productivity: Drivers could use travel time for administrative tasks when the vehicle is in autonomous mode.

New Challenges for Fleet Managers:

• Mixed Fleets: Managing a fleet with a mix of human-driven vans, Level 2 assisted cars, and Level 4 autonomous lorries will create immense complexity for insurance and risk management.
• Driver Training: Drivers will need to be trained not just to drive, but to supervise an autonomous system and handle emergency handovers correctly.
• Software Management: Ensuring every vehicle in the fleet has the latest, most secure software will be a critical and ongoing task.

Specialist fleet insurance will be more crucial than ever. A broker like WeCovr, with experience in complex commercial and fleet insurance, can help businesses develop a strategy that embraces the benefits of AVs while mitigating the new risks.

How UK Drivers and Businesses Can Prepare for the Change

The autonomous revolution won't happen overnight, but the groundwork is being laid now. Here’s what you can do to stay ahead of the curve:

1. Understand Your Current Tech: Many new cars already have Level 1 or 2 features (ADAS - Advanced Driver-Assistance Systems). Read your vehicle's manual to understand what they do and, more importantly, what their limitations are. Never become complacent or over-reliant on them.
2. Stay Informed: Keep an eye on changes in UK law, such as the full implementation of the AV Act. Understanding the legal definition of 'self-driving' will be crucial when you purchase a vehicle with these capabilities.
3. Prioritise Software Updates: Just like your smartphone, a connected car's software needs to be kept up to date to patch security vulnerabilities and improve performance. In the future, failing to install an update could even have insurance implications.
4. Speak to an Expert: The world of motor insurance is becoming more complex. Using an independent, FCA-authorised broker gives you access to expert advice and a wide range of providers. We can help you compare policies to find the best car insurance provider for your specific needs, whether you're insuring a family car, a commercial van, or an entire fleet.

Frequently Asked Questions (FAQs)

Will my insurance be cheaper with a self-driving car?

In the long term, it is widely expected that the reduction in accident frequency will lead to lower overall insurance costs. However, in the short to medium term, premiums may actually rise. This is due to the high cost of the technology, expensive repairs for sensors and cameras, and the new risks like cybersecurity that insurers must cover.

Who is liable if my self-driving car crashes in the UK?

Under the Automated and Electric Vehicles Act 2018, if your car is in a valid self-driving mode and has an accident, your insurer will be responsible for paying compensation to any victims. The claims process for the public is kept simple. The insurer may then use product liability law to recover its costs from the vehicle manufacturer if the technology was found to be at fault.

Do I still need a driving licence for an autonomous vehicle?

Yes. For the foreseeable future, including for vehicles with Level 3 and Level 4 automation, you will still need a valid UK driving licence. This is because the driver must be qualified and able to take back control of the vehicle when requested or when the system reaches its operational limits. Only with Level 5 'full automation', where a car has no steering wheel or pedals, would a licence potentially become unnecessary.

The road ahead is complex, but the direction of travel is clear. Autonomous technology is poised to make our roads safer and our journeys more efficient. Navigating the insurance challenges this brings requires expertise and foresight.

Ready to ensure you have the right motor insurance for today's roads and tomorrow's technology? Get a free, no-obligation quote from WeCovr and let our experts find the best policy for you.