Once firmly in the realm of sci-fi, self-driving cars are rapidly becoming a reality. In 2022, the Highway Code was changed to contain a section on the use of automated cars, including this line: “While an automated vehicle is driving itself, you are not responsible for how it drives, and you do not need to pay attention to the road.” That’s exciting news for the daydreamers among us, the reality is that most automation is way less sophisticated than that. Here we take a look at what the so-called 5 levels of automation actually are – and what they mean for the future of insurance.
Level 1 automation.
This is where features aid driving in certain situations, but do not take control of the car – adaptive cruise control is, for instance.
In terms of impacting your insurance, these cars may be deemed safer than older models without such features – and therefore cheaper to insure. But that’s about it.
Level 2 automation.
At this level of automation the car is taking both latitudinal and longitudinal control. Or in other, less fancy words, it’s doing the steering, accelerating and breaking. However, at this level drivers still need to be constantly ready to step in.
Today’s Advanced Driver Assistance Systems (ADAS) like ‘lane change mode’ or ‘self-parking’ would be examples of level 2 automation. As the name suggests, this level is still assistance more than anything. The human driver is the one responsible for making sure the lane change, parking manoeuvre or whatever else is performed safely.
It’s important to note that as far as the Highway Code goes, assisted driving is not considered as an example of an automated car driving itself:
“If you are driving a vehicle with assisted driving features, you MUST stay in control of the vehicle.”
With very few exceptions, level 2 is the current ceiling for automated cars currently out on our roads.
Level 3 automation.
Due to the complexity involved, very few manufacturers have reached these heady heights just yet. But more may be about to – and sooner rather than later.
At level 3 automation, the car can take over all aspects of the task of driving – but not in all circumstances. Drivers will have to be ready to retake control if prompted (so you can’t just pop on your Deep Chill playlist and drift off). However, while self-driving mode is engaged, you can take your attention off the road (so you can at least scroll through your playlist).
This level is where things get interesting from an insurance point of view. In 2022 the Law Commission of England and Wales and the Law Commission of Scotland put out a joint report recommending that when a car is in a true driverless mode:
“The person in the driving seat would no longer be responsible for how the car drives. Instead, the company or body that obtained the authorisation (an Authorised Self-Driving Entity) would face regulatory sanctions if anything goes wrong.”
Those two sentences could potentially have a massive impact on how car insurance works – a topic we’ll dive into after a quick look at the last two levels of automation.
Level 4 automation.
At level 4, the car will handle most situations, and the human driver would only be prompted to take control if something comes up that’s beyond the car’s abilities – like really bad weather. This is essentially a reversal of what happens at level 3, where the car can drive itself in some conditions – but autonomy is the exception rather than the rule.
Level 5 automation.
Goodbye driver!
This final level of automation is the point at which you don’t even need a human in the car. The vehicle can handle every aspect of the journey on its own – allowing you to be a passenger and nothing more.
How will the 5 levels of automation change car insurance?
If human drivers aren’t going to be legally responsible for accidents, it stands to reason that they won’t be considered liable in the case of an accident. From there it follows that smart insurers will be offering discounted premiums for those times where their human customers aren’t the ones driving. Afterall, when you’re not driving, why should you be paying for insurance?
For a lot of insurers, moving through the 5 levels of automation would mean a massive shakeup. In fact, it’d be about as big a leap as it was for the car manufacturers to reach level 3 automation in the first place. It would mean changing their pricing, their technology platforms, and their underlying business models.
Pricing reactively based on what’s happened in the past won’t be good enough. They’ll have to be able to do things interactively – to respond to changes in risk as and when they happen.
And that’s going to be a headache. Well, for traditional insurers at least.
For some newer players, the brave new world will be quite a lot like the one we’re in now…
Interactive insurance is already here.
At By Miles we already use real time data to offer dynamic pricing. That’s a fancy way of saying, we change our pricing based on what drivers are doing at a given moment, right there and then.
With our pay-by-mile policies, what you pay is based on how far you drive. If your car’s parked, you’re saving money. And that starts the moment you park. You don’t wait for renewal to see a saving, or hang about hoping an algorithm will smile on you and give you a lower ‘driving score’. You do something that lowers your risks and, in the turn of the key, your insurance costs go down.
For us, the idea of responding to risk in real-time isn’t new or disruptive at all. It’s how we’ve always done things. Putting a pause on premiums when someone puts their car in self-drive mode isn’t really any trickier than pausing them when they park. You just need to have the right data.
When it comes to collecting mileage data, many of our members use our lovely little Miles Tracker to share information with us. But others skip the device out altogether and use their smart cars to link directly with our By Miles Connect platform.
In future, that’ll give us a direct route to knowing instantly when our members have gone into self-driving mode – allowing us to price accordingly. And for our members, that’ll mean more chances to save.
Talking of which…
If you’re a lower mileage driver, you don’t need to wait around for a smarter kind of insurance. Our pay-by-mile policies could save you money in the here and now. Grab a quote and find out.
