The automobile industry is experiencing one of its most significant changes with the introduction and growing popularity of autonomous cars.

Experts predict there will be 23 million autonomous vehicles on the road by 2035. While benefits are expected from these innovative arrivals such as fewer crashes, autonomous vehicles are also raising issues and challenges around insuring them.

Who is at fault?

A popular question asked by drivers, auto manufacturers, and insurance companies is, “Who is at fault when an accident with an autonomous vehicle occurs?”

Even when the cars involved are being driven conventionally, determining who is at fault in any auto accident can be a complex process.. For a driver to be deemed “at-fault” for a crash, they must be deemed to have been more than fifty percent responsible for causing it, even if the circumstances were out of their control. For example, if a driver hits black ice and loses control of their vehicle, hitting another car and causing damage, the first driver would be at-fault for the accident.

In most states, when a driver is determined to be at-fault for the accident, their insurance company is responsible for paying all damages, including medical expenses and property damage. Some states are considered no-fault states because they require personal injury protection (PIP) insurance. In these states, each driver’s insurance pays the driver’s medical expenses from an accident.

Disrupting the auto insurance industry

The rise of autonomous vehicles on the road changes how carriers view fault. If there is no driver, and the autonomous vehicle caused an accident, who is liable for paying the damages?

Some experts also predict the shift to driverless vehicles will create a greater need for shared driving services, in which cars are not owned by individuals. Shared vehicle fleets will decrease the requirement for drivers’ need to buy brand new cars, along with the need for individual auto insurance policies.

The prospect of the shift to sharing is forcing insurance carriers to contemplate changes, especially since they risk losing 80% of their auto business by 2040. New insurance coverage types will define if the manufacturer, ride-sharing company or passenger renting the driving time will be responsible if and when accidents occur.

Taking action

Car manufacturers, tech companies, and the government face a difficult road in getting all the puzzle pieces together to make autonomous vehicles a success. But some are not sitting and waiting for insurance carriers to develop a solution. They’ve already taken action to stay ahead of the risk involved and avoid repercussions.

Waymo

Waymo, a self-driving technology company, recently came to an agreement with Trov, an insurance startup for their expected 2018 launch, in Arizona. Trov has devised on-demand insurance for passengers that is triggered by Waymo’s software. The insurance will cover medical expenses for the passenger when an accident occurs, as well as trip interruption and property loss expenses.

Tesla

Tesla has been taking great strides to convince insurers to better understand the autonomous features on its vehicle, such as autopilot. After a report that showed a 40% decrease in Tesla’s crash rate with the introduction of the autopilot capability, auto insurer Direct Line responded by offering a 5% discount to drivers that utilize the feature. As Direct Line continues to track the impact of autopilot on accidents, the company hopes the data it gathers will convince other insurers that autonomous vehicles are a safe option for drivers and insurance carriers alike.

Direct Line isn’t the only carrier that noticed the decrease in Tesla crashes. An insurer known as Root, also offers discounts to Tesla drivers, which it calls a “self-driving car discount”. The company tracks driving habits using a mobile app that measures “auto-steer eligible miles,” and then applies a tiered discount based on the number of miles driven.

Michigan

In 2016, Michigan became the first state to pass full legislation on autonomous vehicles and insurance. The legislation stipulates that if a driverless vehicle causes an accident, the liability falls on the auto manufacturer.

As autonomous vehicles continue to increase in popularity, insurance carriers need to make significant changes to protect drivers and passengers fully. In the meantime, more innovations like these are likely from manufacturers, rideshare services and insurance companies alike.

Maxime Rieman is Product Manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.