The dream of driverless cars and a $42bn industry

With the exception of ‘petrol heads’ the concept of the driverless car has been the dream of the automotive industry and consumers for decades.

Car manufacturers have begun gradually introducing ‘assisted driving’ features into their vehicles such as cars that brake and park automatically and are able to stay within their lanes independently. It is seen as a step towards fully-autonomous cars, which can drive without any human input and could be on roads in as little as five years.

According to analysts at Boston Consulting Group, the driverless car market could be worth $42bn by 2025. However, with the first death of a driver in June 2016 in the US, due to a defect in a test car or driver error, many are asking about the legal and regulatory landscape surrounding this relatively unproven technology.

First death in driverless car raises questions

The death, which happened in the US in June 2016, occurred as the driver of a Tesla Model S was using a new feature called Autopilot. The cause of the accident is not yet known but some reports have suggested there will be a US federal investigation which will shed light on why the car crashed. For manufacturers, understanding the driver’s role in the crash will offer context for an incident which has taken away some of the charm from driverless technology.

Though the Tesla vehicle is not technically a driverless car, Autopilot is arguably the most sophisticated partially-autonomous system on the roads according to analysts. However, Google has been working to make a truly driverless car. The two companies are currently the biggest names in autonomous vehicle technology and development according to a June 2016 article in The Atlantic. According to The Atlantic, Tesla’s strategy is incremental with the idea of adding one sophisticated assistive-driving feature at a time, to eventually end up with a fully autonomous vehicle. Tesla emphasises that its Autopilot feature requires a person to stay completely focused behind the wheel, even if the car does much of the driving. Google, on the other hand, is designing its vehicles for full autonomy from the start – a ‘level 4’ system, as it is known in the driverless world – which involves the car doing all of the driving without any human intervention necessary.

UK and Europe push towards driverless technology

The UK is already at the forefront of R&D in driverless technology. In February 2016 Jaguar Land Rover announced it would invest £5.5m in a project aimed at testing connected and autonomous vehicle technologies on UK roads. The three year trial, called the UK-CITE (UK Connected Intelligent Transport Environment) initiative, brings together a consortium of car manufacturers and communications businesses including Vodafone Group, and comes as part of a £20m investment split between eight different projects focused on driverless vehicle technology. The projects are the first to be funded from the government’s £100m Intelligent Mobility Fund. They range from developing autonomous shuttles to carry visually-impaired passengers using advanced sensors and control systems, to new simulation trials for autonomous pods to increase uptake and improve real-world trials.

Car companies jump-start industry by pledging safety and liability

In July 2016 Volvo announced plans to begin testing 100 driverless cars in London within two years, building on a programme already announced in its home nation of Sweden. Speaking at an industry event on the subject in May 2016, Håkan Samuelsson, chief executive of Volvo Cars, said his company would accept liability if one of its cars were in a collision where its technology was at fault. Volvo has so far been the only car maker to issue such a strong statement on liability. General Motors will offer a super cruise system with hands-free automated driving on freeways that have proper lane markings by 2016. However, drivers will have to be ready to take over control of the vehicle and cars will be fitted with a device designed to alert the driver to pay attention even during highway driving. Toyota said it plans to offer crash-avoidance technology in Toyota and Lexus models by 2017.

According to an October 2015 article from the BBCm Professor Sandor Veres, director of autonomous systems at Sheffield University, stated: “This bold move by Volvo can pave the way for global legislation, if other manufacturers take similar undertakings then legislation can be made simple.” He went on to say that it is also unclear whether automatically holding manufacturers liable would stand up in court – at least in the UK.

Some disagree with the idea that the roads will be safer. The Association of British Insurers (ABI) has gone against conventional wisdom and stated that driverless cars will give consumers a “false sense of security” that will lead to an increase in accidents in the short-term.  At an insurance conference in May 2016, James Dalton, an ABI director, said “there is a danger some accidents could be caused by motorists thinking they can stop paying attention to the road before the technology is sufficiently advanced.” He went on to say that the growth in features like automatic braking and lane assistance systems may give drivers a false sense of security that they can relax while their car looks after them.

However, contrary to ABI’s view, US research from the National Highway Traffic Safety Administration, suggests the number of road collisions is predicted to fall by 80% by 2035 because self-driving cars do not get distracted. In June 2016 reinsurer Swiss Re and mapping company Here estimated that collision avoidance software would wipe $20bn off insurance premiums because of fewer crashes.

Regulating for this new world

The US

As of July 2016, according to Gabriel Weiner and Bryant Walker Smith, in their report ‘Automated Driving: Legislative and Regulatory Action’ at Stanford Law, only four US states (California, Nevada, Florida and Michigan) have passed bills related to automated driving (e.g. testing on roads) while 14 have bills on committee/under consideration and 16 failed to pass any legislation.

At a federal level, in January 2016, US Transportation Secretary Anthony Foxx released a new policy updating the National Highway Traffic Safety Administration’s (NHTSA) 2013 preliminary policy statement on autonomous vehicles including investment and removing potential roadblocks to the integration of innovative, transformational automotive technology that can significantly improve safety, mobility and sustainability.

In March 2016 NHTSA also announced a 10-year $3.9bn commitment to support the development and adoption of safe vehicle automation. According to a statement, NHTSA will propose guidance to the industry on establishing principles of safe operation for fully autonomous vehicles in mid-2016.


In May 2016 a bill was announced in the Queen’s Speech that will help ensure the UK is at the forefront of the development of self-driving vehicles. Driverless cars will be tested on UK roads by as early as 2017 and the new legislation would mean that by 2020 autonomous cars can be insured under regular car insurance policies, allowing them to be driven outside of carefully controlled test conditions by real drivers.

According to TechWorld and research company IDG, Germany and Sweden are the only two countries, apart from the UK, to have conducted a review of their laws and driverless cars. German legislation has thrown a spanner in the works – it found that driverless cars do not currently comply with its legislation meaning it will take longer for them to be commercially available. Equally, Swedish driverless car trials must take place in designated areas to avoid negligence claims.

The Insurance dilemma

Driverless cars are expected to lead to a dramatic reduction in accidents but they could also shift liability for accidents from drivers to vehicle manufacturers, meaning a complete restructuring of how the industry operates. In the UK, Thatcham Research, the insurance industry’s research arm, has estimated that insurance premiums could fall by 50% by 2025 and 80% by 2040 as safety improves dramatically.

Insurers could also find themselves dealing with vehicle manufacturers, rather than drivers, as responsibility for accidents moves to those who have designed driverless car technology, forcing them to re-evaluate their business models.

The Government has pledged to amend road laws by 2018 to account for the rise of driverless cars, or cars that are semi-autonomous. This could allow for car companies to be liable for damage and injury, meaning that the companies would have to take out insurance policies.

In June 2016 UK insurance company Adrian Flux launched what it claims to be the UK’s first personal driverless car insurance policy. The policy is designed for consumers who already have driverless features in their cars, such as self-parking, or are thinking of buying a car with autopilot features. Adrian Flux said its policy would be updated as both the liability debate and driverless technology evolved.

Where does the road lead?

With technology advancing at startling rates and trials currently underway, the introduction of semi-autonomous cars will be imminent. However, all of the predicted growth depends on legislation being put into place. Policy makers in the UK, US and Europe will need to develop the necessary frameworks in conjunction with car manufacturers. In addition and alongside legislation and liability, policies will need to be developed for privacy, telecommunications and cyber security as these have also been issues hindering the final breakthrough of the technology from sci-fi into reality.

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