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“Autonomous driving in cities will only work properly when nobody is driving themselves”

Dr Christoph Wetzel explains what autonomous driving means for German HDI. He is responsible for the portfolio Property/Liability/Accident/Motor on the Board of Management of Talanx Deutschland AG

You have a doctorate in economic history. Are we currently experiencing a phase of creative disruption with networked and autonomous driving, in the sense first formulated by the economist Joseph Schumpeter?

Dr Christoph Wetzel: I do not believe this is disruption in the sense that everything is going to change very quickly all of a sudden and in one fell swoop. Even though the pace of technical development has increased, we are talking here about a more extended period of time. However, it is true that new technologies entail changes. In my doctoral thesis, I wrote about stock exchanges in the 19th century and the interesting aspect of this is that many of the companies that would have been listed in something like the German DAX at the time no longer exist today. One example of this type of company would have been mining and rail enterprises.

What impact will the technical development of vehicles exert on the insurance industry?

Autonomous driving offers a lot of opportunities. Automation of specific processes that were previously carried out by drivers could prevent a lot of accidents and avoid bodywork damage. Today, the premium volume in the market is already much lower because of the large number of assistance systems. After all, drive assistants have been reducing the number of accident deaths for decades and the frequency of accidents is also declining. By the same token, cars are also getting bigger and the technology is making them more and more expensive. As a result, the level of the average claim is increasing and this is going in the opposite direction to the fall in premiums. I will give you an example: If you have to change the bumper in the latest Golf 7 because of a minor parking accident, this will cost an order of magnitude greater than you would have had to pay in previous models. This is due to the large number of sensors that have now been installed in the bumper. Insurers will therefore undoubtedly still be necessary in the future.

If cars are driving down our highways fully autonomously sometime in the future and this has completely eliminated human error from driving, will anybody still need a motor insurance policy?

You have pointed out the uncertainty here with the word “sometime” – nobody can seriously say when autonomous driving will really take over. We are already seeing cars that can drive partly autonomously on our motorways. For example, the new E Class from Mercedes. However, the legal framework in Germany at the moment still requires the driver to take the wheel at all times when any risk occurs. Quite apart from the legislation, it will certainly be some time before we will see fully autonomous cars driving in city traffic. At one point, researchers at the University of Braunschweig carried out a study looking at the percentage of road users who failed to act in accordance with the law at a road junction. What do you think was the result of the research?

Tell us.

More than 40 percent of road users failed to observe the highway code. Cars cut in on other vehicles and people simply stepped out and walked across the road. But it all worked brilliantly because everyone responded to this form of anarchy. The real issue is about how you can program this chaos into an autonomous vehicle? The fact is you have to configure the car in conformity with the statutory legislation. This means that autonomous driving in cities will only work properly when nobody is driving themselves. What’s more, a motor insurance not only provides cover for accidents but also for hail, theft, damage caused by animals and glass breakage. This kind of damage will continue to create demand for insurance.

However, depending on the decisions taken by lawmakers, liability for the consequences of accidents may in future no longer be the responsibility of the keeper but the manufacturer.

We are absolutely clear that the keeper of the vehicle should continue to hold liability if there is an accident with an autonomous vehicle. The insurer is then responsible for establishing the reason for the damage and as necessary seeking recourse from the automobile manufacturer. However, if the legislation decides that the manufacturer will be solely responsible, we also provide product liability through HDI Global SE in the Group. We are therefore concerned about another aspect.

What are you concerned about?

We are observing an attempt by automobile manufacturers to populate every customer contact point. Their objective is to create their own protected ecosystem around the automobile. For example, a special app enables its customers to easily obtain a lot of services related to their mobility through the automobile manufacturer. They can use the app to agree appointments at a service centre or generate financing offers. It is in our interest to be part of such an ecosystem.

Isn’t it possible to replace an insurer in this kind of situation?

Not if we develop products together and are able to offer outstanding claims management. These are modules that manufacturers are interested in. And we are excellent at claims management. We need to succeed in being better than the competition and develop a positive customer experience.