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August 5, 2015

How Do We Insure Connected Cars?

Summary:

Should rates be higher because of hacking risk? Who owns the risk if a connected car has been hacked and gets into an accident?

Photo Courtesy of Sheri

Without any doubt, connected cars are one of the most exciting and interesting areas right now, with focus from almost every sector: motor manufacturers, insurance providers, mobile and networks and so much more.

Given the vast number of partnerships, from Apple CarPlay to Spotify to mapping providers and more, the car will be no doubt the most connected device that any of us own. Ten years ago, you jumped into a new car to test drive and wanted to see how it drove, handled and more. Today’s customer jumps in and wants to know: Can I can connect my phone? What apps can I use? And more.

However, and I think this was inevitable for us all – merely a matter of “when,” not “if” — Jeep just got hacked, and with a simple experiment that has demonstrated the catastrophic potential and risk that “connected everything” has. Fiat Chrysler (Jeep) is now recalling 1.4 million cars for an update that needs to be physically delivered — ironic that the update can’t even be delivered over the air, creating a huge cost for Jeep and an even bigger warning to the manufacturers and consumers alike.

That said, there is a good interview here on CNBC with one of the security researchers, where he says he is more afraid of distracted drivers (texting, eating, smoking, etc.) than of hacked cars.

From an insurance perspective, what are the implications here?

  • Do we price connected cars at more expensive rates because of a higher hacking risk?
  • Do we void any policy for motorists who have failed to collect their latest mandated update?
  • Do we need to update our terms and conditions to ensure that it’s the customer’s obligation to make sure her car is running the latest version of software?
  • What happens if you are in an accident with a vehicle that has been hacked? Who owns the risk?

What do you think?

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About the Author

Nigel Walsh joined Deloitte in 2016 as Partner in the Insurance Consulting team. His key focus areas include technology transformation, digital and insurtech. Prior to Deloitte, Walsh served as Vice President and Head of UK Insurance for seven years. Walsh has been actively engaged with clients across multiple lines of business as they embrace transformation.

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