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The Tesla Model 3, self-driving vehicles and insurance implications

shutterstock_251998009How this new car is shaking up the insurance industry

Post written by Matthew Wachter

Historians – and those in the insurance industry – may look back on March 31, 2016, as the beginning of a seismic shift in the automobile industry, and how vehicles are insured. That’s the day that American automotive and energy storage company Tesla Motors began taking pre-orders for its new flagship vehicle. Within 24 hours, Tesla racked up more than 180,000 reservations for the $35,000 Model 3. CEO Elon Musk said the company would have to “rethink production planning” because it received more orders than expected.[1] Within one week, pre-order totals topped 325,000.[2]

The Tesla Model 3 will be the first widely adopted, fully electric, plug-in motor vehicle with a distance range exceeding 215 miles. This represents a huge step in the development of  environmentally friendly and sustainable transportation.

Every Tesla Model 3 will come standard with Tesla’s patented “Autopilot” self-driving technology (which includes forward radar, a forward-looking camera, 12 long-range ultrasonic sensors positioned to sense 16 feet around the car in every direction at all speeds and a high-precision digitally controlled electric assist braking system). Autopilot allows Tesla vehicles to steer within a lane, change lanes with the simple tap of a turn signal and manage speed by using active, traffic-aware cruise control.

Digital control of motors, brakes and steering helps avoid collisions from the front and sides and prevents the car from wandering off the road. The car can even scan for a parking space, alert you when one is available and parallel park on command.[3]

The implications for the insurance industry are huge. Are electric vehicles safe and reliable? How do we adequately underwrite self-driving vehicles? What are the liability concerns in the event of an accident?

If a car can handle most tasks without the driver exerting control, it could be considered a class-3 autonomous vehicle. Several states, including California, Nevada, Florida and Michigan, would require the driver of a class-3 vehicle to have special registration.[4] But hands-free driving doesn’t negate other laws. For example, New York law requires that drivers have one hand on the wheel at all times, and other states prohibit talking on the phone or texting while driving, even if this new technology would make these activities safer.

The world of electric and self-driving cars will continue to rapidly expand, and industry experts predict there will be 10 million self-driving vehicles on the road by 2020. It will be up to the insurance industry and lawmakers to adequately prepare for this exciting new technology.

BIO: Matthew Wachter, an attorney and regulatory compliance analyst for Westfield Group, has more than 10 years of insurance and legal experience. He lives in Akron, Ohio, with his wife, Karen, and Rottweiler, Lola.

[1] http://www.pcmag.com/news/343566/tesla-model-3-sales-not-too-shabby

[2] https://www.teslamotors.com/blog/the-week-electric-vehicles-went-mainstream

[3] https://www.teslamotors.com/blog/your-autopilot-has-arrived

[4] http://www.wsj.com/articles/tesla-electric-cars-soon-to-sport-autopilot-functions-such-as-passing-other-vehicles-1431532720

 

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