An Analysis of Economically Efficient Insurance Schemes for Automated Vehicles

Abstract

Automated vehicles have the potential to have a profound impact on the automobile insurance industry. Preliminary research suggests that various automation systems are correlated with a drastic reduction in the frequency of insurance claims. However, American companies have yet to offer unique plans for customers who own vehicles equipped with an automation system, thereby resulting in economic inefficiency. This thesis suggests various insurance schemes that are designed to insure automated vehicles in an economically efficient manner. First, this thesis provides an overview of the automobile insurance industry and an overview of automated vehicles. Afterwards, the dilemma automated vehicles pose to current liability laws is also examined. This is because the legal treatment of vehicles equipped with automation systems will have a significant effect on how they are insured. Next, before offering suggested insurance schemes, the results of a preliminary analysis on the effect of automation systems on insurance claims are examined. The thesis concludes with a theoretical analysis of the impact automation systems will have on various sectors of the economy once they achieve greater market penetration.