 Safety, liability, and insurance markets in the age of automated drivingDaniel Vignon and Sina Bahrami Transportation Research Part B: Methodological, 2025, vol. 191, issue C Abstract: This paper investigates two fundamental questions related to safety and insurance in the age of automation. First, we touch upon the question of safety and liability under infrastructure-assisted automated driving. In such an environment, automakers provide vehicle automation technology while infrastructure support service providers (ISSPs) provide smart infrastructure services. Additionally, customers can receive coverage for accidents from either of these actors but also from legacy auto insurers. We investigate the effect of market structure on safety and accident coverage and show that an integrated monopoly provides full coverage and fully accounts for accident costs when choosing safety levels. However, in the Nash setting, even though full coverage obtains, lack of coordination leads to partial internalization of accident costs by the automaker. Moreover, multiple equilibria might exist, some of them undesirable. We show that, both in the presence and absence of legacy insurance, an appropriate liability rule can induce optimal safety levels under the Nash setting. Our second question concerns itself with the role and welfare effects of the availability of legacy auto insurance in the age of infrastructure-assisted automated driving. Our analysis shows that the industry is not necessary for optimal coverage when the cost of accidents is known in advance and all possible accident scenarios are contractible. In fact, their presence can even harm safety, even though it ensures full coverage for accidents. When only insurance contracts with capped liability for automakers and ISSPs are available and in a monopolistic environment, legacy insurance potentially harms welfare. This highlights the important role of market structure in assessing the future of insurance in the age of automated driving and lays the groundwork for future investigations in this direction. Keywords: Driving automation; Automated vehicles; Infrastructure-assisted automated driving; Safety; Insurance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:transb:v:191:y:2025:i:c:s019126152400239x Ordering information: This journal article can be ordered from DOI: 10.1016/j.trb.2024.103115 Access Statistics for this article Transportation Research Part B: Methodological is currently edited by Fred Mannering More articles in Transportation Research Part B: Methodological from Elsevier |
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