In recent months, the development of smart connected vehicles has accelerated significantly. Cities like Beijing, Shanghai, Hangzhou, and Shenzhen have expanded their autonomous driving testing zones, paving the way for the large-scale application of smart connected vehicles. As these vehicles transition from the realm of science fiction into everyday life, some people commend the ease and efficiency of these transportation solutions, while others express concerns over safety. Questions arise about accountability in the event of an accident involving a driverless vehicle: who is responsible? Who pays for car insurance? To address the safety risks associated with smart connected vehicles, government agencies, insurance institutions, automakers, and operators are collaborating to establish a comprehensive insurance service system.
**An Urgent Need for Safety Assurance**
Are the autonomous driving capabilities of new energy vehicles equivalent to those of smart connected vehicles? Industry experts explain that levels of driving automation are defined from L0 to L5, where L0 to L2 refers to driver assistance. Most vehicles on the market currently feature only driver assistance functionalities. Level 3, which entails conditional automation, represents a critical milestone, as it shifts the responsibility for detecting and responding to driving conditions from humans to the system. In China, Level 3 conditional automation and Level 4 high automation are transitioning from testing and demonstration phases to public road use.
In recent years, favorable policies have emerged to support the development of smart connected vehicles. Last November, a joint notice was released by several ministries, providing the first policy support for on-road testing of Level 3 and Level 4 autonomous driving. In June of this year, the Ministry of Industry and Information Technology and other departments announced a consortium of nine automakers and nine operational entities to initiate pilot projects in seven cities including Beijing, Shanghai, and Guangzhou, covering passenger cars, buses, and trucks.
In July, five departments jointly published a list of cities designated as pilot areas for the “integration of vehicles, roads, and cloud technologies,” which includes first-tier cities and various provincial capital and city-level areas. This initiative aims to establish a reliable, low-latency connected cloud infrastructure to foster the widespread application of autonomous driving through rich scenarios and robust data support.
According to the Ministry of Industry and Information Technology, data from earlier this year reveals that 17 national smart connected vehicle testing zones, seven leading vehicle networking regions, and 16 pilot cities have been established, with over 32,000 kilometers of test roads open and more than 7,700 testing licenses issued, accumulating over 120 million kilometers of testing mileage. More than 8,700 roadside units (RSUs) have been deployed across the country.
As the level of automation increases and the responsibility for driving shifts from humans to systems, smart connected vehicles reveal distinct risk challenges, leading to new insurance needs. A recent white paper on insurance innovation for smart connected vehicles published by Taiping Re and the China Asia-Pacific Reinsurance Research Center highlights that components like chips, algorithms, and sensors, as well as the overall system architecture, pose significant risks to vehicle functionality. Furthermore, when vehicle networking capabilities are active, there is extensive data exchange with external systems, raising concerns about cybersecurity and data breaches.
“Risk assurance is a foundational need in the transportation sector,” stated Li Lisong, general manager of Taiping Re (China). “Changes in the industry will eventually reflect on the insurance sector, necessitating new requirements for automotive insurance.” The insurance industry is still in the observation and contemplation phase regarding the implementation of smart connected vehicle insurance, but with rapid advancements in the industry and policy landscape, the urgency to address these challenges has increased significantly.
**Challenges in Product Development**
In the context of pilot programs for smart connected vehicle access and road testing, insurance security emerges as a critical area of research. A draft regulation from Beijing’s autonomous driving car initiatives suggests that entities utilizing autonomous vehicles for innovative activities must secure mandatory traffic accident liability insurance, carrier liability insurance, passenger accident insurance, and appropriate commercial insurance policies. Additionally, there is encouragement for insurance providers to develop products tailored to the unique features of autonomous vehicles.
Currently, existing insurance products primarily cater to traditional automobiles. Insurers lack dedicated products to address potential accidents and liabilities specific to the testing and usage scenarios of smart connected vehicles, leading to various challenges in product development.
First, there is the difficulty of liability determination. According to the white paper, traffic accident responsibility assessment typically relies on driver behavior, making liability resolution more complex for smart connected vehicles at Level 4 and below, where interactions between safety personnel or drivers and the vehicle complicate the situation. This complexity not only increases investigation costs for insurers but also extends the process for compensatory actions.
Second, there is a shift in liability responsibility. “Some pilot projects clearly state that once autonomous driving is activated, the vehicle insurance will cover initial liabilities. If there is no driver, the manufacturer or operator will be the primary responsible party,” noted Zhang Lei, CEO of Car Technology. As a result, the primary policyholder role may shift towards vehicle manufacturers, with car owners only needing to purchase limited types of insurance; under autonomous modes, vehicle owners might not need to bear premium costs.
Additionally, there are design difficulties associated with these insurance products. The relatively limited data surrounding high-level autonomous vehicles in China makes it challenging to assess risk and develop models in the same way as traditional vehicles using extensive historical claims data. While smart connected vehicles are equipped with various new sensors leading to substantial testing data, these datasets can be disorganized, incongruent, and hard to analyze. Simultaneously, the ever-evolving algorithms for autonomous driving can lead to unstable and insufficient data, complicating risk pricing for insurers.
Currently, the insurance sector is actively exploring the development of relevant products for autonomous driving scenarios. The insured products in existing smart connected vehicle demonstration operations primarily include traditional vehicle insurance, liability insurance, and accident insurance. However, smart connected vehicles also face risks such as network disruptions and cyberattacks, which existing policies do not adequately cover, rendering these vehicles vulnerable in certain contexts.
Despite progress in domestic policies and regulations for smart connected vehicle insurance, the overall framework remains in its early stages, largely centered in pioneering cities. There is no uniform standard for insurance in this domain in China, and disparities exist across local policies, which could lead to applicability issues for cross-regional operations in the future. Therefore, it’s crucial for government and regulatory bodies to stay updated on the latest technological and industrial developments, adjusting and refining relevant policies to establish comprehensive risk-sharing mechanisms, tailored specifically to the characteristics and operational behaviors of smart connected vehicles.
**Innovating with Caution**
“The technologies behind smart connected vehicles, particularly autonomous driving, are still not fully matured and will undergo rapid iterations for a considerable duration. Corresponding legal and policy frameworks are also in a state of flux,” Li Lisong observed. In the future, the roles of driving participants and responsibilities will become even more complex, necessitating continual adaptation of insurance strategies to keep pace with these evolving conditions.
At present, the landscape for autonomous driving insurance products—both domestically and internationally—remains a fertile ground for innovation. From an international perspective, companies like Tesla in the U.S. have integrated insurance as a critical component of their autonomous driving strategy, using driver behavior and vehicle performance data to enhance safety. In Japan, specific commercial insurance for Level 4 autonomous systems allows system providers to offer insurance memberships for a monthly fee, absolving hardware suppliers and equipment users from the need for direct insurance purchases or liability.
A representative from Taiping Re (China) indicated that the company has been researching smart connected vehicle-related policies and risk assessments since 2019, monitoring market conditions, technological advancements, and insurance requirements to develop suitable pricing models and innovative insurance products.
To ensure their pricing models adapt swiftly to developments in smart connected technology, Taiping Re (China) has innovatively structured dynamic models that evolve alongside growing levels of automation. As vehicles demonstrate increasingly autonomous capabilities, models adjust by modifying the weight and relevance of factors associated with driver involvement, ultimately phasing out driver-related metrics altogether.
Cai Zhiwei, vice president of China Property and Casualty Insurance Group, revealed that his company initiated the development of exclusive insurance clauses for smart connected vehicles in 2022, closely aligning with national strategies for automotive intelligent development. They have begun accumulating underwriting and claims data, laying a solid foundation for specialized product terms and practical implementations for smart connected vehicles.
“As we transition from testing to public road deployment for smart connected vehicles—currently numbering around a thousand—the claim rates are very low and stable, suggesting minimal immediate impact on business,” Cai noted. His company is committed to proactive research on industry trends and preparing innovative products in response to regulatory and industry requirements while prioritizing the delineation of human versus system responsibilities and addressing diverse consumer needs for smart connected vehicle insurance.
“Given the rapid evolution of smart connected vehicle technology, which spans automotive, telecommunications, and computing sectors, relying solely on an insurance company’s expertise to provide comprehensive quality services would be challenging,” said Li Weimin, general manager of the auto insurance department at Dinghe Insurance. “Cross-industry resource integration and collaboration are essential for building an effective insurance service ecosystem for smart connected vehicles, necessitating cooperative efforts among insurers, reinsurers, automakers, operators, and insurtech firms.”
