Michael Lloyd, the AA’s director of insurance said: “The proposals reflect the AA’s view that compulsory insurance should be extended to driverless cars. “This single insurer model will ensure that in the event of a collision, the not-at-fault party will be properly compensated in the way that motor insurance works now “Many questions remain to be resolved but this principle will allow for smooth handling of claims immediately after a collision and the question of liability can be sorted out in the background. The fact remains that there are issues relating to where liability will ultimately lay, especially if there is some kind of fault relating to the software operating the vehicle.”

The proposals permit insurers to develop policies in a competitive market and will form part of the planned-for Modern Transport Bill, which will set out regulations for driverless and automated vehicles.