AUTONOMOUS VEHICLE TECHNOLOGY:
CONSIDERATIONS FOR THE AUTO INSURANCE INDUSTRY
2013 Intelligent Transportation Systems (ITS) Technical Meeting
Monmouth College
John P. Friedman
Vice President State Government Relations
USAA
June 26, 2013
Good afternoon. I am pleased and honor to be here to talk about our
industry’s commitment to driver and highway safety and to talk about the
role of new technologies, in particular collision avoidance systems will play
in making our roads and highways safer in the future.
First about USAA. I lead USAA’s State Government Relations team. USAA
stands for United Services Automobile Association which is a provider of
financial services, including car insurance to members of the US military
and their families. USAA was formed in 1922 by army officers who also flew
airplanes and had trouble getting car insurance because flying was then
considered to be a risky occupation. USAA now serves more than 9 million
members and provides a complete array of financial products for the
military and their families.
USAA and the entire insurance industry have long been supporters of
driver safety initiatives. We were early supporters of mandatory seat belt
laws, we support various initiatives to improve driver safety, including
child passenger safety, reducing teen driving incidents, combatting driving
under the influence, improving road awareness through model-driving
simulators and challenging motorists to take “no texting” pledges. Most
recently, USAA, launched a nationwide tour to more than 10 military
installations and events to demonstrate how texting while driving impairs a
person's ability behind the wheel and increases their risk of a collision. The
tour, an extension of AT&T's "It Can Wait" initiative, supports the military
community's "101 Critical Days of Safety" program, which focuses on safety
education during the summer months between Memorial Day and Labor
Day.
These are some of the examples of our commitment to our
policyholders and represent programs that stem from a long history of
motor vehicle safety.
An important part of this history includes the
Insurance Institute of Highway Safety where our chief actuary serves on the
Board of Directors. .
The Insurance Institute of Highway Safety (IIHS) is an independent,
nonprofit research and communications organization. Established in the
1950s, the IIHS has been a leader in finding out what works and doesn't
work to prevent motor vehicle crashes in the first place and reduce injuries
in the crashes that still occur. The Institute's research focuses on counter
measures aimed at all three factors in motor vehicle crashes (human,
vehicular, and environmental) and on interventions that can occur before,
during, and after crashes to reduce losses. In 1992 the IIHS’ Vehicle
Research Center opened, including a state-of-the-art crash test facility.
(They crash cars!!) The Institute's affiliate organization, the Highway Loss
Data Institute (HLDI), gathers, processes, and publishes data on the ways
in which insurance losses vary among different kinds of vehicles.
The basic tenant of auto insurance is to insure people against personal
injury and property damage. This contract naturally lends itself to focusing
on vehicle safety improvements.
Developing insurance products that
recognize the utilization of new technologies is an organic approach to how
the industry participates in the emerging trends in vehicle automation.
WHAT’S HAPPENING NOW
A number of companies companies doing business in New Jersey and
elsewhere are on the forefront of using telematics technology. The data
from these devices has resulted in “pay-as-you-drive” insurance that allows
a policyholder to earn a performance discount based on their driving
habits. The transmission of accurate driving data lets insurers match the
price of their coverage to the actual risk posed by drivers. Factors such as
acceleration, breaking, speed, swerving, cornering and mileage help to
determine risk, but also allow for a more fair way of evaluating driver
ability.
For example, an 18-year-old male typically will have a high
premium by virtue of being lumped in with teenagers who speed and
swerve. However, if he is a cautious driver, driving a car equipped with a
telematics device might result in a lower rate based on his actual driving
pattern.
I’m sure you have all seen “Flo” on TV encouraging drivers to enroll in
Progressive Insurance Company’s “Snap Shot” program, or perhaps have
met “Brendon,” who is a shining example of an Allstate customer using the
“Drive Wise” program. Possibly you’re familiar with the recent partnership
between Ford and State Farm, where a policyholder driving a vehicle
equipped with the Ford SYNC on-board car connectivity system can upload
information directly to the insurer. At USAA, we have learned that while
parents are not so interested in “pay as you go” they are very much
interested in monitoring the driving activities of teen drivers and we are
piloting a program where a free GPS device is placed into the teen’s car and
the device transmits data about vehicle speed, acceleration, braking and ,
yes, location to a secure website so Mom and Dad can keep an eye n their
new driver. All of these initiatives represent an industry trend that will soon
become more readily accepted. In fact, analysts reporting to the HLDI
predict that the 2 million customers using telematics-based insurance today
could rise as high as 100 million by 2020.
Looking to the next level is the inclusion of collision avoidance technology
which provides limited automated control of safety functions (e.g. brakes).
Car makers are promoting these safety features more each year.
The
Highway Loss Data Institute’s recent study of Volvos outfitted with “City
Safety” concludes a measurable mitigation of frontal crashes. The analysis
looks at insurance loss data, noting that claims filed for property damage
liability coverage – the insurance that pays for damage to vehicles struck by
an at-fault driver – were filed 16% less often for the S60s than other
midsize luxury cars. For bodily injury liability claims – the coverage that
pays for injuries to people in the crash other than the insured at-fault driver
-- the S60 had 18% fewer claims. Similarly, collision coverage that pays for
damage to the at-fault driver’s vehicle, 9% fewer claims were made. This is
a very general overview of the study’s findings. Nevertheless, the data
demonstrates that safety-equipped vehicles are reducing the frequency and
severity of accidents, which ultimately may lead to lower insurance
premiums.
Of important note, however, as pointed out by the IIHS, forward collision
systems vary in efficacy because drivers may ignore alarms, they disable the
system because they find it annoying, or the system only works in
conjunction with adaptive cruise control. Volvo's “City Safety” doesn't alert
drivers before it steps in and brakes and you can't permanently disable the
feature. The human factor in all of this remains the critical challenge for all
involved with the evolution of this technology.
And there lies the test for autonomous, self-driving vehicles. Overall, the
insurance industry supports the research of this advancement, but right
now we are in learning mode as students of the technology. Companies
already consider various risk factors when underwriting premium criteria,
including driver experience, vehicle model-year and road usage. Anyone
who has bought a vehicle recently knows that you need to provide the VIN
number when you buy your policy. That allows for tracking by make and
model year and it is that will provide the hard data that will demonstrate
the impact for insurers. And driving a “Smart car” is just another risk
factor. If the smart cars become the prime target for car thieves, what you
pay for comprehensive coverage for these vehicles will be effected. In
addition, there is uncertainty about how these vehicles will change legal
liability standards. So, today, if I am driving, I am responsible and will be
held accountable in civil or in bad cases criminal court for my behavior.
But, if the vehicle drives itself or responds automatically and the accident
occurs, who is at fault? Whose insurance pays? Is the manufacturer liable?
The owner of the car?
As these technologies emerge, another issue will be the ability of drivers to
transfer from driver control to vehicle control and back.
Will these
technologies further enable distracted driving habits, already a major
problem on our roads? How will older drivers adapt to these new
technologies?
These are long-term considerations, but what about now, as we enter into a
transition period where our roadways consist of both “smart” and “nonsmart” cars? Our transportation system infrastructure is pacing with its
own technology with systems such as red light cameras, speed cameras, EZPass toll collections and electronic highway message boards.
These
measures also focus on human driver behavior with the goal of improving
safety.
However, they, too, are being challenged for their efficiency and
pose liability uncertainties.
So now we have roads with a semi-smart
infrastructure being traversed by a mix of vehicles with varying capabilities.
And have humans behind the wheels. This scenario makes for a cocktail of
consideration for insurance actuaries and underwriters alike.
There is no doubt in my mind that the benefits of emerging vehicle
technology are playing a key role in minimizing accidents.
There are
numerous incentives for drivers to own such vehicles, including the
prospect of paying less for auto insurance. As all parties involved move
forward to further enhance and develop the technology, it is critical for the
auto insurance industry to be at the table because we, too, share the
ultimate goal of saving lives.