AUTONOMOUS VEHICLE TECHNOLOGY:
CONSIDERATIONS FOR THE AUTO INSURANCE INDUSTRY
Christine O’Brien
President, Insurance Council of New Jersey
The
University Transportation Resource Center
Connected Vehicles Symposium, Rutgers University
2nd
June 17, 2013
Good afternoon. Thank you for the opportunity to participate in this exciting forum to discuss
emerging vehicle technology and the role that the auto insurance industry will play in
enhancing driver safety.
My goal today is to illustrate the commitment that insurance
companies currently have to collision avoidance technology and to the future development of
autonomous vehicles.
In addition, I will highlight a recent study indicating measurable
differences in insurance claims as a result of forward collision avoidance systems and touch
upon potential liability concerns.
As president of the Insurance Council of New Jersey, I oversee the day-to-day operations of a
trade association that represents 18 New Jersey licensed property/casualty insurance
companies. Collectively we underwrite over 50% of auto, homeowners, worker’s compensation
and commercial policies in the state marketplace. Each company has dedicated itself to various
initiatives to improve driver safety, including child passenger safety, reducing teen driving
incidents, combatting driving under the influence, improving road awareness through modeldriving simulators and challenging motorists to take “no texting” pledges. 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. Part of this history includes the Insurance Institute of
Highway Safety.
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. 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
Several insurance 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. All of these initiatives represent an
industry trend that will soon become the norm. In fact, aanalysts 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. As I’m sure you’re aware, 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. Driving a “Smart car” is just another risk factor.
However, once everything is fully automated, how is liability going to be determined in the event of an
accident? Is the manufacturer liable? The owner of the car? The driver?
These are long-term considerations, but what about now, as we enter into a transition period where our
roadways consist of both “smart” and “non-smart” cars? Our transportation system infrastructure is
pacing with its own technology with systems such as red light cameras, speed cameras, EZ-Pass 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.