New challenges ahead for insuring aftermarket autonomous solutions, Allstate’s Geoff Williams tells Louis Bedigian.

Mobility is expected to change with a plethora of ground-breaking innovations, providing safer, cleaner transportation in a less congested environment. That’s great for consumers but the mobility revolution poses new challenges for insurance companies. The current strategy for insuring automobiles might need to be replaced when autonomous vehicles arrive. Aftermarket upgrades – designed to turn conventional automobiles into autonomous vehicles – could add another layer of complexity.

“While we have advanced safety features, the overall rate of accidents are going up,” said Geoff Williams, vice-president of automotive at Allstate. “These things are improving safety but we haven’t reached an inflection point because the rate of accidents haven’t dropped.”

Williams said that it is hard to quantify how a new ADAS feature – whether something from a carmaker or developed by another party – will impact the safety of a vehicle. Consequently, insurers have no way of knowing if it will be capable of reducing the frequency or severity of accidents. This makes it difficult to form a proper insurance rate. Said Williams: “Once we get into some of these autonomous features, particularly if we get into the aftermarket world, what does the testing look like? If the feature is from an OEM today, you take it back to the OEM and fix it. If you’re putting aftermarket software in there, okay, you’re fixing it – what is the testing going to cost there? There’s some unknowns along the way.”

For now, he is looking at how price, regulations and legislation will affect aftermarket autonomous solutions. He said there are currently three components that impact the price of insurance: location, make and model, and the driver’s personal characteristics (age, number of accidents, etc.) “The challenge we have is that we don’t have any loss experience on the autonomous side of things,” said Williams. “We have limited knowledge regarding AV capabilities. Tesla’s out there today, so we’re starting to gather information on that but when you get into Level 3, what’s the driver’s aptitude to take over driving at 50mph?”

Thus, if an aftermarket upgrade arrives next year, insurers will probably analyse its value and price that into the insurance policy of anyone who upgrades. Drivers would need to report any, and all, autonomous upgrades to their insurance companies or their new features may not be covered. That may change as cars become smarter, better connected and more capable of delivering real-time driver and vehicle information. Williams added: “Today we might have some heavier weighting on location and personal characteristics. Does that change when we put more of that on the vehicle and we can do it on more of a real-time basis?”

Too many regulations to count

Insurers will also face new challenges from the regulatory environment. There are different insurance departments for each of the 50 states and Williams said they are all unique. “They would have to approve what we’re doing because they want to make sure that it’s fair and equitable,” he explained. “Those approvals are based on actuarial support.”

Since there are still a lot of unknowns regarding all forms of autonomous driving, regulators might be sceptical. Even in the best-case scenario – where carmakers, aftermarket solution manufacturers and insurers are ready to launch – any number of state regulators could delay or hinder deployment.

Nevada regulators have said they won’t stand in the way of automakers that are ready to deploy but what about federal legislation? That poses yet another challenge, both for autonomous vehicles and the way they may be insured. Said Williams: “There’s little to no laws or court cases to inform liability. When you are in autonomous mode, does that go to product liability or is that on the personal insurance side of thing? Those things are starting to be documented right now.”

Saving lives and lowering rates

Insurance rates have yet to decline in the United States, mainly owing to the loss cost associated with insuring a vehicle. That may not change if the number of accidents continues to increase along with the repair fees associated with expensive ADAS features. That said, Williams has a positive outlook on the future of driver safety. “I think the frequency might start going down because of the advanced safety features, whether you want to call that automated or not,” said Williams.

In the meantime, he expects the cost of repairs to increase even if accidents decline but he believes the day will come when insurance rates decrease as well. This would be a win-win for everyone. “Somewhere along the way the rate of accidents will go down at a faster rate,” said Williams. “Then the repair costs will go down and you’ll be paying lower rates. I wouldn’t say ‘if’ that’s going to happen – it’s a matter of when and how long that happens because there will be safer cars.”

[Ins.Bedigian.2017.07.21]

Mobility is expected to change with a plethora of ground-breaking innovations, providing safer, cleaner transportation in a less congested environment. That’s great for consumers but the mobility revolution poses new challenges for insurance companies. The current strategy for insuring automobiles might need to be replaced when autonomous vehicles arrive. Aftermarket upgrades – designed to turn conventional automobiles into autonomous vehicles – could add another layer of complexity.

“While we have advanced safety features, the overall rate of accidents are going up,” said Geoff Williams, vice-president of automotive at Allstate. “These things are improving safety but we haven’t reached an inflection point because the rate of accidents haven’t dropped.”

Williams said that it is hard to quantify how a new ADAS feature – whether something from a carmaker or developed by another party – will impact the safety of a vehicle. Consequently, insurers have no way of knowing if it will be capable of reducing the frequency or severity of accidents. This makes it difficult to form a proper insurance rate. Said Williams: “Once we get into some of these autonomous features, particularly if we get into the aftermarket world, what does the testing look like? If the feature is from an OEM today, you take it back to the OEM and fix it. If you’re putting aftermarket software in there, okay, you’re fixing it – what is the testing going to cost there? There’s some unknowns along the way.”

For now, he is looking at how price, regulations and legislation will affect aftermarket autonomous solutions. He said there are currently three components that impact the price of insurance: location, make and model, and the driver’s personal characteristics (age, number of accidents, etc.) “The challenge we have is that we don’t have any loss experience on the autonomous side of things,” said Williams. “We have limited knowledge regarding AV capabilities. Tesla’s out there today, so we’re starting to gather information on that but when you get into Level 3, what’s the driver’s aptitude to take over driving at 50mph?”

Thus, if an aftermarket upgrade arrives next year, insurers will probably analyse its value and price that into the insurance policy of anyone who upgrades. Drivers would need to report any, and all, autonomous upgrades to their insurance companies or their new features may not be covered. That may change as cars become smarter, better connected and more capable of delivering real-time driver and vehicle information. Williams added: “Today we might have some heavier weighting on location and personal characteristics. Does that change when we put more of that on the vehicle and we can do it on more of a real-time basis?”

Too many regulations to count

Insurers will also face new challenges from the regulatory environment. There are different insurance departments for each of the 50 states and Williams said they are all unique. “They would have to approve what we’re doing because they want to make sure that it’s fair and equitable,” he explained. “Those approvals are based on actuarial support.”

Since there are still a lot of unknowns regarding all forms of autonomous driving, regulators might be sceptical. Even in the best-case scenario – where carmakers, aftermarket solution manufacturers and insurers are ready to launch – any number of state regulators could delay or hinder deployment.

Nevada regulators have said they won’t stand in the way of automakers that are ready to deploy but what about federal legislation? That poses yet another challenge, both for autonomous vehicles and the way they may be insured. Said Williams: “There’s little to no laws or court cases to inform liability. When you are in autonomous mode, does that go to product liability or is that on the personal insurance side of thing? Those things are starting to be documented right now.”

Saving lives and lowering rates

Insurance rates have yet to decline in the United States, mainly owing to the loss cost associated with insuring a vehicle. That may not change if the number of accidents continues to increase along with the repair fees associated with expensive ADAS features. That said, Williams has a positive outlook on the future of driver safety. “I think the frequency might start going down because of the advanced safety features, whether you want to call that automated or not,” said Williams.

In the meantime, he expects the cost of repairs to increase even if accidents decline but he believes the day will come when insurance rates decrease as well. This would be a win-win for everyone. “Somewhere along the way the rate of accidents will go down at a faster rate,” said Williams. “Then the repair costs will go down and you’ll be paying lower rates. I wouldn’t say ‘if’ that’s going to happen – it’s a matter of when and how long that happens because there will be safer cars.”

[Ins.Bedigian.2017.07.21]

TU-Automotive ADAS & Autonomous USA 2017

02 Oct 2017 - 03 Oct 2017, NOVI, USA

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