Tag Archives: auto insurance

Self-Driving Vehicles: A Wake-up Call

How close are self-driving vehicles to truly becoming a reality? The answer depends on who is being asked.

Automotive manufacturers may sheepishly respond with “longer than we proclaimed,” as the initial 2020-2022 predictions give way to timing that is now being held closer to the chest, according to the 2019 J.D. Power Mobility Confidence Index Study. However, this critical—albeit possibly humbling—realization brings to light the intersection of the fantasy vehicles played out on-screen in sci-fi movies and TV shows, and the complexities of the technology necessary to safely maneuver real-world vehicles on public roads in all environmental conditions.

Many consumers who had long dreamed of these fantasy vehicles have since pumped the brakes. Why? Tech failures/errors (71%), risk of vehicle being hacked (57%) and legal liability as a result of a collision (55%) are consumers’ top concerns that were uncovered in the J.D. Power study. As consumers begin to experience first-hand the integral technologies that make self-driving vehicles possible, many believe it will likely be more than a decade before they become a mainstay on public roadways.

Ultimately, one thing both groups agree on is this: Turning dream cars into real cars isn’t simple.

Effects of Real-World Elements on Self-Driving Vehicles

Automakers are put to the test when introducing safety technology in real-world situations. Sure, a vehicle will stop or swerve when it’s supposed to on a closed course, but what about on the road with other vehicles?

Recently, a Tesla Model S crash occurred when the driver had Autopilot engaged and the car hit the back of a fire truck stopped in a high occupancy vehicle (HOV) lane. The safety system is designed to temporarily ignore stationary objects in the roadway to reduce “false alarms,” but, according to one of the many findings of the resulting National Transportation Safety Board (NTSB) report, the fire truck was no false alarm. Even though the name of the technology may imply the vehicle will handle itself in any situation, it’s still imperative for the driver (or operator) to pay attention and take control if necessary, regardless of successful experience with the system’s performance in more ideal situations.

See also: How to Prepare for Self-Driving Cars  

Consumer Trust and Acceptance Needed for Adoption of Self-Driving Vehicles

No manufacturer has a ready-for-purchase, self-driving vehicle available today. The safety technology in 2019/2020 model-year vehicles is what the industry calls Advanced Driver Assistance Systems (ADAS). These include features like adaptive cruise control, forward collision warning, lane-keeping assistance systems and automatic parking, to name a few. Although truly automated features are not yet available, the driver must remain engaged regardless of what safety system is activated, even if his or her feet are off the pedals and hands are off the steering wheel. Unfortunately, consumers don’t seem to fully understand this, which will hurt future acceptance of self-driving vehicles, as crashes occur that are caused by misunderstanding of systems.

ADAS features—the building blocks for full vehicle automation—are designed to notify the driver of situations that may lead to a collision and step in if the driver fails to act. Roughly 60% of new vehicles sold today are equipped with some or all of these technologies, which the National Highway Traffic Safety Administration (NHTSA) says could reduce crashes and save thousands of lives.

However, many drivers have deemed some ADAS alerts so annoying or bothersome that they disable them. Nearly one-fourth (23%) of customers with lane-keeping and centering systems—one of the most prevalent safety technologies on the road today—fall into this category, with 61% sometimes disabling the system and possibly trying to avoid them on future vehicle purchases, according to the 2019 J.D. Power Tech Experience Index Study.

Consumers who are concerned about cars being able to drive themselves want more information about these complex systems, as well as more channels to learn how to use them or how and why they kick in. Dealers remain one of the main partners to educate consumers about what these technologies bring to the table and help consumers trust that systems are going to kick in when they’re supposed to, as well as understand when they’re working properly.

The Cost of Repairing Safety Technology

Automakers have developed incredibly rigorous standards of research and development, testing and manufacturing to ensure these technologies work reliably. However, the same cannot be said of the automotive service and repair shops we depend upon to safely fix the 13 million vehicles involved in a collision each year.

There is no clear way for consumers to know the ADAS features in their vehicle have been properly repaired following a collision even though they may receive a report or invoice stating this to be the case. This is another area where trust will help garner consumer adoption of self-driving vehicles.

The repair industry is still trying to understand and operationalize these very complicated and delicate technologies. For example, many ADAS features rely on cameras to help determine a vehicle’s position in relation to the road, stationary objects and moving vehicles or people. These cameras may be mounted in different areas depending on the vehicle’s make and model. Something as seemingly simple as replacing a cracked windshield could mean the difference on whether a particular safety system continues to properly engage, if the new windshield isn’t designed or calibrated for the correct model’s specifications.

Even though most consumers leave the repair shop trusting that their vehicles are functioning properly, given the wide disparity between manufacturers’ product offerings, the complexity of calibration that is required for these technologies and the repair facility’s capabilities, that trust is possibly misplaced.

See also: The Evolution in Self-Driving Vehicles  

It would be beneficial for the service and repair industry, car buyers and the insurance industry as a whole for automakers to develop a uniform process and governance that all repair facilities can use to verify that any repairs for vehicles equipped with ADAS features are calibrated correctly. This would help ensure the accuracy and consistency of driver assistance technology repairs through a vehicle’s lifecycle. Unfortunately, there’s no clear indication of when something like this might be put into place, which further limits the potential for fully automated vehicles to grow beyond a niche in the automotive marketplace.

The main factor in making self-driving vehicles a reality is transparency. Keeping consumers informed about all aspects of the technology they’re investing in—why they need it, how it works, when it will activate and how to tell if it’s still functioning as intended—will go a long way to keep this journey marching forward with fewer roadblocks.

4 Ways Telematics Is Improving Car Safety

Recent corrective pricing aimed at combating deteriorating loss costs across the commercial auto insurance industry has put increasing pressure on fleet managers and employees insured. Driving the point, commercial auto insurance renewal rates increased 4.5% in Q1 2019, inching toward the 6% to 12% increase predicted in 2018. Luckily, the use of telematics – specifically vision-based AI solutions – has presented an opportunity for business fleets to identify unsafe driving, analyze the conditions in which they occurred and implement measures to reduce it, thereby lowering premiums and increasing safety measures.

Currently, the automotive usage-based insurance market, which gives insurance companies the ability to quote coverage costs specific to driver behavior, has 65.1 million policyholders and is expected to grow in coming years. UBI separates itself from traditional formulaic premium quoting and serves as a voluntary policy in which drivers may pay less if they provide the insurer with access to all driving behavior up front. The tighter, streamlined insurance supply chain formed through the adoption of telematics and usage-based models ultimately benefits both the insurer and the insured.

Here are four ways telematics is evolving commercial auto insurance:

1. Improving overall safety

Safety is the top line item in both insurers’ and insureds’ objectives. By collecting data on driver speed, harsh braking, rapid acceleration, driver drowsiness, etc., vision-based AI solutions allow employers to record incidents, intervene in unsafe driver conditions and train employees to practice safer habits. By agreeing to submit behavior, actions and conditions to the insurer, drivers are generally more conscious of their surroundings and position – increasing awareness and promoting a culture of safety.

While in-cab cameras and vision-based technologies may not be able to prevent an accident in real time, they do ensure measures are taken to prevent future incidents. Captured video gives employers a passenger-seat view of employee driving behaviors and enables them to correct bad driving habits and instill better ones. From the employee, to the employer, to the insurer, having access to driver behavior data creates a safety ecosystem where all parties can manage and build on driver improvement.

See also: A Vision for 2028, Powered by Telematics  

2. Providing hard metrics

Unsafe drivers can put employers at risk for a 10% to 15% increase in insurance rates. Ultimately, the goal is to hire only safe drivers. However, mistakes do happen, which is why fleet managers turn to telematics software to help improve existing driver performance. Not only does real-time telematics enhance driver safety, but it also gives weight to the claim that a company’s drivers are safe, making premium cuts and discounts from commercial auto insurers more likely.

Companies using telematics to monitor driver behavior receive a 5% to 15% insurance discount on average. The concrete evidence provided when harnessing this data gives fleet managers peace of mind that each driver is maintaining a safe speed and obeying state driving laws. In the event of an accident, the data provided can help determine liability in a claims settlement, potentially protecting businesses from false claims and subsequent rate increases.

3. Adding a next-generation visual component

Telematics technology has been around for decades – not solely for automotive purposes, either. As it became more commonplace in fleet monitoring, traditional uses involved the collection and distribution of data to support claims and flag dangerous behavior. Now, the convergence of telematics data with video and AI, vision-based technology is giving fleet managers and insurers more in-depth, real-time insight for decision making.

The industry is starting to see the virtual and real world blend together with vision-based solutions that provide context about what is going on inside a vehicle at the time of an alert. Telematics technology previously existed to inform companies when a driver was being erratic or braking too hard, and before now little to no context was provided as to the condition surrounding the event. New vision-based video solutions are incorporating artificial intelligence and machine learning, which in some cases leads to drivers being rewarded for defensive driving when they would have previously been penalized for seemingly dangerous behavior.

4. Developing a mutually beneficial partnership

The annual accident rate for commercial fleets is around 20%, and each accident can cost an average of $70,000. Not only is this detrimental to the driver and the company employing the driver, but it also makes insuring a great risk.

See also: Advanced Telematics and AI  

The information provided through today’s telematics technology solutions allows insurers to assess potential customers and associated risk, and fleet managers to lower insurance premiums. As next-gen telematics technology continues to evolve, fleet software companies are starting to partner directly with insurance providers to give discounts to businesses that adopt telematics software to track safety and monitor assets. If drivers are continuously being recorded and reported, auto insurers are more likely to be comfortable with providing affordable coverage, knowing they can easily spot potential liabilities.

The rise in premiums and increasing renewal rates designed to combat auto insurance market instability can only be deterred through the use of telematics technology that monitors, reports and supplies driver data directly to the insurer. Engaged companies are using this solution to drive growth, reduce risk and distance themselves from the competition. This insight, on average, encourages insurance discounts that not only benefit the company but encourage drivers and their fleet managers to improve safety practices, ultimately benefiting the insurer, as well.

Getting the Full Picture on Driving Records

It’s not hard to see how drivers with histories of driving violations pose a higher risk to insurers. However, there may be another side to the story that isn’t immediately captured: A considerable portion of major driving offenses are dismissed or downgraded in the U.S. court system.

Today, 80% of drivers have access to programs that dismiss or downgrade their violations, which can obscure their driving history and mask dangerous behaviors. This means it’s important for insurers to stay abreast of new ways to help mitigate this risk and ensure they are providing customers with accurate quotes that capture the full risk profile.

Downgraded or dismissed? What does it mean?

Downgrades and dismissals can happen when courts make certain programs available. These programs are intended to ease the burden of costly tickets and ultimately help drivers stay licensed, insured and on the road. They can also take pressure off courtrooms and judges that are often backed up with cases. Unfortunately, as a result, people’s real driving violation histories may be disguised. In fact, according to TransUnion’s DriverRisk analysis, 57% of original major offenses, such as DUIs, are actually unobservable by insurers due to dismissals or downgrades. In the states evaluated, 27% of traffic tickets are outright dismissed.

See also: Smart Home = Smart Insurer! 

For example, in New Jersey, drivers can pay $250 to $350 to downgrade certain types of moving violations. A few states have programs for drivers facing a first-time DUI charge to have their case dismissed. For the cases not dismissed, these programs may add delays to the charge appearing on a state-issued driving record. Additionally, there are driving school programs available to drivers to dismiss or downgrade traffic tickets, or to remove points. There are also deferral or probation programs that can eliminate a violation from the state driving record.

So, while drivers benefit from fewer points on their license, insurers are potentially mispricing the policies for drivers whose original violations may have been obscured.

When insurers aren’t presented with the full picture, this can compromise how well premiums align with actual risks. To make things even worse, the DriverRisk study found that the more serious the violation is, the more likely it is to be dismissed or downgraded. The findings show that 41% of DUIs are likely to be dismissed, and distracted driving violations are dismissed 10% of the time. Without visibility into each driver’s actual behavior, insurers tend to spread the premium needed to pay losses associated with these risks across all policies.

This means the base rate for the average driver typically ends up being higher, effectively subsidizing the premium for the drivers with downgraded and dismissed violations. Drivers with dismissed or downgraded violations are more likely to have a loss and a higher loss cost than drivers found guilty of the violation they were ticketed for.

Details of Driving Violations

It is possible and very important for insurers to gain deeper insight into original violation information for prospective and current customers, in addition to the final disposition decisions. Insurers should seek information that includes court record data so they can provide more accurate quotes and improve adhering to their underwriting guidelines. Implementing court record violation data solutions can enable insurers to capture valuable insight into: convictions from a prior state (which may be associated with a previous driver’s license number), regardless of a change in name or address; convictions while driving outside of the resident state; tickets with dispositions other than guilty; and tickets and violations that are still active (not yet adjudicated).

See also: 5 Steps to Understand Distracted Driving  

Court record violation data is an essential tool for insurers to develop accurate pricing and underwriting strategies. By understanding a fuller picture of violation history, insurers will be able to more effectively assess the risk of each driver and implement programs to capture the appropriate amount of premium dollars for riskier drivers while providing more affordable premiums to cleaner drivers.

For additional information about TransUnion’s study findings and DriverRisk, please click here.

Pledge to Put Your #phonedown

In 2016, California teen Amanda Clark was on the phone when her Chevrolet Trailblazer rolled three times, landing on its roof. According to the Sacramento Bee, Clark wrote: “I hate the thought of dying without my family knowing how I felt about them.”

Yet one year later, Clark was in a second auto accident. She was driving while on the phone again and lost control of her car. Cellphone records showed that she was texting. She was found unresponsive at the scene and died the next day.

These stories of distracted driving are becoming more common among U.S. drivers, sadly. Drivers continue to pick up their cellphones—for social media reasons, nonetheless—while behind the wheel, removing their attention from what’s happening around them to focus on a five-inch screen.

As April’s Distracted Driving Awareness Month arrives, DriversEd.com has released new survey data in its 2019 Distracted Driving and Social Media Report. The most alarming findings: 55% of surveyed participants admit to checking social media while behind the wheel, and 25% said they’ve even recorded a video while behind the wheel.

“There’s no way around it: The data is startling. I wish I could say the solution is as simple as parents talking to their teen drivers about the dangers of distracted driving. But parents are also the ones checking their Facebook, watching YouTube videos and recording Instagram videos,” said Laura Adams, safety and education analyst at DriversEd.com. “We are in an ever-growing distracted driving crisis, and the consequences are deadly.

“For many drivers, health and safety take a backseat to their likes and shares,” Adams added.

See also: 5 Steps to Understand Distracted Driving  

Why is this problem still so prevalent?

Part of the problem actually has to do with hearing those scary statistics: We don’t really believe they apply to us. It’s a phenomenon that cognitive scientist Tali Sharot named The Optimism Bias. Basically, when people think about their own futures, they tend to overestimate the likelihood that good things will happen and underestimate the likelihood of bad things. In the context of driving, that means we overestimate our own capabilities. In fact, one study showed that 93% of U.S. drivers think that they’re in the top 50% of safe drivers. Thus, drivers also underestimate their likelihood of being in a car accident. This would explain why so many drivers will agree that texting while driving is bad but admit to doing it anyway: We know it’s dangerous in general, but we don’t quite grasp how much of a risk it is to ourselves specifically.

Take it from a teen…

Grace Keller, a former DriversEd.com student and guest teen contributor, suggested drivers keep their belongings, including cellphones, in other parts of the car to avoid distracted driving behavior.

“I usually throw my backpack in the back seat with my phone and all my other potential distractions in it, so that I don’t even become tempted. Though I admit it can be difficult — I mean, we’re all living in a very high-tech society where we feel the need to constantly be plugged into our social media, group-chats, etc., but whatever it is you need to look at or check up on can wait,” she stated.

How you can help

The National Safety Council is asking the public to use these life-saving measures to help curb the growing rates of distracted driving–related injuries and fatalities:

  1. Commit to putting your #phonedown. Stow your cellphone in your purse, backpack or trunk to keep it out of reach. If it’s needed for GPS use, switch to “auto mode” to turn off notifications and calls.
  2. Stay engaged in teens’ driving habits. Parents should lead by example by putting their phones down. Head to “Parents: Tools to help your teen resist using their phones,” on DriversEd.com for more parent-focused information.
  3. Practice defensive driving. Buckle up and keep in-car distractions (passengers, music, etc.) at a minimum to focus on the road ahead. Be sure to get enough sleep to avoid fatigue and drive attentively.
  4. Recognize the dangers of drugged driving. From prescription opioids to alcohol to marijuana use, learn how each one impairs your ability to drive safely. Visit www.stopeverydaykillers.org to learn more.
  5. Fix recalls immediately. See if your vehicle is currently under recall by visiting www.checktoprotect.org.
  6. Ask lawmakers and state leaders to protect travelers on state roadways. The National Safety Council’s State of Safety report shows which states have the strongest and weakest traffic safety laws.

See also: Distracted Driving — an Infographic  

The 2019 Distracted Driving and Social Media Report was conducted by DriversEd.com as a follow-up to its more broadly focused 2018 Distracted Driving in America Report and zeroes in on risky behind-the-wheel social media behavior: feed checking, video watching and video recording, providing insight on the current state—and dangers—of distracted driving and social media use.

The survey was conducted online using Survey Monkey. One thousand, twenty-nine participants were polled, spanning across the U.S., with the U.S. driving population represented by the 943 respondents who, before completing the survey, answered that they have a driver’s license. Of those 943 respondents, 522 answered that, while behind the wheel, they have checked social media while either at a red light, at a stop sign, stuck in traffic or moving on the road. Those 522 respondents represent drivers who admit to checking social media while driving. The demographics of those polled represented a broad range of household income, geographic location, age and gender.

The article was originally published on DriversEd.com.

What a Safer World Means for Brokers

On Nov. 20, 2018, Insurance Journal reported an article suggesting auto insurance premiums will decrease by $25 billion by 2025. To put that in perspective, that is approximately 5% of all U.S. P&C premiums. Think you’ve seen a soft market before? Just wait.

The article continued to state that new coverage lines will more than make up the difference, according to the report author, Accenture. It proposed that businesses in particular will buy $81 billion more in other lines. This means woe for the personal lines carriers and agents who have achieved far more personal lines premium growth in the last 10 years than commercial (an average annual rate increase of approximately 3.3% vs. -.1%, 2005-2017, inclusive).

The authors argue that driverless cars will make the roads safer but increase the need for product liability. I am not sure about this because it has been reported that some manufacturers are planning to forego product liability insurance on their driverless cars. Maybe they had a change of mind or the authors are providing insights missing from press releases the Securities and Exchange Commission might want to review. Or maybe the manufacturers’ contracts will place all liability on their vendors or others (like the owners who do not read their software agreements).

The authors suggest consumers, companies and governments will quickly buy much more cyber coverage. They probably do need to quickly buy more, but, with as many as 3,000 cyber forms floating around in the U.S. alone (according to a recent Rand Corp. study), what cyber is actually being purchased? The Rand study is important to understanding future cyber purchases because, as it suggests, some of the forms may not be intended to pay claims, some companies’ actuarial models may be shots in the dark and clearly some companies’ forms indicate they really do not know what they are doing (at least this is my impression of Rand Corp.’s conclusion). These are big issues that put into doubt what the cyber insurance market really even is, and what happens with the inevitable shakeout? If some companies do not really know what they are insuring (reading some companies’ forms suggest they really do not know what they are insuring) and are taking shots in the dark on pricing (and reserving maybe?), there may be a problem of stronger and smarter companies not achieving adequate market share until the shakeout occurs.

See also: Cybersecurity for the Insurance Industry  

Add to this confusion the fact that explaining cyber insurance, and explaining exactly what the different cyber forms are insuring, is very difficult. Agents need to try doing this to understand that increased cyber sales are not magically going to happen. Beware the agent who pretends that all cyber forms are the same or that, just because an insured has purchased a cyber policy, they now have “cyber” coverage. The insured may think it has much broader coverage than the carrier interprets (which will be interesting for those companies less sure of what they are even insuring; see the Mondelez v. Zurich suit for a great example). Also, after asking dozens and dozens of agents what they are even insuring when they sell a cyber policy, I’m often met with blank stares or statements that they do not understand cyber so they don’t sell cyber.

Product liability sales may increase. Product liability has been one of the most volatile major lines of P&C insurance over the last 20-plus years, so any prediction specific to this line seems problematic. Since 1996, NPW specific to product liability per A.M. Best (author’s calculation) has only increased 35%. Private passenger auto has increased 106%. In the last 10 years, NPW has actually declined 11%. I am not suggesting these results are rational, because the combined ratio for product liability is an abysmal 129% over the last 10 years. Its worst combined ratio was 159% in 2011, and its best was 84% in 2006. The volatility is absurd and does not really correlate well with NPW growth. This combination of volatility and lack of charging more premium for really horrible combined ratios makes predicting this line’s future problematic.

I hope experts’ predictions are correct regarding other lines taking up the slack. Even if correct, though, personal lines agents and personal lines carriers are going to suffer if they do not begin writing commercial. Small commercial will be hurt, too, because small commercial will lose the auto, clients seem reluctant to buy quality cyber coverage and they do not usually need product liability.

The winners, if the study’s authors’ predictions are correct, will be carriers and agents/brokers writing large, complex commercial accounts.

If the authors are wrong about companies and consumers purchasing a lot more insurance but of a different line, then the entire industry suffers mightily.

Another article in the same edition published a report from Minnesota’s Department of Labor that the state’s workplace injury and illness rate decreased in 2017 to its lowest rate since the state first began measuring it. I suspect Minnesota’s results are similar to other states. The significant advances in safety and the reduced need for employees to work in more dangerous environments relative to total employment support the probability that workplaces should be safer than ever, even in a booming economy. The workplace will become even safer, with more modular construction, better safety devices and monitoring and continuing emphasis on safety. A safer environment means less rate in this line, too.

See also: Leveraging AI in Commercial Insurance  

Maybe the industry needs to offer more law school scholarships to future plaintiff attorneys to take up the slack. Otherwise, most signs point strongly to the devaluation of insurance. Insurance is more important in a risky world than a safer world.

Maybe insurance companies will get desperate and begin insuring previously unthinkable, uninsurable perils and fill the gap that way. Whatever happens, though, insurance sales are going to change significantly. The industry is at an inflection point for carriers and distributors both. This is not a point of despair, but it is a time that requires true strategic thinking and planning to identify the opportunities that exist and to plan for those opportunities, without getting too far ahead and losing what one already has. This is hard work. It requires quite a balance, which is why dedicated strategic planning is truly required.

You can find the article originally published here.