Tag Archives: Mercedes

Autonomous Car Tech Reaches Mid-Market

As part of the 2016 edition of the Usage Based Insurance study, we analyzed the impact of autonomy on the insurance market. We forecast that 380 million semi-, highly or fully autonomous vehicles will be on the road by 2030.

This might sound like a lot, but then at the Consumer Electronics Show in Las Vegas we heard that new manufacturers are entering the race. Typically, we expect the luxury brands to foster the development of autonomous vehicles (AVs), with Mercedes, BMW and Tesla all topping the list of development activity. This time, however, it is the mid-market brands such as Nissan, Ford and GM that are making the announcements.

All three arrived at the show with news and partnerships up their sleeves as the competition grows ever more intense.

  • Nissan, in partnership with Renault, announced 10 vehicle models with autonomous capabilities on the road by 2020, with single-lane control from this year and rolling out multi-lane control intersections assistance from 2018 onward.
  • GM announced a $500 million investment in Uber rival Lyft, which GM says could lead to the development of a fleet of driverless cars, some available for hire, as well as a network of car rental stations. This announcement follows news regarding the development of GM’s self-driving version of the hybrid Chevrolet Volt.
  • Ford revealed an agreement with Amazon, aimed at linking cars with connected homes and the Internet of Things. Ford was also expected to announce a tie-up with Google, but that did not happen, possibly because of recent regulatory proposals limiting driverless vehicle testing in California. Instead, the car maker stated that it would triple the size of its Fusion Hybrid autonomous research fleet this year to 30. Ford will also integrate new solid-state lidar sensors that create real-time 3D models of the surrounding environment.

Although many autonomous functions, such as cruise and parking, are aimed at improving comfort, most of the development today is focused on safety and crash avoidance.

These capabilities will have a direct impact on the insurance industry a lot sooner than the driverless car. We analyzed and quantified that impact in the study to precisely estimate the share of accidents that could be avoided with the introduction of advanced driver assistance systems (ADAS).

For example, we concluded that frontal collision avoidance and cruise systems could reduce losses by as much as 50% (depending on the level of sophistication).

ADAS functions could therefore lead to a reduction in accidents of between 30% and 40%, with AVs beginning to have a significant impact in mature markets from 2023 onward. In the most advanced countries, such as Germany, premiums will decrease by as much as 40% between 2020 and 2030.

With the end of the statistical actuarial model also approaching, insurers will need to be acutely aware of the car technology evolution speed. The car without accident will be on the road long before the car without driver.

The 2016 edition of the UBI Global Study was launched last month; It covers the impact of ADAS on insurance premiums in details and with a market forecast up to 2030. You can download the free abstract here.

Beginning of the End for Car Insurance?

Volvo’s statement last week that it would accept all liability when its cars are in autonomous mode takes the threat to traditional auto insurance to a whole new level. Google and Mercedes have already made similar promises, so we now have three major companies saying they will treat certain car accidents as product liability issues and will take on risk that has historically been the responsibility of individual drivers and auto insurers.

For good measure, Tesla just offered a software download that will let real drivers in real Model S cars operate autonomously on real roads.

The future is upon us.

Obviously, this is just the start. In Churchillian terms, we aren’t at the beginning of the end for car insurance, and we aren’t even at the end of the beginning; we’re at the beginning of the beginning.

For the immediate future, there will be zero effect on auto insurers. Only a small number of drivers will be operating their cars autonomously and only for a portion of their time on the road. Tesla isn’t even accepting liability at this point, and auto insurers won’t initially even be asked to adjust their rates to reflect the risk that providers of autonomous technology are taking out of the auto policy equation.

A thoughtful column by Craig Beattie argues that two significant steps still have to happen before much risk for car accidents moves to the product liability side of the ledger. First, courts must sort out the many issues that will be raised when the first unlucky person dies in an accident where an autonomous vehicle is at fault. Second, he says, autonomous cars must be in operation long enough that lack of maintenance, rather than product design, becomes the issue that has an autonomous car cause an accident. Courts will then have to sort through who bears the responsibility for that lack of maintenance.

Although I agree with the first point, about settling key issues in court, I’m not so sure the second is a huge deal. I think vanishingly few people will own autonomous cars once we get through the hybrid phase that Volvo, Mercedes and Tesla are taking us into now, where people can switch into and out of driverless mode in what are otherwise traditional cars. Today, cars sit idle more than 95% of the time, so it’s far more efficient to share cars operated as part of a fleet, rather than pay to have what is usually someone’s most expensive asset, or second-most (after a house), just sit there. A study that Chunka Mui and I cited in our book Driverless Cars: Trillions Are Up for Grabs found that a fleet owner could provide cars to people for 90% less than we pay for car transportation now and still make gobs of money. So I believe that fleets, not individuals, will be responsible for maintenance, removing that as an issue that would be in the province of traditional auto insurance.

I also expect the federal government to get involved at some point. If driverless cars can really reduce the number of traffic deaths on U.S. highways (currently roughly 35,000 a year) by tens of thousands and reduce the number injured in accidents (currently about 2.5 million a year) by many hundreds of thousands, then driverless cars create a clear societal good, and their use should be encouraged. Even if the government decided to be revenue-neutral, it could take the money it currently spends through Social Security, Medicare, Medicaid, etc. because of auto accidents and could perhaps cover all the liability for accidents caused by autonomous vehicles — and have a lot left over, besides.

Politics will rear its ugly head when it comes to deciding what government should do and how quickly it can act, but it’s hard to run a campaign in favor of injury and death.

So the issue about traditional auto insurance is much less about if it goes away and much more about when.

“When” is a legitimate question. It takes 15 years or more for the full complement of cars on U.S. roads to be replaced, so you could decide that autonomous-car technology won’t really be mature for a few years, then start a clock and count out 15 years to a time when roads will be fully autonomous. That approach takes many people’s calculations to 2030 and beyond — by which time today’s C-suite members will be safely retired.

But many autonomous technologies, such as forward collision avoidance systems and automated braking, can be installed as a retrofit — Autonomoustuff, advised by our friend Guy Fraker, is a notable supplier. And the dynamics of auto accidents and insurance change long before every car becomes autonomous. Many studies say 20% to 25% penetration is plenty to cause major changes.

While I won’t venture a precise guess about the fate of car insurance, I’ll offer an observation: When Chunka and I wrote about driverless cars 2 1/2 years ago, we staked out what was then an extremely aggressive position about how quickly the transition to autonomous vehicles would happen and about how far the ripples would reach, including for auto insurance — and we may be turning out to have been too cautious.

Insurance and the Connected Car

I grew up watching Knight Rider and seeing KITT, where Michael would continuously talk into his watch, and KITT would drive to his rescue (through a garage door or two) or safely transport him through the night while Michael had a catch-up on his sleep — only to be woken up by the local police freaked out at the thought of him asleep at the wheel, only to be foiled by his pretending to have a “crook neck”!

Move forward 15-plus years, and we now talk to our watches, and cars are driving themselves. This futuristic TV show and its “connected car” is today’s reality and only becoming more and more real. We are allowed driverless cars from January 2015.

The connected car is a super exciting area that many folks already talk about in great detail. In fact, Capgemini’s Car’s Online study  presents a compelling case. Here is a quick summary from me of benefits:

  • Safety — by default, car capability increases beyond recognition. Humans no longer control of the car (especially as the car will react quicker than we ever would). In 2015, all cars in Europe must be equipped with eCall, a system that automatically contacts emergency services and directs them to the vehicle location in the event of a serious crash.
  • Fleet knowledge and efficiency — knowing when to roll vans/cars/trucks across what roads.
  • Intelligent GPS — bye bye theft, traffic jams and other inconveniences.
  • Location-based services — working out the best things for you along the way, including charging points for you and your car!
  • Infotainment and more — never be out of touch; everything is connected to your biometric-enabled smart phone. Your fingerprint not only unlocks the phone but tells the car who is driving and sets your profile and other preferences.

Of course, there is far more to it than this. The key here for me — it’s an unprecedented volume of data for us to derive insights from. There is a good summary from Direct Line in the UK here. A 12-month pilot, for example, gathered more than 11 million miles of data.

It’s nothing new!

One of my frustrations is that everyone talks about telematics as a new shiny thing. Like GPS, telematics has been around for more years than I care to recall — however, it has only just found its feet in mainstream marketing and the minds of consumers, primarily because of plummeting technology costs for the telematics “black box,” smartphones that can do the same (or similar) things and, most importantly, a problem to solve: the increasingly high cost of insurance. I use the word “mainstream” carefully; telematics is talked about a lot, with adoption in some key demographics (young drivers). While it has applicability across a great many other demographics, the number of actual policies is still relatively low compared with the total number of policies in force for any one insurer. I do, however, believe this will change, not because of the desire to reduce the cost but more because of the way we move to buy everything as a true utility or service.

This was debated at a recent roundtable discussion by Post magazine, which I participated in. However, to drive significant adoption, it may need a more fundamental change. Perhaps a change in law from opt-in to opt-out? It would certainly give governments the opportunity to truly consider road charging properly!

Let’s be blunt!

The connected car brings so much more and is yet another blunt instrument providing oodles of data back to organizations that allow you to use it. As in most of these cases, there is always a pioneer, and in the world of motoring it’s usually Formula 1, followed quickly by Mercedes in the consumer markets, before it filters down to other manufacturers. As an aside, there are some great videos here on data in F1 here and here – the difference being, soon this will be available to all of us, on our phones. F1 is a world where hundreds or thousands of changes are made to the car during a race to increase performance and the team’s chances of winning. It’s all data-driven. Imagine now if that same logic could apply to your everyday commute. Extend the life of your car, avoid accidents and congested roads and get cheaper gasoline. The list goes on — these, in fairness, are all here today and almost all through your smartphone. It’s simply quicker and easier to update than the cars’ in-built systems. Just look at the long list of features on the Ford Fiesta driving experience page.

Today’s reasonably priced car is a hive of sensors, features and functions. Advertising of them has moved from mpg, performance and power steering, to how it connects to the rest of your digital life, from Foursquare check-ins with Mini, to connecting to your phone in every car. (A change in law helped that specifically here in the UK, to ban the use of phones while driving.) In fact, infotainment is now seen as more important in most cases than the actual driving experience itself.

From an insurance perspective, the connected car offers a great insight into not just where and when you drive, but how you drive, too — therefore what risk you present to insure. We already have the ability to do some great things way beyond UBI (usage-based insurance); organizations like MyDrive compare your driving style to that of advanced motorists — the key here being you can drive fast (among others) safely. In fact, go a step further: Allianz has found in the Australian market that if you are a meat eater you are a better driver than your vegetarian counterpart. Data is starting to tell us much more than ever before.

What does the future hold?

Jump forward five, 10, 15 years. We will live in world of autonomous vehicles. Car safety will have excelled beyond recognition. Motor accidents will be a thing of the past. It is a familiar story now. What or who do we insure then? The personal market with have dissolved. The fleet and commercial market will have evolved.

From a personal perspective, I still question even the basics of car ownership. Going back to where I started this post, I remember growing up as a kid, and my first ambition at 17 was to get driving lessons, pass my test and buy a car. Ask a 17-year-old today in the UK where car ownership is on his list of priorities, and I would be surprised to see it in the top 10. This in itself brings a new challenge. We will no longer insure the driver and vehicle; you will simply rent your journey with a Zip Car or similar, which will include a near-new car, Sat Nav, insurance, gasoline and much more. These new schemes, or fractional ownership, could destroy the need (in urban areas, at least) or the desire to own a car and its associated financial burden.

For insurance companies, we need to decide on what or where the market will be – who we establish new partnerships with outside the vehicles – to drive new revenue streams and make the most of the vast volumes of data available about each and every journey. Of course, with this brings more questions, the most important being: If all this data is so valuable, who owns it?

Home, James!

Personally, while I love driving, 99 times out of 100, we could probably be doing something else far more valuable when the one thing we haven’t solved yet is creating more time. I wait for my autonomous car to chauffeur me around in the future!