sistance Systems (ADAS), which will be part of the final “
autonomous car,” are already widely deployed in production vehicles
and are making a difference in accident statistics and therefore
insurance results. Technologies such as adaptive cruise control,
alertness monitoring, automatic emergency braking, forward
collision warning, lane departure warning, pedestrian tracking,
and side object detection (so called blind spot monitoring) are all
now common in new cars.
The Insurance Institute for Highway Safety Loss Data Institute
published a bulletin last year showing significant reductions in
frequency and severity across both property and liability coverages associated with the deployment of forward collision and lane
departure warning technologies in Honda Acord vehicles.
Third: To make explicit what we just noted, no major technology innovation happens as a single obvious step. There are always
mini-steps, partial victories, point solutions, and blind alleys,
which ultimately result in a major breakthrough and mass adoption. So, as with all such innovations, driverless or fully autonomous, cars are here already/in development/in test/coming in five
years; all of which are true.
An autonomous vehicle requires several basic technologies in
order to operate:
K GPS: A driverless car needs to know where it is and where it
is going, both in detail over the next few yards, and over the
course of an entire journey.
K Range finder: Usually a laser which scans up to 180 meters
distance through 360 degrees in order to detect objects and
create a three-dimensional image of the car’s surroundings.
K Video camera: To detect and identify other road users, lane
markers, and traffic signals.
K Radar: Front and rear systems to detect the precise proximity
K Command and control software: To monitor these systems
and take action as needed to avoid accidents.
Four: The effects of autonomous cars will be compounded by
the sharing economy. Not only will the cars on the road have fewer
accidents, there will be fewer cars on the road in the future. Uber just
announced a pilot program to deploy autonomous (but driver-as-sisted) vehicles in Pittsburgh, a clear step on their declared path to
fully autonomous vehicles. One vision, published in the Wall Street
Journal last year, has it that in the next 20 years there will be only a
fraction of today’s private vehicles on the roads. This vison has it that
fleets of autonomous cars will circulate in urban and suburban areas
and pick up/drop off customers as needed. Estimates in this scenario
are that only 10 percent of the vehicles currently jamming the roads
of our major cities will be required. Urban parking lots, and even
homes with garages will become things of the past.
Five: The speed of availability and adoption of fully autonomous
cars will be governed by regulators and lawyers, not technologists.
The technologists at Uber, Google, Tesla, and now the mainstream
car companies are all saying essentially the same thing: fully autono-
mous cars in five years. The regulators are way behind the technology
curve and are perfectly capable of slowing events significantly. Inter-
estingly, Singapore just invited the world to test and perfect driverless
cars in its low-regulation, low-litigation environment.
Six: The effects on insurance. It may not be as black-and-white as “an industry with no claims is an industry with no
premiums,” but it seems obvious that over time, and probably
starting in the next few years, auto insurance, particularly private
passenger auto insurance (an almost $200 billion business) will
suffer serious disruption and significant contraction.
If claim frequency and severity go down, premiums per vehicle will go down. If there are fewer cars, there will be less overall
premium. If individuals cease to own cars but the Ubers of the
world grow, premiums will shift from personal to commercial
carriers. The industry, with no doubt the willing assistance of
plaintiffs’ lawyers, will have to figure out who or what is at fault
when autonomous vehicles cause accidents.
Technology will probably increase the already large cost distinction between “preferred” drivers and “non-standard” risks. The former will purchase newer cars quicker and will receive the premium
benefits that come along with the technologies that make driving
safer. The poor, the inner-city dwellers, and the young will be left in
their beaters that cost less than their annual insurance premiums.
Personal lines auto won’t disappear. As we noted above, just as
people like to read paper books, many people like to drive. Driving for pleasure is not a utilitarian function that will be replaced
by robots. Insurance carriers with classic-car programs are not
going away. I suspect many people who ride-share autonomous
vehicles to work will keep a cherished vehicle for weekend jaunts.
It seems sensible that the major effects of autonomous
vehicles will be on the driving extremes—urban (and rush hour)
commuting and long distance driving. In the winter I drive
from Hilton Head, S.C. to Park City, Utah to ski. It is a 2,200 mile
marathon, which stops being fun sometime early on day one. Just
imagine if I could sit in the back and write ITA Pro articles while
the car drives itself. Or sleep.
The demographic effect will also be on the extremes. I suspect younger people will adopt driverless cars quicker than older
people. People who are older than the older people will also embrace driverless cars because it will return freedom of movement
to those who can no longer drive safely.
No doubt other developments will occur, which no one has
yet anticipated. We are talking about experts after all. What is
certain is that no matter what happens with autonomous cars and
their effects on insurance, the effects will be dramatic and they
will happen relatively soon, assuming, of course, the regulators
and the plaintiffs’ attorneys allow them to. ITA
George Grieve is a popular writer and speaker on the subject of insurance technology solutions. He is the author of
a book composed of a popular collection of his columns,
“Shop Talk,” and is CEO of the consulting firm CastleBay