 By Allison Nau, Marketing Development Manager, LexisNexis Risk Solutions
In the first week of July this year,Volvo showcased new technology that will allow drivers to park their cars using an app on their mobile phone. The technology combines GPS, sensors and cameras and will allow the driver to leave their car at the entrance to a car park, have the car park itself and return safely whilst avoiding pedestrians and ordinary vehicles.
Volvo expects this technology to be commercially available within a few years, rather than a few decades. Meanwhile,Google’s test autonomous vehicles are an increasingly common sight- at least if you live in Mountain View, California. Driverless vehicles are something no longer consigned to science fiction but rather something the insurance industry will have to adapt to in years to come.
Rather than representing revolutionary change, the driverless vehicle is more like an evolution of its modern day cousin: the driver-assisted vehicle. Insurers have been dealing with driver assist technology for decades – whether anti-lock braking systems (ABS) or more recently adaptive cruise control, which uses sensors to maintain safe distances from vehicles in front, lane departure warning systems or even autonomous emergency braking systems (AEB). AEB detects and warns the driver of obstacles in the road ahead such as a pedestrian or stationarycar. If the driver then fails to react, the AEBbrings the car to an emergency stop automatically.
Safety equipment tends to start out as an optional extra on top-of–the-range vehicles before being “recommended” by bodies such as Euro NCAP and eventually being made compulsory. ABS which was included initially in luxury vehicles is now compulsory and ubiquitous across Europe. As vehicles become more autonomous this will be matched by increasing use of “fly by wire” style technology and an increased ease for insurers to access data – either through telematics or “black box” style accident data recorders. The insurance industry may even drive the pace of change towards more autonomous vehicles, as insurers become less willing to insure vehicles that lack the technology. Insurers have adapted to driver assist technology, adjusting rates to reflect differing levels of risk through vehicle scores.
Looking forwards, astechnology improves and vehicles continue to become more autonomous, more changes will be seen by the insurance industry. The risk will shift in part from driver error to technical malfunction with the type of vehicle driven becoming more important. Understanding the level of risk presented by the vehicle itself will becomea major area of focus, and current rating factors such as driver age or experience will likely become less important. For this reason, the move to more autonomous vehicles will be matched by insurers increasing their use of information on particular vehicles to determine risk – this is something many insurers are already starting to do through the use of custom vehicle scores that leverage more granular data.
A custom vehicle score uses information obtained from third parties to allow insurers to determine the relative risk of a specific vehicle. For example an insurer may offer a lower premium to a vehicle equipped with AEB – recognising that AEB can significantly reduce the risk of slow speed collisions and the associated whiplash and personal injury claims. Taking this a step further, an advanced vehicle score could allow insurers to differentiate between AEB systems and rate accordingly. As vehicles become more autonomous, insurers will increasingly use more granular vehicle information to rate the risk. Those insurers doing this are likely to have an advantage over the competition.
Driverless or semi-driverless vehicles will also open up new fields of risk. How will the insurer handle a driver that disables the technology? How does the driver’s experience driving with and without the technology change the risk? More troubling however, whilst accidents and injuries should decrease over time, they will not be eliminated completely.Driverless vehicles may have faster reaction times and be able to stop faster, but they still need to obey the laws of physics – especially minimum stopping distances. Autonomous vehicles will still have accidents.This will complicate liability; even if the car is driving autonomously it is likely the driver will need to maintain some ability to intervene if necessary. Who then in the event of an accident will be at fault, the driver or the vehicle manufacturer? What about situations where neither a human driver nor an autonomous vehicle could avoid an accident? All of these are interesting dilemmas and ones that insurers and the legal profession will need to address in due course.
The other issue is the driver, even in an autonomous vehicle the driver will still need to intervene every so often. Modern passenger aircraft for example are capable of operating almost completely under autopilot, taking off, flying and landing with minimal human interaction, yet the pilot is required to maintain the ability and capability in skill to intervene. How will drivers maintain their skills if they depend on autonomous vehicles? One route could be through telematics – enabling the driver to demonstrate their abilities, or perhaps new licence requirements such as regular manual retests.
There are certainly obstacles to overcome before autonomous vehicles become the norm but with the increasing sophistication of driver-assist technology it is clear that this is technology that is here to stay. The insurer that is best placed in this new world will be the one that is maintaining an advantage today through data analytics – whether this is better understanding driving behaviour through telematics or using granular vehicle information in custom vehicle scores to truly understand the risk that they are underwriting.
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