- Where Insurance & Technology Meet

The Rollout of Automated Driver Assistance Systems and the Impact to Insurance Costs

Long available as high-end luxury vehicle options, Advanced Driver Assistance Systems (ADAS) are now offered on a number of 2017 vehicle models. For example, Toyota Safety Sense offers an ADAS bundle that will be included as standard on the majority of Canadian models starting with the 2017 model year.

How is the insurance industry responding to ADAS advances?

Automatic Emergency Braking (AEB) is a road vehicle safety system that helps prevent crashes or reduce their severity by applying a vehicle’s brakes automatically. The systems use on-board sensors – e.g., radar, cameras, lasers – to detect an imminent crash, warn the driver, and apply the brakes if the driver does not take sufficient action.

In November 2016 Aviva Canada announced a 15% auto insurance discount for drivers of vehicles with AEB. It is expected that other Canadian insurance companies will soon offer discounts in one form or another.

The Aviva discount is being rolled out across the country and will be applied to policies automatically upon purchase or renewal. The discount is available now in Alberta, Quebec, Ontario and PEI, and will be extended to New Brunswick on May 1, 2017.

US experience

According to an AP article of June 2016, of the 11 biggest US auto insurers, only Hartford Insurance Group and Liberty Mutual Insurance Cos. offer discounts for automatic braking. Hartford’s discount is about $30 per year on the average annual insurance premium of about $1,000. Discounts are predicted to grow as more vehicles get AEB as standard equipment and data show claims improvement.

Currently, the Hartford discount is only in five states — Illinois, Ohio, Minnesota, Oklahoma and Arkansas. Liberty Mutual said it could not specify the discount size because of their variance by ADAS feature, driver, and state. Other companies say ADAS discounts are included in overall rates. Still others are studying claims data.

Where do Brokers fit?

Insurance brokers will be increasingly important in the roll out of ADAS insurance discounts.  Brokers are closer to the customer.  Moreover,  they are in a better position to determine and confirm exactly what system the vehicles have.

Since most people ‘set and forget’ their insurance, having a relationship with an industry leading insurance broker is becoming even more important with the roll out of new technologies. Brokers are playing an even more important role in providing policy and coverage reviews to highlight the new discounts and programs that are available for the customer.

Why all these changes by auto manufactures and Insurance Companies?

A joint whitepaper by HERE and Swiss Re entitled The Future of Motor Insurance estimated that ADAS would reduce accidents significantly. An IIHS study released in 2015 found that 40 percent of rear-end crashes would be avoided if all cars had AEB systems.

“The specific benefits vary, but our latest analyses all show large reductions in property damage and bodily injury liability claim rates,” says HLDI Vice President Matt Moore. “Interestingly, the reductions in bodily injury claims are about twice the size of the property damage claim reductions. A large number of bodily injury claims are for whiplash injuries that occur when your vehicle strikes another from behind. ”

So what’s next?

Vehicles equipped with ADAS systems consistently show a reduction in injuries and deaths as a result of automobile accidents, as well as the recovery of productivity now lost in traffic jams caused by the crashes that have been prevented. Deploying AEB on a wide scale will allow us to further evaluate the technology’s impact on insurance losses, so that more insurers can explore offering discounts or lower premiums.

Editor’s note: Adam Mitchell is president of Mitchell & Whale Insurance Brokers Ltd., a family-run business operating since 1948. Based in Whitby, the company is licensed throughout the province and works with customers across Ontario.

Adam is part of the faculty of the 2017 Insurance-Canada Broker Forum (ICBF2017) being held at the Allstream Centre in Toronto on March 1, 2017.