From the early days of Telematics and Usage-Based Insurance (UBI) until recently, consumers’ interest has waxed and waned. Drivers have been less than enthusiastic (worries about privacy, etc.). However, this is changing. Future estimates range from 25% to 70% of policies being based on telematics within 5 years. But what else will emerge?
Time changes autonomously …
Every one who works on the automobile file agrees there are significant changes underway. The biggest element is the emergence of autonomous vehicles.
If we thought UBI was a challenge to drivers, the introduction of a driverless car ratchets up the debate by an order of magnitude.
On the one hand, many drivers believe that driverless cars’ technologies are less safe than the human driven version. And, in the case of a fully autonomous Uber vehicle in Arizona killing a pedestrian, that concern is genuine. More on that later.
There is a growing interest in autonomous vehicles which goes beyond the ‘cool’ factor. Like it or not, autonomous vehicles negotiate the roads better than most drivers because the latter (like me) tries to ‘beat the traffic,’ while the autonomous driver follows the ‘slow and steady’ rules.
Mark Breading reported on activities at the Las Vegas Consumer Electronic Show (CES2018) in January. At a panel, Michigan Governor Tom Snyder noted that there were three benefits from Autonomous Vehicles: 1) improved safety, 2) increased access to mobility, and 3) improved efficiency of the infrastructure.
On the same panel, Tom Willson, Allstate’s CEO, noted that “improving the efficiency of the transportation infrastructure is the biggest economic opportunity in America today.”
So what’s the risk?
In the early days, there was concern that autonomous vehicles would reduce a significant percentages of premium from insurers due to reduced risk. From a short term basis, this doesn’t look likely.
Writing in CNET, Dara Kerr looks at the fatal Uber accident in Tempe Arizona and asks “Are driverless cars safe?” The analysis will take some time to settle, but Tempe Police Sgt. Roland Elcock said “Our investigation did not show at this time that there were significant signs of the vehicle slowing down.”
It may not be easy to determine the cause. As we noted in a recent post,
IoT and other cyber constructs are moving at the speed of light, becoming very complex. For example, modern automobiles have 100+ million lines of code for control, navigation, entertainment, and more. Putting this into context, a Boeing 787 has around 6.5 million, and an F-22 Fighter has less than 2 million.
Also, there are a number of suppliers, including automobile manufacturers and technology firms. Some of the constructs are regarded as privileged information, so determining standards may not be easy.
However, I would expect that governmental organizations will be driving the search for causes and the remediation of the problems.
And insurance is emerging…
Insurers are rejigging policies. A recent Accenture blog noted that a start-up organization, Voyage, was planning to provide rides to 4,000 residents for the 15 miles of road in a retirement community in California.
Trials were underway, but things almost went off the road (pardon the pun) when the topic of insurance arose. Fortunately, Munich Re agreed to partner with Voyage to provide coverage.
But there was one interesting twist. According to an article in the New York Times,
California requires autonomous vehicles to have $5 million of coverage, but the Villages insisted on 50 percent more coverage because it is a private community with more liability risk.
So this went well beyond required coverage. And the price doubled.
And one more twist: MunchRe agreed to hold cover if it could provide “data – any data – produced by the cars.”
Where to?
Telematics and UBI are on the rise. Looking to the future, there are interesting options that go well beyond road vehicles. For example, fast trains, drones and missiles are proliferating with the requirements for movement of things as well as people. And insurers – such as MunichRe – have been experimenting heavily with new insurance constructs.
What do you think? If you have an application, or are wondering where this will drive us (second pardon for pun), I’d be very interested.
