Self-driving cars might kill auto insurance as we know it

Written by PAUL TULLIS, BLOOMBERG  

Dan Peate, a venture capitalist in California, was thinking of buying a Tesla Model X a few years ago—until he called his insurance company and found out how much his premiums would rise.

“They quoted me $10,000 a year,” Peate recalled.

For all the concern over accidents involving driverless cars, including Tesla’s troubles with its limited self-driving “Autopilot” mode, it’s easy to forget one of the supposed virtues of autonomous vehicles: they will make the roads safer.

A sophisticated array of lidar, radar and cameras is expected to be more adept at detecting trouble than our mortal eyes and ears. And computers never get drunk, check Tinder or fall asleep at the wheel.

Peate, 40, wanted to launch a new firm specializing in insurance for vehicles with automated-driving modes (and eventually fully-autonomous cars), and on January 30 announced the creation of Avinew, with US$5 million in seed funding led by Los Angeles’ Crosscut Ventures.

Its insurance product will monitor drivers’ use of autonomous features on cars made by companies including Tesla, Nissan, Ford and Cadillac, determining discounts based on how often the feature is used.

Avinew has agreements with most manufacturers, and is working to tie up the rest, Peate said, allowing it to access driving data once a customer gives it permission. It said it expects to be writing policies later this year in select states.

The transition points to a larger, existential crisis for the multi-billion dollar car insurance industry. If nobody’s driving, why do we need auto insurance?

Premiums—and company revenues—are based on a driver’s likelihood of being in an accident and actual crash rates. With more than 90 percent of accidents caused by human error, taking the driver out of the equation is going to mean big changes for insurers.

“When you think of all these sensors and calibration, a little fender-bender could be a much more costly proposition,” said David Ross Keith, an assistant professor of system dynamics at the Massachusetts Institute of Technology.

As automation reaches Levels 4 and 5—fully autonomous capability with the option for a human driver to take over, and fully autonomous with no human involvement, respectively—insurance is going to change dramatically.

“It’s foreseeable that insurance is a much less consumer-facing industry in the future,” Keith said.

That’s because the driver won’t be the risky part. “Liability is likely to migrate from the individual to the manufacturer and the licensers of the software that drives the AV,” said Rodney Parker, an associate professor of operations management at Indiana University.

That means insurers will be selling more policies to companies and fewer to drivers: carmakers and suppliers of communications systems, software, and sensors are going to be on the hook for the failure of their products, rather than drivers paying for not checking their blind spot.

Nationwide is one insurance company that’s started thinking about this problem. Drivers today are rated based on factors including sex, age and driving history. “If we’re getting data from the vehicle, that rating changes dramatically and gets very complex,” said Teresa Scharn, associate vice-president of product development.

Determining who’s at fault when something goes wrong could get thorny in this new world. If the lidar goes on the blink, is that the carmaker’s fault or the supplier of the lidar? What if the driver failed to get the latest firmware update—so now it’s his fault? If a Cadillac with Super Cruise loses its internet connection, is that on GM or Verizon?

“As a society we’ll have to figure out who’s liable for these different things and that will determine who’s required to insure against what risks,” MIT’s Keith said.

Nationwide thinks the smoothest road ahead will be one on which insurers and automakers each have a hand on the wheel. “We’re working to build deeper relationships with car manufacturers,” Scharn said.

And if that sounds like it hints at mergers on the horizon between insurers and automakers, you’re not off the mark. Other analysts confirm “those conversations are going on as we speak.”

Source: Bloomberg

SGI’s Valentine’s Day tips for road safety (and also dating)

SGI’s Valentine’s Day tips for road safety (and also dating)

Happy Valentine’s Day!

The love gurus at SGI have come up with some road safety tips that can double as advice for your love life.

(We figure this is timely, as some people might be planning romantic road trips for the long weekend, or – if a relationship has progressed – a family getaway during the kids’ February school break.)

The tips are below. 

Take it slow

Moving too fast can be dangerous. Wherever your relationship is heading, if it’s really important or special, it’s worth it to take things a little slow. And, when dealing with winter driving conditions, remember to adjust your driving speed to match the road conditions even if it means driving slower than the posted limits.

 

Give them some space

For a relationship to be healthy, it’s natural for both partners to have some time to themselves for their own interests. Crowding someone isn’t good on the road, either. Never tailgate. You should always follow a minimum of three-to-four seconds behind the vehicle ahead, and increase your following distance if there are poor road or weather conditions

 

Hold them tight (with a seatbelt)

There’s nothing quite like a loving embrace to make someone feel safe and secure. It’s the same feeling you get from a properly secured seatbelt. So buckle up, turn on a seat warmer, and it’s almost like being spooned! (OK, maybe that’s a stretch.) Seriously though, you need to wear your seatbelt. It’s the quickest, easiest thing you can do protect yourself and others sharing a vehicle with you in the event of a crash. And make sure any children in the vehicle are safe and snug with the appropriate car seat or booster seat.

 

Pay attention to what’s important

Any relationship will have a few bumps in the road, but if you keep your head up and focus on what really matters, you’ll be able to see those rough patches coming. When you’re behind the wheel, you need to focus on just driving, so you’ll be ready for anything in your path – like pedestrians, other vehicles, or wildlife. So put down your phone – or hand it to your passenger – and avoid other distractions.

 

Make a plan so you’ll be safe

If your Valentine’s Day (or weekend) plans involve sharing a bottle or two of wine in front of a roaring fire, or an evening out with dinner and cocktails, nothing puts a damper on a romantic evening quite like a being pulled over by police or having your vehicle impounded. If your plans involve alcohol or drugs, don’t drive. Plan a safe ride before you go out. If you’re impaired, call a sober person to come pick you up. Or, hey, maybe you can stay the night!

Happy Valentine’s Day from all of your friends at SGI, and enjoy the long weekend ahead. Remember: whether you’re driving or dating, take care out there.

Tyler McMurchy

Manager, Media Relations

SGI

www.sgi.sk.ca   www.sgicanada.ca

 

B.C. limits court experts in auto insurance to spur early settlements

By Dirk Meissner

THE CANADIAN PRESS

VICTORIA _ The B.C. government is going to try and contain financial losses at its Crown-owned auto insurance corporation by reducing the use of experts in accident lawsuits.

The government has amended the rules for civil cases in the B.C. Supreme Court to limit the number of experts and the reports they write in lawsuits involving the Insurance Corporation of British Columbia, Attorney General David Eby said Monday.

Accident injury claims have increased 43 per cent in the past five years and the use of experts has contributed to a 20 per cent rise in the corporation’s injury settlements in the past year, Eby told a news conference.

The changes are designed to trim the excesses in the system, he added.

“It doesn’t advance any interest to have six-plus adversarial experts on a claim. It doesn’t advance any interest to have a $50,000 expense to resolve a $100,000 claim.”

Eby, who is also the minister in charge of the Crown corporation, said the agency is on track for a year-end loss of $1.18 billion, compounding the blow of last year’s $1.3 billion deficit. He described the financial situation left by the former Liberal government at ICBC as a “dumpster fire” last year.

Last week he said the financial situation at the public auto insurer is critical and getting worse, with losses of $860 million in the first nine months of this fiscal year.

Eby said the government estimates it can save $400 million with the limitation measures, but that depends on lawyers and judges supporting fewer reports and experts.

The Trial Lawyers Association of B.C. said it supports measures to make the civil justice system fairer, faster and cheaper, but it criticized the government for acting unilaterally.

“Passing such consequential changes to our system of civil justice with no legislative debate is undemocratic,” the association said in a statement.  “Time and again this government seems to favour ICBC’s financial interests over the legal rights of British Columbians, and this rush to pass restrictions on how victims of negligence must prove their cases at law is the most recent illustration of making car accident victims pay for reckless driving.”

Raj Sahota, a Victoria personal injury lawyer, said the changes are workable especially since there are options to apply for further expert opinions if required.

“Generally speaking, I think these changes now are good for the system and good for this particular (practice) within personal injury litigation,” he said.

Eby said he expects there will be legal challenges, but added the changes bring B.C. into line with other provinces that limit experts in injury claim cases from motor vehicle accidents. Australia and the United Kingdom have much tougher restrictions on the use of experts and expert reports, he said.

“We believe the balance we have struck between unlimited adversarial experts under the current system and the no adversarial expert rules of other jurisdictions will reduce the costs and delays associated with using duelling experts while preserving a party’s ability to get evidence in front of a court,” Eby said.

The changes mean the parties in injury claims cases are limited to the use of one expert and one report for claims of less than $100,000 and up to three experts and three reports for all other claims.

Eby said the courts will also be able to permit more court-appointed or joint experts at its discretion.

The changes start immediately on motor vehicle accident claims, he said. The government is also considering making the injury expert changes apply to all personal injury claims by Feb. 1, 2020.

“The challenge with the issue, as all issues on this file, is finding the right balance between protecting the interests of British Columbians injured in motor vehicle accidents and finding ways to make the current system work better,” Eby said.

The B.C. Utilities Commission approved ICBC’s request in January to allow for an interim basic auto insurance rate increase of 6.3 per cent.

A number of other cost-saving reforms are also being implemented starting April 1, including higher fines for repeat offenders and a payout limit of $5,500 for minor soft-tissue injuries.

Lengthy cases, not low offers from ICBC, at root of high legal costs

VICTORIA _ A review of legal cases involving British Columbia’s public insurer says despite public perception, the agency isn’t lowballing claimants in its settlement offers.

The review conducted by legal counsel in the Ministry of the Attorney General was released Wednesday and says the Insurance Corporation of British Columbia is running a “very sound” legal department.

It says the cases reviewed do not validate “whatsoever” longtime criticism that ICBC makes inappropriately low settlement offers with the effect of driving claimants to retain lawyers and then unnecessarily pushing lawsuits to trial.

Instead, the review says the longer a claim takes to reach a resolution, the more it costs, and it blames the difficulty of getting prompt trial dates and loose deadlines for filing court material as factors.

The review recommends compelling claimants to give more in-depth descriptions of their claims before they launch lawsuits and shortening the limitation period to 18 months for an action to begin.

It also recommends implementing a roster of independent, qualified medical experts as a source of objective assessment for soft-tissue injuries like whiplash.

The review was conducted using aggregate data, as well as 100 randomly selected claims files closed between 2013 and 2017, ranging from minor injury claims to catastrophic ones.

It was done after ICBC saw significant increases in motor vehicle accidents, as well as jumps in the number and severity of claims, the number of claims involving litigation and higher costs from them over the past six years.

B.C.’s public auto insurer heading for another billion dollar loss

VICTORIA _ British Columbia’s attorney general says the financial situation with the province’s public auto insurance agency is critical and getting worse.

David Eby says theInsurance Corporation of B.C. lost $860 million for the first nine months of its fiscal year, $273 million higher than expected.

He says that puts the Crown corporation on track for a year-end loss of $1.18 billion, compounding the blow of last year’s $1.3 billion deficit.

Eby says a key reason for ICBC’s worsening financial crisis is the escalating costs of settling personal injuries claims, which have jumped by 43 per cent over five years, and almost half of each litigated settlement is legal expenses.

Major reforms are kicking in on April 1 this year and are expected to save the public agency more than $1 billion a year, but Eby says recent financial results make it clear the government needs to do even more.

Eby says the government will have more details in the coming days on how it intends to respond to the escalating legal costs.

“Although ICBC’s financial challenges are significant, there should also be no doubt that ICBC remains a valuable public asset that provides important benefits for British Columbians,” he says in a news release.

“Our government’s job is to deliver affordable, high-quality auto insurance to British Columbians, and we will do so.”

How technology is reshaping the insurance industry

Canada has a rich history of innovation, but in the next few decades, powerful technological forces will transform the global economy. Large multinational companies have jumped out to a headstart in the race to succeed, and Canada runs the risk of falling behind. At stake is nothing less than our prosperity and economic well-being. The Financial Post set out to explore what is needed for businesses to flourish and grow. You can find all of our coverage here.


In its simplest form, insurance spreads the risk of loss suffered by one person amongst many. But in today’s modern economy, constantly evolving with the tides of innovation, insurance has never been so complex. Technological drivers of change present the industry with some of its greatest opportunities and risks in decades; however, if not managed carefully, technology could be as catastrophic as it is revolutionary to the industry.

Historically, the growth and establishment of insurance originated in the days of the shipping industry when a vessel and its cargo could be damaged or lost due to storm, loading and unloading, fire, or even pirate attacks.

Today, the rapid and significant changes in technological innovation of products present the insurance industry with its greatest risk – and opportunity – since pirates took to the seas. The most significant agents driving this change in the insurance industry are: the Internet of Things (IoT) and autonomous vehicles.

The IoT is the connector between companies, products and consumers. It can also be the engine behind the creation of a multitude of connected devices and technology that will directly present both risks and opportunities for insurers and consumers alike.

Perhaps the most significant IoT-related development is the category of wearable technology. Wearables have expanded beyond their initial explosion into eHealth and are now equipped with the technology required to communicate with one another – and with insurers. Insurers can use this technology to adjust rates and premiums to more accurately reflect usage, as opposed to simply applying statistical averages that may not represent the specific individual.

This technology has advanced to the point where consumers are beginning to endorse insurer use of wearable data, as has been seen in the auto insurance industry using telematic devices that can be connected to your vehicle to transmit user data to insurers. This technology is being embraced by consumers as an opportunity to reduce premiums for good driver behaviours. Something that should only improve with the introduction of autonomous vehicles.

More than 90 per cent of car accidents are caused by human error. The advent of autonomous vehicles is predicted to eliminate human drivers and therefore human error. This likely won’t result in a 90 per cent reduction in car accidents, at least initially, but even a conservative estimate of cutting accident rates in half means massive savings in claims paid.

Technological innovations on the road today such as advanced braking and lane keep are already reducing collisions and accordingly premiums associated with vehicles equipped with those technologies. Some savings will be offset by the anticipated higher cost of repairing these complex and expensive vehicles, but if claims paid are reduced, premiums should follow suit.

Given that 42 per cent of property and casualty premiums are derived from car insurance, significant questions arise around how the industry is going to survive such reductions in its present structure.

As part of the Insurance Bureau of Canada’s (IBC) paper, Auto Insurance for Automated Vehicles: Preparing for a Future of Mobility, the IBC sets out a “single policy” insurance framework where one policy would respond to any claim made against the “driver,” even if the vehicle is being operated in autonomous mode. In this way, insurers move from insuring not only the negligence of the driver but also any negligence with respect to the autonomous features that may have been involved. Whether the various provinces and territories will adopt this approach remains to be seen, but the insurance industry has correctly perceived a risk and is attempting to mitigate that through new opportunities.

Of course, as technology advances, so do the accompanying risks. For example, many vehicles have a keyless feature wherein simply approaching your locked vehicle allows you to open the door and drive away without using the key. Car thieves have responded with a device that detects the signal being emitted from the key fob and can boost that signal so that it reaches the locked vehicle in the driveway. The thief can then steal the car while the keys are still “safely” locked inside the home.

Consumer behaviour changes gradually and this gap between initial adoption and understanding creates an opening for criminally-minded technology experts to manipulate.

Like the sea-faring pirates of old, the new security risks will both create opportunities for insurers and raise concerns for consumers and insurers alike. To succeed in the decades ahead, insurance companies of the future need to embrace innovation and adapt rapidly. Consumers will remain the central drivers of these changes as expectations for more personalization and convenience will remain high. But in a fast evolving industry which is as vital to consumers and business as it is the economy, caution and control must be applied. Regulators will need to listen to both insurers and consumers alike to futureproof the industry and develop frameworks that protect both the sector and society.

Special to Financial Post

Robert L. Love is a partner in the Toronto office of Borden Ladner Gervais LLP (BLG) and national leader of the auto industry group. He is one of the contributors for BLG’s latest report, Innovative Industries Reshaping the Canadian Economy.

Source: Canada.com

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