Every driver — even really good ones — can have a bad day on the road.
Federico Guerrini | Contributor Forbes
In fact, getting rid of the driver could also have remove the need for private insurances, as all the liability in case of an accident would be transferred to the car’s manufacturer, the software creator, or other third parties. It does make sense, if you think about it for a minute: if you relinquish control over what your car is doing, why should you pay for any misdemeanor?
And it not just common sense: this possibility (purely theoretical, at this point) is outlined in an essay by Yale Law School student Jack Boeglin in the current issue of the Yale Journal of Law & Technology.
“If nondiscretionary-communicative vehicles became mandatory (as the introduction of either the interactive or remote-controlled models might require), there would be no need for private insurance, since all liability for AVs would be transferred to manufacturers,” writes Boeglin, adding that “Eliminating the entire automobile insurance industry (which has roughly $200 billion dollars in annual revenue) would be a monumental boost to administrative efficiency.”
For insurance companies that might be a catastrophe, at least for a while, as they struggle to adjust, but they could soon find other revenue streams, for instance signing deals with the manufacturers.
The chance of having the passengers’ full attention during all the time of the journey, would also create a huge amount of possibilities of monetization for advertisers and content providers.
On the customer’s side, not having to pay for an insurance could prove an irresistible bait for cash-strapped car owners, helping them overcome all their fears related to the further erosion of privacy that could take place if driverless, connected and remotely-controlled vehicles become mainstream.
In Boeglin’s view, freedom, privacy, and liability are not independent elements, but interlocking pieces, that together compose the puzzle of driverless cars’ regulation. It’s like a formula, the final result of which, depends on the weight of each element of the equation.
Do you want more privacy and freedom? You’ll have to pay for it. It’s not an altogether new concept, actually. A number of insurance companies already allow customers to pay less, if the consent to install on their vehicles a ‘black box’ which keeps track of certain parameters, like stopping speed, acceleration, and turning radius. Usage-based insurance programs like Progressive PGR +0.91%Snapshot and Allstate ALL +0.76% Drivewise are good examples of that.
But intelligent cars, with the assistance of 360-degree cameras, could provide much more information: from whether a safe braking distance was observed and the laws of the road were followed, to how smoothly turns were handled.
“These vehicular telematics could also provide a telling comparison between the driving behaviors of the human driver and her automated companion,” Boeglin says.
In other words, they could help estimate the ‘percentage’ of driver’s fault in case of an accident and distribute therefore the liability between the man and the machine. In the case of what the student calls ‘discretionary communicative vehicles’ (those in which the driver can still override autonomous driving) the guilt would be pondered in accordance with the evidence collected by the vehicle’s computer.
In the extreme scenario, in which the human completely relinquishes control to the machine, all the liability would go to the manufacturer.
You probably figure that if you’re a bad driver and collect some fender-benders or speeding tickets in your DMV record, your insurance company is going to charge you accordingly. But what you might not have expected is that insurers also might slap you with penalties — sometimes hefty ones — if you’ve blown off paying a bill here or there.
Car insurance companies in all but three states — California, Hawaii and Massachusetts, where it’s illegal — use a driver’s credit history in the secret sauce of their underwriting formulas. People with bad credit are considered higher-risk customers, so insurers often charge them more, explains Jill Gonzalez, an expert at WalletHub, a personal finance site that just published a study showing what insurance companies in what states penalize drivers the most for poor credit.
WalletHub asked the five biggest car insurance companies in the country for quotes for two imaginary drivers who were identical except that one test case had excellent credit and the other had no credit history.
“There is a strong correlation between one’s credit characteristics and insurance losses,” Gonzalez says. “The insurance companies usually look at the the credit history to see how the insured can manage his or her risk exposure.”
Across the board, the difference between quotes given to the “great credit” versus the “no credit” driver varied by 49%, but some fluctuations were much, much greater.
Credit obviously isn’t the only factor insurers look at to determine premiums, and different companies assign varying degrees of importance to this characteristic. WalletHub’s study finds that Farmers Insurance seems to place the most weight on driver credit data, with a 62% difference between quotes given to WalletHub’s two hypothetical drivers. Even Geico, the insurer WalletHub says “seems to rely on credit data the least,” has a 32% fluctuation between the two driver scenarios.
The results also vary widely by state; in Connecticut, the impact of great credit versus no credit only contributes to a 15% fluctuation in premiums. In Michigan, however, it’s another story: WalletHub finds that credit status contributes to a 115% fluctuation in rates.
Gonzalez says the biggest issue consumers face is that a lot of companies aren’t up-front about their use of credit data in underwriting. “The problem we discovered is that not all of the companies are transparent in letting their customers know that credit scores impact insurance premiums to a significant extent,” she says.
WalletHub looked at the websites of the 10 biggest auto insurers to see how soon, how often and how prominently they advised customers that their credit would be a variable in the eventual premium price they were quoted. It says Progressive is the most transparent, but Gonzalez points out that a lack of transparency among many carriers means that drivers have to do a lot more homework if they have credit problems.
“Consumers with no credit have to do some serious research before deciding on an insurance company,” she says.
That doesn’t keep people from believing it, though. According to an Insure.com survey done last year, 46 percent of 2,000 licensed drivers believed that red cars are more expensive to insure because they are pulled over more often.
Yet they’re doubly mistaken.
Not only does color have nothing to do with , a particular model’s risk isn’t determined by the number of tickets its owners receive.
Red, blue, silver: It makes no difference
Your insurer could not care less what color your car is.
“We handle dozens of insurers, and not one of them asks,” says Des Toups, managing editor of Insurance.com.
“The color of your car has no bearing on your premiums,” says Loretta Worters, vice president of communications with the Insurance Information Institute (III).
“The color of your vehicle is not even a question on the insurance application, and it is a non-factor,” says Kristofer Kirchen, president of Advanced Insurance Managers.
In most cases, your insurance company doesn’t even know the color of the car you are driving.
They do ask for your vehicle identification number (VIN) number during the underwriting process, but vehicle color is not a component of the VIN code. A VIN can tell you quite a bit about a vehicle, including where it was built, its trim level and even warranty details, but it cannot tell you or your insurer the color of your ride.
So go out and buy that Ferrari-red sports car. Your insurer will not care, as long as it is not an actual Ferrari.
Tickets don’t matter? Yes and no
Tickets matter when an insurance company looks at your driving record to calculate your individual rates and decide whether you are a .
A single speeding ticket can raise your rates by 15 percent, according to data gathered from six major carriers for Insurance.com by Quadrant Information Services. Two tickets? Nearly 40 percent.
So, yes, tickets do affect rates, but only for the driver who got them.
Insurance companies care far more about claims, which directly affect their bottom line. A car with a high frequency of claims or a record of more expensive claims will be more costly to insure – for everyone who buys that model of car.
“It’s really two separate questions: How risky is the driver, and how risky is the car?” says Toups. (See “ ”)
In neither case is the car’s color a factor.
Whether red cars are more frequently pulled over is harder to pin down. Law enforcement officers say it’s simply not an issue, and certainly a radar gun or speed camera doesn’t know the difference between arrest-me red and rental-sedan white.
Color does matter: The exceptions
The only way paint can be a factor in your insurance rates is if you have a custom paint job, but even that shouldn’t add a ton to your premium.
“Custom paint could increase your rates,” says Kirchen, “It could be considered under additional custom parts and equipment, but there would only be a nominal fee charged for it.”
And while it won’t directly cut your rates, your car’s color may make it less likely to be stolen. In that case, a red car might be an advantage.
According to a 2012 report by CCC Information Services, red doesn’t even register in the top five vehicle colors that are most frequently involved in thefts. Car thieves prefer green, gold, black and white cars, and their No. 1 pick is silver.
Cars that are frequently stolen will also cost more for comprehensive coverage.
So who cares about color? You do
Insurance.com surveyed 1,000 men and women, all married, licensed drivers over the age of 25, asking them what color their car is, and why they chose that color. The top colors were:
- Black: 19.5 percent
- Silver: 18.5 percent
- White: 16.2 percent
- Blue: 12.5 percent
- Red: 8.5 percent
The reasons drivers chose their particular color:
- It was pretty: 31.5 percent
- No other choice: 25 percent
- Wouldn’t show dirt: 10.2 percent
- I look good in it: 9.7 percent
- It blends in: 7.6 percent
- It stands out: 6 percent
- Safety: 5.8 percent
- Resale: 4.2 percent
The original article can be found at Insurance.com:
By Marley Jay
THE ASSOCIATED PRESS
NEW YORK — Allstate will start insuring drivers who pick up passengers through ride-hailing apps like Uber and Lyft.
The insurer said Wednesday that the Ride for Hire policy will cost $15 to $20 a year on average and will provide coverage for drivers who get into accidents while they are on the way to pick up new fares. It said it can also help them deal with gaps in coverage between their own auto insurance and policies offered by the ride-hailing companies.
Allstate Corp. will offer Ride for Hire coverage in Colorado, Illinois, Texas and Virginia in 2015 and said it plans to start offering the coverage in other major markets in 2016. Companies including Farmers, Geico, and USAA also started offering ride-sharing insurance in a few states earlier this year.
Ride-hailing smartphone apps like Uber, Lyft and Summon can be used to book a ride from a nearby driver. The drivers don’t work for the companies directly, however. Some work for car services while others are using their personal vehicles to make some extra cash.
The issue of how the drivers are insured is complex and has been contentious at times.
Uber and Lyft both provide insurance for drivers while they are carrying passengers, and they offer varying levels of coverage for drivers who have turned on their app, meaning they are available to give rides, and for drivers who are on their way to pick up a passenger. Drivers are also required to keep a personal auto insurance policy. However Allstate said insurance from ride-hailing app companies sometimes has a higher deductible than a drivers’ personal auto policy, meaning a driver might have to pay a larger-than-expected deductible in some circumstances.
Last month Uber temporarily pulled out of Kansas in a dispute over insurance coverage and background checks for drivers. Uber also suspended operations in Portland, Oregon, for several months during a dispute over the same issues and has fought against similar laws in other states.
By VALERIE RABURN
Source: The Wall Street Journal
Google ’s new foray into the American auto-insurance market will likely bring in a good chunk of revenue, what’s precious to the Silicon Valley giant is the mass of data it will be able to collect.
In March, the company launched a U.S. version of its Google Compare auto-insurance site, which has been up and running in the United Kingdom since 2012. The U.S. site allows consumers to get quotes from a dozen auto-insurance companies, including MetLife and Mercury Insurance. The rollout is starting with California, but Google says the site will be open to residents in other states soon.
At first glance this appears to be simply another enticing revenue stream for the company. Google Compare aggregates insurance quotes from more carriers than any one consumer could possibly juggle on his own, which will draw shoppers looking for the best deal. Google gets paid each time a user on the site clicks through and buys a quoted policy.
Yet consider how all this sifting of auto-insurance rates will position the company: Could Google turn this revenue-generating learning experience into a more lucrative opportunity to underwrite its own insurance policies and displace traditional carriers—especially once driverless cars become a reality?
Consumers using Google Compare enter their demographic and vehicle information, just as they would to get a quote on the website of a big-name carrier. Google then is able to see—and subsequently analyze—the rates that more than a dozen insurers return to that customer.
This broad understanding of how auto-related risks are priced in the competitive market could allow the company to insure tomorrow’s vehicles, or simply roll the cost of insurance into the retail price of Google’s own driverless car once it hits the market. That’s one way for Google to become the exclusive insurer of its driverless cars, firmly slamming the door on any would-be competitors.
There’s a reason that Google Compare went live in the United Kingdom, where it now presents quotes from 124 companies, before it was introduced here. The U.K has already approved testing of driverless cars on public roads. U.S. regulators are being more conservative, taking time to think through the implications of the new technology.
For example, government representatives and several companies—including Ford, General Motors , Honda, Toyota and Xerox , where I work—have joined with the University of Michigan and the Michigan Department of Transportation to build Mcity, a 32-acre simulated town that will test various types of connected and autonomous vehicles. Mcity, which includes several miles of roadway, roundabouts, crosswalks and other obstacles, is slated to open in July.
It’s not difficult to imagine how driverless cars will change consumer habits and choices. Fewer people will buy cars, as ordering a vehicle from an unmanned car service will be cheap and convenient. In some ways, this will bring the luxury of a chauffeur to middle-class families and convert drive time into bonus time. Google reportedly has invested $258 million in the app-based ride service Uber, which recently announced its own initiative to research autonomous vehicle technology.
All this will upend the auto-insurance market, which has annual revenues north of $150 billion. For one thing, the businesses that own and furnish cars for just-in-time transport will be responsible for insuring them. For another, the accident rate with self-driving vehicles will be but a fraction of what it is today, since human error will be eliminated from the equation. That will push insurance payouts and prices way down. After an accident, the onboard computer and sensors will be able to determine whether it was caused by a poorly designed algorithm or a parts failure.
Since often fault won’t be an issue, auto insurance could come to resemble general product liability insurance, similar to that held by manufacturers of everything from stovetops to trampolines. Hence the opportunity for Google, armed with mountains of data on the evolving market, to confidently bundle insurance into the price of its driverless vehicles.
The bottom line: In the short term, insurance carriers participating in Google Compare might draw consumers away from the big-name players. In the long term, not only could personal auto insurers struggle to stay afloat, but commercial insurers could be muscled out of the market as well if Google—tomorrow’s auto maker—gets into the business of managing what happens when cars collide.
Today’s traditional insurance carriers might want to explore alternate lines of business. The velocity of change over the next 10 to 15 years will be unprecedented. It will be interesting to see how the insurance industry responds.
Ms. Raburn is chief innovation officer of insurance services at Xerox.