The Self-Driving Car and the Coming Revolution in Auto Insurance

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.

Ontario: Hundreds rally against cuts to auto insurance benefits

BY MARYAM SHAH, TORONTO SUN

TORONTO – Changes to auto insurance benefits for motor vehicle accident victims passed in the Ontario legislature Wednesday as part of the provincial budget.

“God help us all,” Tammy Kirkwood said upon hearing the news. “We’re getting a lot less coverage for a lot more money and I’m not sure why.”

Kirkwood was one of hundreds of protesters at Queen’s Park rallying against reductions in auto insurance benefits which they say will have the most effect on victims with catastrophic injuries.

The 47-year-old Orillia woman said protesters were “flabbergasted” that the provincial government “was trying to disable our resources and our funding to recover.”

Part of the changes to auto insurance rules under the new budget mean that combined coverage for medical, rehabilitation and attendant care benefits for the catastrophically injured will be cut in half from its current cap of $2 million to $1 million.

Kirkwood survived a 2008 collision when a dump truck hit her car. She had to be pried free from her vehicle by firefighters, and was deemed catastrophically injured.

She says she was only able to move forward because she had access to the services she needed.

Unable to return to work, Kirkwood now volunteers as an advocate with FAIR Association of Victims for Accident Insurance Reform.

New Democratic Party MPP Jagmeet Singh spoke at the rally in support of their cause.

The cuts affect “the most vulnerable people,” such as people with brain and spinal cord injuries, he said.

“They need benefit coverage … to live an at least somewhat decent life,” Singh pointed out.

A spokesman for Finance Minister Charles Sousa said the government is “working hard to create a fair and affordable insurance system” for the province’s 9.4 million drivers.

Ontario is “the only province in Canada to offer exclusive catastrophic coverage,” Kelsey Ingram said in an e-mail.

“Catastrophically impaired claimants will also continue to be able to sue an at-fault party to recover damages for health-care expenses and potentially other claims,” she added.

The provincial government is also committed to making sure any savings from these changes do not result in “excess profits” for insurance companies, Ingram said.

“This is about lowering premiums while providing support and protection for all Ontario drivers,” she said.

Parents – make sure to plan a safe ride home for your teens this grad season

Parents – make sure to plan a safe ride home for your teens this grad season

For high school seniors, grad celebrations and one last summer of carefree fun and parties remain before they move onto the next chapter of their lives. It’s an exciting time for grads and ICBC is asking parents to make sure their teens have a plan to get home safely from all of their celebrations and parties.

Every day from June to August, 19 youth are injured in crashes in B.C.

The number of youth killed in crashes increases by nearly 30 per cent in July and August in B.C. with an average of 10 youth killed. Speeding, impaired driving and distracted driving were the top contributing factors for young drivers in these fatal crashes.

Top five tips for parents:

  1. Know the plan every time. Talk to your teen about all of their plans for grad celebrations and parties and how they’ll be getting home from each of them. Many grads treat themselves to a limousine – make sure it’s scheduled to drive them home. If they could end up going to multiple parties in a night, make sure they plan safe rides for that too.

  2. Backup plans. Review a few scenarios with your teen in case their safe ride home falls through so they’re prepared and discuss alternatives whether it’s transit, a taxi or calling a family member for a ride. Ask your teen to program local taxi companies’ phone numbers into their phone, look up transit information in advance and set aside money for transit or a taxi just in case.

  3. Call for help. If you haven’t already, consider letting your child know that they can call you at any time if they ever need a ride. If they do call you for assistance, be supportive and consider saving your questions for the next day or at least until you’re home. If you aren’t able to pick your teen up yourself, you can always call a taxi to get them home safely.

  4. Designated drivers. If your teen is going to be the designated driver, remind them that a designated driver does not drink at all and use real-life scenarios to encourage an open discussion about not allowing passengers or peer pressure to influence their choices.

  5. Take a stand. If your teen will be getting a ride with a friend, remind them to ask the driver if they’ve had anything to drink before getting into the vehicle if they aren’t sure. Even if you’re confident that your child is going to make the right choices, talk to them about looking out for their friends, especially those they know are easily influenced by others. Your teen’s choices can have a significant influence on their friends and make it easier for them to take a stand too.

Regional statistics*:

  • On average, 385 youth are injured in crashes each month from June to August in the Lower Mainland.

  • On average, 71 youth are injured in crashes each month from June to August on Vancouver Island.

  • On average, 97 youth are injured each month from June to August in the Southern Interior.

  • On average, 28 youth are injured in crashes each month from June to August in the North Central region.

    Learn more about ICBC’s road safety speakers who have been touring the province sharing their personal, heartbreaking stories to thousands of students to motivate them to think twice before taking risks while driving. You can also find more helpful road safety tips on icbc.com.

*Fatality data based on police data from 2009 to 2013. Injury data based on ICBC data from 2009 to 2013. Youth defined as aged 16 to 21.

 

Media contact:
Lindsay Olsen​
604-982-4759

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