Why emerging automotive safety technology could cost insurers billions


Why emerging automotive safety technology could cost insurers billions

With new automated driving features being released on a rolling basis, insurers said it is difficult to keep up. 

Forward collision warning with automatic braking has been found to have one of the greatest safety benefits among various driver assistance systems. The Insurance Institute for Highway Safety concluded in a recent study that automatic braking could reduce front-to-rear crashes with injuries by 56 percent.

But most ADAS features are still sold as optional equipment, making it impossible for insurance companies to validate which features ultimately end up on a specific car. Insurers are reluctant to trust car buyers to correctly identify what technology their vehicle has on board. 

Advanced safety features not only differ in performance and description among different manufacturers, but even among models by the same automaker, according to research by IIHS and its UK equivalent Thatcham Research, which conduct road tests to evaluate safety tech performance.

“The only way you can adequately price is by getting more data to understand what a vehicle has and whether it makes a difference,” said Matthew Avery, Thatcham’s research director.

That data is not sufficiently provided by manufactures who often cite proprietary and competitive reasons, said Tom Karol, general counsel of the National Association of Mutual Insurance Companies, whose members insure more than 170 million U.S. auto policyholders.

Automakers and insurers said they are dealing with the data issues. General Motors has a team working on ADAS and insurance, according to Barry Engle, head of GM’s North American operations.

Engle said he expects with better information, the insurance industry would respond positively. “To the extent that they are not, collectively we need to do a better job of communicating with one another,” he said.

Swiss Re is leading efforts to develop a global ADAS risk score and a mechanism allowing carmakers to supply data to Swiss Re, which in turn will recommend discounts to auto insurers. 

“If we say these cars are safer, insurers are more prone to believe us as we take part of the risk” as a reinsurer for consumer-facing auto policy writers, said Sebastiaan Bongers, Swiss Re’s head of products and technology.

Bongers believes reductions in accident frequency and severity will eventually offset higher repair costs. But he said lower premiums could result in temporary liquidity problems in the insurance sector in about ten years. 

Swiss Re so far has partnered with BMW AG and is in talks with more auto manufacturers to develop a comprehensive system. 


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