Self-driving cars will soon no longer be a figment of the imagination, so insurers need to think about how to cover this emerging risk.
David Lukens, director of telematics for data analytics firm Lexis Nexis Risk Solutions, told
Insurance Business in a phone interview that risk apportioning will shift over time as autonomous vehicles are adopted en masse by the consumer market.
“I do think we’re going to see some shift in liability away from the operators of the car and some shift to the auto manufacturer who produces these systems,” he explained.
“I don’t think we’re ever going to see a day when the driver of the vehicle has no liability. There’s always going to be car insurance,” he added.
Lukens also compared the current advances in autonomous cars to similar developments in the aviation industry as aircraft moved towards full automation several years back.
“One bellwhether I use to watch how this could evolve is the aviation industry. Aviation has been highly automated for a while but the pilot is still in the airplane even though technically the airplanes can fly themselves. Pilots are always there, they monitor the systems,” he further explained.
He also pointed out that in the case of accidents, there are instances when human error still factors as a liability.
Additionally, he said that the dynamics of risk management will change with changes in driver behaviour, and the beginnings of these changes can be seen with how semi-autonomous vehicles and conventional vehicles currently interact on the road.
He noted that increased vehicle automation and the data that can be collected from them is propelling the move towards usage based insurance (UBI) models, and is revealing the potential of new technology to change driving behaviour.
Currently, Lukens said that the UBI pricing model is used to underwrite 8% to 10% of policies in the US. However, the effects of adverse selection can already be felt by the insurers that are not participating in the use of telematics.
He also observed that the regulatory attitude toward UBI, which uses data from various sources, which are distilled and retrieved to underwrite policies based on an insurer-determined driver score, is generally favourable because it is “inherently fair.”
“Basically, your rate is impacted by your driving behaviour. It is statistically related to loss outcomes. So there’s a direct relationship there that…consumers (can understand) and that consumers can control. Most programs give consumers feedback that allows consumers to change their behaviour in a way that saves them money,” he pointed out.
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The ubiquity of the internet of things (IoT)--which are devices connected to a data network that enables the collection, monitoring and exchange of information—is also changing consumer attitudes towards telematics, by breaking down initial hesitation to share data with their service providers.
“The more integrated people are to sharing information for their benefit, the lower the hurdle is for telematics, the more willing people are going to be for sharing driving data to get insurance benefits and potentially other benefits as well,” Lukens emphasized.
The move towards increased automation, and eventually, autonomous vehicle operation makes data more critical when underwriting emerging risks.
LexisNexis, which operates a telematics data exchange, is aiming for continued market relevance by undertaking new partnerships with diverse data sources.
Lukens said that the firm is currently in talks with auto makers and telecommunications firms to beef up its arsenal of data to better serve the insurance industry. Among others, the company provides telematics services that let the insurer access standardized data and analytics from diverse sources at specific points in their processes, such as pulling data for underwriting, consumer monitoring, and reviews for policy renewal.
He added that as the benefits of telematics, and consequently the value of UBI, become more apparent, there will be a “bigger appetite for insurers to consume (data) on a more regular basis to do sort of ongoing monitoring…so they can provide ongoing services.”
Furthermore, Lukens said that the core model for integrated databases such as the one the company develops and operates for telematics, has applications for other insurance products such as property, for insuring smart homes, for instance.
“As more data is available, we are definitely looking into developing ways for insurance companies to get access to data in a way that’s easy for them to ingest,” he stressed.
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