Category Archives: Auto Trends

Self-Driving Cars Still Evolving

A fatal car accident involving a Tesla Model S in autonomous driving mode is drawing widespread scrutiny both in the United States and overseas.

Joshua Brown was killed in May this year when a tractor trailer made a left turn in front of his Tesla and the self-driving car failed to apply the brakes.

The National Highway Traffic Safety Administration (NHTSA) said it is investigating the incident and will examine the design and performance of the automated driving systems in use at the time of the crash.

Its preliminary evaluation of the incident doesn’t indicate any conclusion about whether the Tesla vehicle was defective, the NHTSA said.

In a blog post, Tesla noted that this is the first known fatality in just over 130 million miles where autopilot was activated:

“Among all vehicles in the U.S., there is a fatality every 94 million miles. Worldwide, there is a fatality approximately every 60 million miles. It is important to emphasize that the NHTSA action is simply a preliminary evaluation to determine whether the system worked according to expectations.”

Tesla further noted that neither Autopilot nor the driver noticed the white side of the tractor trailer against a brightly lit sky, so the brake was not applied:

“The high ride height of the trailer combined with its positioning across the road and the extremely rare circumstances of the impact caused the Model S to pass under the trailer, with the bottom of the trailer impacting the windshield of the Model S.”

As companies continue to innovate and invest in self-driving technology, the crash indicates that fully automated cars are still a thing of the future.

The crash also raises important concerns over regulation.

According to this New York Times article:

“Even as companies conduct many tests on autonomous vehicles at both private facilities and on public highways, there is skepticism that the technology has progressed far enough for the government to approve cars that totally drive themselves.”

And the Wall Street Journal reports:

“Tesla now risks being the test case that could prompt new safety regulations or laws limiting the deployment of self-driving technology.”

The crash also highlights liability concerns regarding this emerging technology. Most car crashes are caused by human error, but presumably the NHTSA investigation will also evaluate potential product liability on the part of the manufacturer.

The crux of the issue is weighing up the risk of crashes versus crashes avoided via the use of self-driving technology.

As the Insurance Information Institute (I.I.I.) notes:

“As crash avoidance technology gradually becomes standard equipment, insurers will be able to better determine the extent to which these various components reduce the frequency and cost of accidents. They will also be able to determine whether the accidents that do occur lead to a higher percentage of product liability claims, as claimants blame the manufacturer or suppliers for what went wrong rather than their own behavior.”

Liability laws might evolve to ensure autonomous vehicle technology advances are not brought to a halt, the I.I.I. adds.

Distracted Drivers, Meet the Textalyzer

After years of decline in road fatalities, numbers were up 8 percent in 2015. Many believe the rise is due at least in part to distracted driving and advocates are looking to programs that have successfully curtailed drunk driving for potential solutions.

The New York Times reports that one idea from New York lawmakers, would give police officers a new digital device that is the equivalent of the Breathalyzer — a roadside test called the Textalyzer.

An officer arriving at the scene of a crash could ask for the phones of any drivers involved and use the Textalyzer to tap into the operating system to check for recent activity, according to the New York Times article.

“The technology could determine whether a driver had used the phone to text, email or do anything else that is forbidden under New York’s hands-free driving laws, which prohibit drivers from holding phones to their ears. Failure to hand over a phone could lead to the suspension of a driver’s license, similar to the consequences for refusing a Breathalyser.”

However, the proposed legislation faces hurdles to becoming law, including privacy concerns, even though the Textalyzer bill would not give the police access to contents of any emails or texts.

If the law were to pass in New York, some believe it could spread across other states in the same way that the hands-free rules did after New York adopted them.

This is an interesting idea. The insurance industry has long been a major supporter of anti-drunk driving and seatbelt usage campaigns.

Distraction was a factor in 10 percent of fatal crashes reported in 2013, according to National Highway Traffic Safety Administration (NHTSA) data. Some 14 percent of distraction-affected crashes occurred while a cell phone was in use, the NHTSA notes.

A Highway Loss Data Institute study of collision claims patterns in four states (California, Louisiana, Minnesota and Washington) also found that texting bans may not reduce crash rates. Collisions went up slightly in all the states, except Washington, where the change was statistically insignificant.

The use of technology to better assess risk is something that insurers embrace in many different lines of business, including auto and health. Clearly, privacy concerns will need to be weighed, but this is a novel approach to tackling the distracted driving problem.

Check out Insurance Information Institute statistics on distracted driving here.

More On Employment and Claim Frequency

Earlier this month Insurance Information Institute (I.I.I.) chief actuary Jim Lynch linked teen employment to the spike in claim frequency. I.I.I. chief economist Steven Weisbart responds:

I think Jim’s post draws the wrong inference from the data. Specifically, the slide pairs the drop in the teenage unemployment rate with the rise in overall collision claim frequency. He infers that if teens are not unemployed, they’re employed and, presumably, driving to work.

But the drop in the unemployment rate of this age group isn’t solely—or even mainly—because they’ve taken jobs. To start with, in 2006-07, there were seven million people ages 16 to 19 in the labor force. That began falling in 2008, crossing six million in 2010 and plateauing at about 5.6 million midway through 2011. So in the space of less than five years, about 1.5 million people ages 16-19 disappeared from the labor force.

In contrast, the number unemployed in this age range dropped from about 1.1 million in 2006-07 to about 0.9 million in 2015. So about 200,000 got jobs. Some who had been in the labor force in 2006-07 must have gone to school, joined the military, were imprisoned, or simply gave up looking for a job (and therefore were not considered to be in the labor force).

If, instead, you look at the number in this age group who were employed in this period, it was 6 million in 2006-07, dropped to 4.3 million in mid-2010, rose to 4.5 million by mid-2014, and was 4.75 million in 2015:Q4. So the number of people in this age group who were employed is still 1.25 million below what it was before the Great Recession and subsequently.

I’ve put together a different slide (below), showing the change in employment and the change in claim frequency. As the number of employed falls with the Great Recession, so does claim frequency. And as employment numbers climb, so does claim frequency.

Employment and Collisions

So I’d say that Jim has a good explanation for the spike in the number of claims; more people get jobs, start driving to and from work and unfortunately get into accidents more often.

But it wasn’t just teen workers. It was everybody.

Teenage Drivers and the Surge in Claim Frequency

Insurance Information Institute Chief Actuary James Lynch looks at teenage driving:

2016.02.25 LYNCH teen driving slide

This chart shows how closely the teen unemployment rate tracks overall auto accident rates countrywide. It’s eerie. When the teen unemployment rate rises in 2008, the rate of accidents plummets.

And in 2013, when teen unemployment falls, claim frequency takes off.

Here accident rates are measured as collision frequency — the number of collision claims per 100 vehicles over the previous 12 months, as measured by ISO. The seasonally adjusted unemployment rate is from the Bureau of Labor Statistics.

The correlation is so strong (R2 = 0.629, for you data geeks) that I’m tempted to hedge. The data seem to say that teen drivers are behind the current spike in auto rates. I think they are part of the reason, maybe even a big part.

Certainly teen drivers with jobs have to get to work, so they log more miles, and that will lead to more accidents in any group, but particularly teens, whose driving records are notoriously bad.

But many people in this age group can’t drive legally. It would take more research to see how much of the spike in claim frequency is driven by younger drivers.

I was inspired to put this together by an article in the Insurance Institute of Highway Safety’s (IIHS) Status Report, which showed how more teens are on the road.  Their point was to dispel the idea that teens had given up driving for good, that young people would rather text their friends than see them face to face. Instead, IIHS showed, teens were driving less because they didn’t have jobs. Once they got jobs, they started driving again.

At the Insurance Information Institute, we speak frequently about how driving trends affect insurance. We post our PowerPoint slide decks here. We also collect many facts and statistics on auto insurance here.

Residual Auto Market, Meet Self-Driving Cars

Everyone wants to talk about autonomous vehicles, and for proof  I.I.I. chief actuary Jim Lynch  offers the AIPSO Residual Market Forum, at which  he spoke in mid-April.

AIPSO manages most of the automobile residual market, where highest risk drivers get insurance. Each state has a separate plan for handling risky drivers and AIPSO services most of them in one way or another, acting as the linchpin in the $1.4 billion market, about 0.7% of all U.S. auto insurance written in 2013, according to Auto Insurance Report.

Though small, the residual market is important, but it’s not an area that would naturally lend itself to discussing the self-driving car. If cars could drive themselves, of course, there wouldn’t be much of a residual market.

Even so, I was one of three speakers at the forum’s panel exploring industry trends, and at AIPSO’s request, all three of us touched on autonomous cars.

Though he spoke last, Peter Drogan, chief actuary at AMICA Mutual Insurance, probably did the best job of laying out the future technology and some of its challenges. Particularly spooky was a 60 Minutes clip in which a hacker took over a car Lesley Stahl drove over a parking lot test course. She wasn’t driving fast, but she couldn’t stop after the hacker took over the brakes of her car.

Karen Furtado, a partner at Strategy Meets Action, a consultancy that helps insurers plan for the future, laid out the case for disruption. Autonomous vehicles will not only make vehicles safer, they will change driving habits. Fewer cars will be on the road, and more people will share them, summoning self-driving vehicles through ride-sharing apps, all of which could potentially shrink the $180 billion auto insurance market.

I’ve made my thoughts clear before, both in this blog and elsewhere: the technology will change driving forever, but it takes about three decades for auto technology to become common on roadways, giving insurers a lot of time to adjust. And some coverages, like comprehensive, will not be affected, as they protect cars when they aren’t in accidents.

A PowerPoint of my presentation is posted here.

Traffic Ahead

I.I.I. chief actuary Jim Lynch looks into the future of self-driving cars:

I wrote about autonomous vehicles and insurance for the March/April edition of Contingencies magazine.

I argue that while the safety improvements will reduce the number of automobile accidents, any predictions of the end of automobile insurance look overblown today.

The first cars to drive themselves will only do so for a few minutes at a time — far from the curbside-to-curbside Dream Vehicle that gets most of the media attention. Any new auto technology takes two or three decades to cascade from a pricey option on luxury vehicles to standard equipment found on every used Chevy.

The slow rollout means claim frequency — the number of claims per hundred vehicles — is likely to decline over the next few decades at about the same rate as it has over the past five decades, giving insurers plenty of time to adapt, just as they have since the first policy was issued in Dayton, Ohio, in the 1890s.

Here is an excerpt:

The property/casualty industry will react as it has for decades, as regulation and innovation have made auto, products and the workplace safer. The impact will be carefully measured by actuaries, who will adjust rates as the innovations prove out. Insurers will find new coverages that customers will want.

The Dream Vehicle will change auto insurance, sure, but it won’t destroy it.”

The I.I.I. has an Issues Update on Self-Driving Cars and Insurance.

Unbuckled and Unprotected

I.I.I.’s Jim Lynch brings us a timely reminder on why it’s important to buckle up:

I hate to write this: CBS newsman Bob Simon, who died February 11 in a Manhattan auto accident, was not wearing a seat belt, according to The New York Times.

Simon lately filled an elder statesman role on 60 Minutes, but his reporting career was one of globetrotting daredevilry. He covered America’s urban riots in 1968. He reported for six years from Vietnam and rode one of the last U.S. helicopters that left Saigon before the city fell in 1975. He was captured by Iraqi troops at the outset of the 1991 Persian Gulf War and was held prisoner for 40 days.

Simon died when the limousine in which he rode sideswiped a Mercedes in Manhattan, then hit a lane barrier.

Every death is a tragedy, an accidental death doubly so. Sadder still that a person who survived so much danger might well have survived this accident had he been wearing a seat belt. His driver had buckled up and survived; both of his legs were broken, as was an arm. The Mercedes driver was uninjured.

I.I.I.’s Facts and Statistics on highway safety points out that seatbelts saved more than 12,000 lives in 2012 and could have saved another 3,031, had everyone used them.

I ride in cabs and black cars fairly often and know it feels awkward to buckle up. The action seems to be a referendum against the driver, as if my action says I question the driver’s competence. And I feel weirdly invulnerable when I travel, as if tragedy can’t find me in the back seat.

Still, I always strap myself into the harness, and I wish Bob Simon had done so as well.

In 2011, 65 percent of New York taxi riders failed to buckle up, according to Taxi and Limousine Commission statistics reported in USA Today, vs. about 10 percent in private passenger vehicles. New York is one of 22 states that do not require cab riders to buckle up.

Self-Driving Cars – With or Without You?

We’re reading that self-driving cars are no longer a thing of the future, but it’s in the subhead of this  Time article: how long will it be before your car no longer needs you? where the heart of the story lies.

Jason H. Harper writes of how he earned one of the first new driverless motor licenses  — technically known as an “autonomous vehicle testing” permit  — from the California DMV.

He then describes his chauffeured ride by a prototype Audi from Silicon Valley to Las Vegas for last week’s Consumer Electronics Show:

The car uses an array of sensors, radars and a front-facing camera to negotiate traffic. At this point, the system works only on the freeway and cannot handle construction zones or areas with poor lane markings. When the car reaches a construction zone or the end of a highway, a voice orders you to take the wheel back.”

Before taking the 550-mile road trip, Harper had to get special instruction on how not to drive, per California regulations:

The training included basics like turning the system on and off and learning the circumstances in which it could be used. The rest was about handling emergencies, such as making lane changes to avoid crashing.”

Harper says the training was far more difficult and involved than a regular driving test. However, average buyers will not need such training.


Because rollout of this technology is gradual. Audi’s program for example would allow the car to self-drive in stop-and-go highway traffic, but when traffic clears the driver takes the wheel again.

It’s at the very end of the article that a voice from academia reminds us that  this  approach may be no bad thing  as  both technology and driver acceptance need time to mature.

Dr. Jeffrey Miller, an associate professor at the University of Southern California, tells Time that in his opinion licenses and drivers will never be obsolete because “the driver will always have to take over in case of a failure.”

It’s an interesting point. From the insurance perspective, too, while self-driving cars are definitely on the way, the  implications for insurers are evolving. In its issue update Self-Driving Cars and Insurance, the I.I.I. notes:

Except that the number of crashes will be greatly reduced, the insurance aspects of this gradual transformation are at present unclear. However, as crash avoidance technology gradually becomes standard equipment, insurers will be able to better determine the extent to which these various components reduce the frequency and cost of accidents.”


They will also be able to determine whether the accidents that do occur lead to a higher percentage of product liability claims, as claimants blame the manufacturer or suppliers for what went wrong rather than their own behavior.”

More on auto insurance here.

J.D. Power Reports on Auto Insurance Customer Satisfaction

Price is a key driver of satisfaction among auto insurance buyers, according to the J.D. Power 2014 U.S. Insurance Shopping Study – Wave 1.

The study examines insurance shopping and purchase behaviors and overall satisfaction among customers who recently purchased insurance across three factors (in order of importance): price, distribution channel, and policy offerings. Retention and shopping rates reflect Q2 2013 results.

J.D. Power reports that rate increases are driving more auto insurance customers to obtain competitive price quotes, while satisfaction with the purchase experience is trending downward among new buyers due to lower satisfaction with price.

Key findings of the study include:

— Price satisfaction declines to 808 (on a 1,000-point scale) in 2014, from 821 in 2013.

— Auto customer retention averages 97 percent, with 3 percent of auto insurance customers switching insurers, fueled by a shopping rate of 8 percent.

— More than 20 percent of new buyers purchased auto insurance online. Therefore, companies that lack a viable quote website are not well-positioned to acquire or sell to one in five customers.

— The average annual savings when switching to a new insurer is on par with 2013 ($387 vs. $386, respectively).

In a press release, Jeremy Bowler, senior director of the global insurance practice at J.D. Power, says:

As rate increases continue to drive customers to shop around for the best price, insurers need to provide a seamless shopping experience, including competitive websites with quote compatibilities and a satisfying on-boarding experience to acquire new customers.

Communicating new offerings and allowing customers to tailor their policies helps demonstrate the value of the policy and improve customer satisfaction.†

The 2014 U.S. Insurance Shopping Study – Wave 1, which for the first time is being conducted on a quarterly basis, is based on responses from more than 5,500 auto insurance shoppers.

Check out I.I.I. facts and statistics on auto insurance.

Auto Insurance Customers Remain Satisfied

Overall customer satisfaction with auto insurance companies dipped in 2013 from an all-time high in 2012, but remains comparatively high relative to the previous decade, according to the J.D. Power 2013 U.S. Auto Insurance Study.

The study, which was launched in 2000, measures customer satisfaction across five factors: interaction, price, policy offerings, billing and payment and claims.

J.D. Power reports that overall satisfaction with auto insurance companies is 794 (on a 1,000-point scale), down 10 points from 2012. Despite this decline, satisfaction in 2013 is the second-highest level since the study launched in 2000.

Price and policy offerings were key factors contributing to lower overall satisfaction.

In a press release, Jeremy Bowler, senior director of the global insurance practice at J.D. Power says:

In 2013, there is a sharp rise in the number of customers who have experienced premium increases. The dollar amount of those increases is also larger, averaging $153 in 2013, compared with an average rate increase of $113 reported in the 2012 study.†

J.D. Power reports there is a direct relationship between the size of premium increase and the percentage of affected customers who switch insurers. Only 9 percent of customers who experienced an annual rate increase of $50 or less switched insurers, whereas 18 percent of customers switched when the increase was between $51 and $100, and 32 percent when the increase is more than $200.

The survey  also  notes  that insurers achieve higher satisfaction scores when they discuss rate increases with customers prior to sending a renewal letter.

Satisfaction averages 698 among customers who are notified before renewal and discuss their options. This is 67 points higher than among customers who did not get to discuss a rate increase prior to renewal.

The study finds that only 16 percent of customers with a rate increase indicate that they had a discussion with their insurer regarding potentially changing their coverage.

Check out I.I.I. facts and stats on auto insurance.