Auto Trends


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.

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.

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.

Why?

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.”

And:

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.

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.

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.

Turns out using hands-free technologies to talk, text or send email while driving is not as safe as many people believe, according to a new study conducted by the University of Utah for the AAA Foundation for Traffic Safety.

The research found that as mental workload and distractions increase, reaction time slows, brain function is compromised, drivers scan the road less and miss visual cues, potentially resulting in drivers not seeing items right in front of them including stop signs and pedestrians.

The report notes:

The assumption that if the eyes were on the road and the hands were on the steering wheel then voice-based interactions would be safe appears to be unwarranted. Simply put, hands-free does not mean risk-free.”

Researchers measured brainwaves, eye movement and other metrics to assess what happens to drivers’ mental workload when they attempt to do multiple things at once.

The results were used to rate the levels of mental distraction drivers experience while performing each of the tasks. The levels of mental distraction are represented on a scale, as follows:

– Tasks such as listening to the radio ranked as a category “1” level of distraction or a minimal risk.

– Talking on a cell phone, both handheld and hands-free, resulted in a “2” or a moderate risk.

– Listening and responding to in-vehicle, voice-activated email features increased mental workload and distraction levels of the drivers to a “3” rating or one of extensive risk.

Professor David Strayer, lead author of the study, says:

These new, speech-based technologies in the car can overload the driver’s attention and impair their ability to drive safely. An unintended consequence of trying to make driving safer – by moving to speech-to-text in-vehicle systems – may actually overload the driver and make them less safe.”

More on this story from NPR.

Check out I.I.I. facts and statistics on highway safety.

While the percentage of auto insurance shoppers has reached a six-year low, the percentage of those shoppers who select a new insurer is at a six-year high, according to the just-released J.D. Power and Associates 2013 U.S. Insurance Shopping Study.

The study found that only 23 percent of auto insurance customers shopped for a new policy in the past 12 months, but 45 percent of those that did ultimately switched insurer.

J.D. Power notes that the proportion of insurance customers who shop has decreased from a high of 33 percent in 2011, while the switching rate among shoppers has steadily increased from a low of 33 percent in 2010.

The findings come as overall customer satisfaction with auto insurance companies has improved to an all-time high of 804 (on a 1,000 point scale) in 2012. Overall new buyer satisfaction with the auto insurance shopping experience averages 828 for the third consecutive year.

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

Unlike many other industries we measure, policy retention rates for personal auto insurance in the U.S. market average 90 percent. With customer satisfaction generally high and climbing, this industry has witnessed fewer customers shopping, but those who are shopping are serious about switching insurers.”

Another key takeaway from the study is that insurer websites are becoming increasingly important in the new-buyer purchase experience, increasing to 24 percent in 2013, up from 22 percent in 2012.

The call center representative is less influential among customers selecting a new insurer in 2013 (20 percent), compared with 2012 (22 percent), while the local agent remains as influential as in previous years.

As more shoppers are buying their insurance online, J.D. Power says it is vital that insurers provide a high-quality and effective Web experience, whether customers are accessing the site via a desktop computer, a tablet or a smartphone.

The study examines insurance shopping and purchase behavior and overall satisfaction among customers who recently purchased insurance across three factors (in order of importance): price, distribution channel, and policy offerings.

The 2013 U.S. Insurance Shopping Study is based on responses from more than 16,900 shoppers who requested an auto insurance price quote from at least one competitive insurer in the past 12 months.

While the dangers of texting and driving get a lot of headlines, you might be surprised at the findings of a new study by Erie Insurance that show daydreaming behind the wheel is even more dangerous.

Erie’s analysis found that 62 percent of distracted drivers involved in fatal car crashes were described by police as daydreaming or “lost in thought”.

The police report data analyzed by Erie in the Fatality Analysis Reporting System (FARS) reveal that of the more than 65,000 people killed in car crashes over the past two years, one in 10 were in crashes where at least one of the drivers was distracted.

Erie did point out that because FARS data on distraction is based largely on police officers’ judgment at the time of the crash, and because some people may be reluctant to admit they were distracted when being interviewed by police after a fatal car crash, the numbers are difficult to verify and may, in fact, under-represent the seriousness and prevalence of driving distractions.

As well as daydreaming, police listed several more specific types of distractions. Below are the top 10 distractions involved in fatal car crashes:

Customers are increasingly satisfied with their auto claims experience, as repairable and total loss claims are being paid faster, according to the J.D. Power and Associates 2013 U.S. Auto Claims Satisfaction Study—Wave 1.

Overall, claimant satisfaction with the auto claims process in the fourth quarter of 2012 increased by six points to 861 (on a 1,000-point scale) from the fourth quarter of 2011, primarily due to an 11-point increase in settlement satisfaction.

J.D. Power noted that slight increases in the ratings of fairness of the claim settlement and timing of the settlement, contributed to the improvement in settlement satisfaction.

The study finds that the average time to pay claimants decreased to 13.9 days in the fourth quarter of 2012, down from 16.4 days in the same period of 2011.

While the average time to pay claimants for a repairable claim (11.8 days) decreased by 1.3 days from the fourth quarter of 2011, the largest decrease is in the time it takes to pay total-loss claims, down by an average of 5.1 days to 18.5 days.

Jeremy Bowler, senior director of the insurance practice at J.D. Power and Associates, commented:

Regardless of the claim type, the faster the claimant is paid and can move forward with a repair or to replace their vehicle, the more likely they are to be satisfied.

In addition, satisfaction with the claims professional is at an all-time high, indicating that the process is becoming smoother, with more frequent updates throughout contributing to a much more satisfying experience.”

The study measures claimant satisfaction with the claims experience for auto physical damage loss. Depending on the complexity of the claim, a claimant may experience some or all of the following, which are measured in the study: first notice of loss; claim service interaction; damage appraisal; repair process; rental experience; and settlement.

The 2013 U.S. Auto Claims Satisfaction Study–Wave 1 is based on responses from more than 3,000 auto insurance customers who settled a claim within the past six months. It excludes claimants whose vehicle incurred only glass/windshield damage or was stolen, or who only filed roadside assistance claims.

Check out this I.I.I. video for five steps to follow to make the auto insurance claim process quicker and simpler.

A new report from the National Insurance Crime Bureau (NICB) has found a strong correlation between organized crime and staged auto accidents.

Covering the period from January 1, 2008, through June 30, 2012, analysts reviewed 13,014 questionable insurance claims.

Questionable claims (QCs) are claims that NICB member insurance companies refer to NICB for closer review and investigation based on one or more indicators of possible fraud. A single claim may contain up to seven referral reasons.

For this report, just QCs with a referral reason of “organized group/ring activity” (OGA) were identified.

Overall, there were 13,014 OGA QCs referred to NICB during this period. The top five states that generated the most were: Florida (3,530), California (2,679), Michigan (1,080), Texas (1,050) and New York (765).

The top five cities generating the most were: Los Angeles (752), New York (595), Miami (575), Detroit (545) and Tampa (545).

The insurance policy type most represented in the NICB analysis was “personal automobile,” accounting for 10,659 referrals. NICB says:

This suggests a rather strong correlation between the kinds of alleged fraud schemes most perpetrated by OGAs —staged and caused accidents.”

Further proof of this connection is evident when looking at these QCs by loss type. The referral reason most often coupled with the OGA referral was by far “staged/caused accident” — indicated 4,347 times. The loss type with the most referrals was bodily injury with 4,401 referrals.

NICB notes:

The results of this QC analysis correlate with what NICB agents and analysts are seeing in their cases—particularly in the no-fault, personal injury protection (PIP) states like Florida, Michigan and New York.”

The NICB defines organized crime groups as “any specific group made up of entities and/or individuals who systematically and repeatedly conduct pre-planned activities for the purpose of generating fraudulent insurance schemes.”

Staged/caused accidents are perpetrated by individuals who are skilled in committing insurance fraud. Those “accidents” set the stage for subsequent acts of fraud ranging from faked or exaggerated injuries to unnecessary or excessive medical treatment.

Check out this I.I.I. backgrounder for more info on no-fault insurance fraud, and insurance fraud in general.

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