Car Insurance: What's New, Pussycat?

I am preparing to attend the Connected Car Insurance 2017 event in Chicago today and I am contemplating the "risk" that the speakers and exhibitors will offer no new solutions beyond the usual usage-based insurance bromides. The inability of the insurance industry to take a more proactive role in embracing autonomous vehicle technology or even advanced safety systems is creating the impression that insurers have a vested interest in cars continuing to crash into things, people and one another.

One company, claims processor CCC, will announce its hyperscale CCC ONE Platform for OEMs (car makers) at the event. The data-infused platform leverages connected car and vehicle data for the promotion and sale of new vehicles and OEM-branded parts, usage-based insurance and telematics-enabled claims, safety insights, and shop certification scorecards.

The CCC platform is already in use by numerous OEMs and dealers, more than 350 insurers, 24,000 collision repairers, and dozens of third-party data and service providers. This platform may well serve as the foundation for industry change. And change is needed.

The Insurance Institute for Highway Safety (IIHS) in the U.S. only recently published a report endorsing such systems as blind spot detection, lane keeping assistance and forward collision avoidance. In the past, IIHS has published studies suggesting that the inclination of consumers to turn these systems off is reason not to offer insurance discounts on vehicles so equipped.

https://tinyurl.com/ybqvul3l - "Lane Departure Warning, Blind Spot Detection Help Drivers Avoid Trouble" - IIHS

Believe me, I understand this rationale, but the larger message, in the past, has been to discourage auto makers from adding these life-saving systems. For some reason, European insurers have gotten over this hurdle and more readily offer discounts for cars with this equipment.

The larger issue underlying this proposition is the universal blame-the-driver mentality. Car makers blame drivers for crashes, as do insurers, rather than seeking out the technological shortcomings of the vehicles and the road network and driving regulations that are contributing to the problem.

There is no question we have a problem, with 1.25M people killed every year - a figure that is on a trajectory to crease 2M as soon as the next decade. Insurers are in possession of the greatest repository of data to solve this problem, and yet they remain mute. (I am aware of historical and ongoing efforts by companies such as State Farm to identify crash hotspots and, separately, advise auto makers on vehicle design. It hasn't been enough and more must be done.)

This is what animates my impression that car insurers have an interest in allowing the highway carnage to continue unabated. Perhaps the greatest irony of all is that it is Tesla Motors that is raising the stakes.

Tesla Motors has put the car insurance industry on notice. Following its self-exoneration from responsibility in multiple crashes, Tesla has let the industry know that if insurers fail to fairly insure its vehicles, the company will take on the insurance task itself. (I am paraphrasing CEO Elon Musk's statements, but that is the gist.)

The way rates are set and regulated today - particularly in the U.S. - remains more or less a blackbox to consumers, who are increasingly encouraged and inclined to shop around for the best rate. While insurance companies that have bought into the usage-based boom insist that the future will be ruled by rates tied to driving data, drivers have not been fooled. As I have written often before, as long as the cheapest rate in the market does not require a driver monitoring device, usage-based insurance will remain a niche application.

Which brings me back to the lack of a proactive role for insurers. To achieve some form of progress the insurance industry needs to improve its collection, aggregation, management and interpretation of data - along with greater transparency. I know usage-based insurance is intended to deliver both greater transparency and more precise underwriting - along with better claims management - but thus far it has failed.

The insurance industry needs to do more to prove its commitment to helping to solve the crisis of increasing highway fatality rates unfolding in the U.S. and globally. It's a big ask. We all know that the safer cars become, the more recklessly people drive. We also know that drivers are increasingly addicted to and distracted by their mobile devices - another key contributor to driving misbehavior.

It is true that car makers ought to bear this burden more directly, but it is the insurance industry that accepts the direct financial responsibility and risk. That vested interest creates a unique responsibility to pressure auto makers and regulators to do more.

I am toddling off to Connected Car Insurance 2017 this a.m. with high expectations and a measured degree of optimism. We have the technology. We have the data. We can make this industry better than it is today. Do we really want to cede control of car insurance to the Elon Musk's of the world? Hold that thought.

Roger C. Lanctot is Director, Automotive Connected Mobility in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk