Updated on: 3/9/2020
The lecture and group discussion will cover the most important technology innovations in the transportation industry and the major impact they will have on the future of automotive insurance. The primary focus will be on telematics devices (aka, car insurance tracing devices) and vehicle automation (aka driverless car technology). Technologies, safety concerns, legal issues, insurance, etc.
Attendees will gain a clear understanding of…
- …the true capabilities and limitations and problems with telematic devices and vehicle automation.
- …how these technologies may positively and negatively impact consumer safety.
- …the legal and privacy implications of these technologies in the context of automobile accidents and liability.
- …how these technologies may radically change the insurance industry.
Part One – Telematic Devices
Historic Data Used To Determine Insurance Premiums
Historically insurance premiums were based on demographic information and risk factors.
- GPA (student drivers)
- marital status
- residence (higher rates of accidents in your city or state?)
- vehicle make/model
- accident history
- ticket / violations information
In recent years auto insurers have also started to incorporate behavior-based credit scores from credit bureaus into their analysis. Why? People who pay their bills on time are also safer drivers.
But telematic devices (aka usage-based insurance or UBI) add another data dimension.
“Insurtech” is the term being used to describe the new technologies with the potential to bring innovation to the insurance sector and impact the regulatory practices of insurance markets.
Telematic devices follow the driving habits of insurance customers---behavioral economics. Think of them as a virtual black box. Two examples are:
- Tracking devices
- Phone apps
When you install a tracking device in your car, it taps into the vehicle’s various computer systems to capture, store, and transmit data.
Most telematics devices are small pieces of hardware that plug into your car’s on-board diagnostics port (OBD-II port)—same port used by emissions test centers or mechanics. Most modern cars built in the last 25 years or so have OBD-II ports. Or some integrate with General Motors OnStar Smart Driver system.
Once collected data is wirelessly transmitted to the insurance company, or a third-party company that they employ to analyze the data.
History of Insurance Tracking Devices
1998 – Progressive launches their ‘Snapshot program’. First insurance company to roll out telematic-based tracking.
At first, Progressive used the program to incentivize good driving habits by offering safe driver discounts. However, in 2013, the company started using collected data to penalize bad drivers.
Which Auto Insurance Companies Use Customer Data Trackers?
Most insurance companies have some sort of telematics program. Major players include:
- Progressive – SnapShot – Launched in 1998
- Allstate – Drivewise & Streetwise – Launched in 2011
- State Farm – Drive Safe & Save – Launched in 2012
- Esurance – DriveSense – App launched in 2016.
- Travlers – IntelliDrive – Launched in 2011
- The Hartford – TrueLane – Launched in 2012
- Nationwide – SmartRide – App launched in 2019
- Liberty Mutual – RightTrack – Launched in 2016
- GEICO – DriveEasy – App launched in 2019
Some insurance companies are developing pay-as-you-go automobile insurance programs---basing insurance rates almost solely on automobile usage data.
Approximately 70 percent of all auto insurance carriers are expected to use telematics UBI devices by 2020.
Non-Customer Telematics Program
PEMCO insurance has launched a multi-city Safest Driver competition using it’s own telematics phone app. PEMCO partners with local transportation departments to brand and promote the app and gives away thousands of dollars in weekly, monthly and grad prizes. Drivers turn over their data which PEMCO uses to promote/sell their products and to pre-populate their driver behavior database.
Example: Seattle’s Safest Driver program. https://www.seattle.gov/transportation/projects-and-programs/safety-first/vision-zero/safest-driver
What do telematic devices and apps track?
Some insurance companies disclose what their devices track. Some don’t. Some use just a few data points others use them all. It’s up to customers to decide whether or not those terms are acceptable to them.
Common data points:
- Day Of The Week Driven
- Time Of Day Driven
- Distance Driven
- Idle Time (Stop-And-Go Traffic)
- Amount Of Time Spent Driving
- Typical Speed
- Typical Acceleration Habits
- Slowing When Turning?
- Obedience Of Laws (No U-Turn, One-Way Street)
- Sudden Changes In Speed
- Incidents Of Hard Braking (Indicates That The Driver Takes Risks And Doesn’t Pay Attention)
Cross-Referencing Driver, Vehicle & Map Data
When data points are linked to map data insurance companies can determine:
- How often the speed limits are exceeded.
- How often the driver rolls through stop signs/fails to make a complete stop.
- How often the driver travels through areas where there is a higher risk of car theft.
- The kinds of businesses that the driver patronizes: liquor stores, pot shops, bars, night clubs, etc.
Some insurance companies are partnering with auto manufactures to get even more data such as how often high-tech safety features are activated: automatic emergency braking and forward collision warning.
What Is In It For Drivers/Customers?
Drivers are rewarded with possible discounts if:
- They drive infrequently
- Drive primarily during the day
- Don’t drive between midnight and 5am
- Don’t accelerate too quickly
- Don’t brake too sharply
- Don’t drive long distances
- Avoid rush hour commutes
- Avoid stop-and-go traffic
Opportunities For Data Confusion
But what about things that are out of your control but can negatively impact how the data appears?
- Bumps or potholes in the road.
- Braking for animals.
- Vehicles parked along the side of a curved road that engage your vehicle’s warning or braking system.
- Accelerating before a yellow light turns to red.
- Stopping unexpectedly for pedestrians in a crosswalk where there is no control device (stop light or stop sign).
- Accelerating or braking as required on freeway entrance/exit ramp.
- Someone else cuts you off causing you to brake hard.
- Your office is located on the same block as a pot shop.
- Different vehicle manufacturers have varying standards for what/how data is collected.
Are Telematic Tracking Devices Making Our Roads Safer?
Some proponents say that the devices encourage ‘behavior modification’ as it causes people to make an extra effort to pay more attention to traffic rules.
A study by the University of British Columbia in partnership with Purdue University which was released in January 2019, found that telematics/UBI users tend to improve the safety of their driving in general. And decrease their daily number of hard brakes by an average of 21 percent after six months.
Other say that the benefit is not enough to give up privacy.
Part Two – Artificial Intelligence Driving Technology
Driverless Technology Terms
- Self-driving cars
- Driverless cars
- Autonomous vehicles (AVs) – Standard Industry Term
- Computer driven vehicle
- Zero-Emission Autonomous Vehicle” (ZEAV)
- Self-driving/safety features
Human driver controls include the steering wheel, accelerator pedal, brake pedal, transmission shift lever, turn signal activator, parking brake control, windshield wipers, and headlamp controls. These interfaces serve as inputs for the human driver’s commands to the vehicle systems that control steering, acceleration, and braking and that activate turn signals and headlamps.
Since most car crashes are caused by human error, in theory, taking control of the moving vehicle away from the driver is expected to drastically reduce highway fatalities.
Autonomous Vehicles: The Vision & Benefits
- The Ultimate Vision: A car that takes you where you want to go, at any time and under any drivable condition, without any human intervention. You give it your destination and it takes you there.
- Potential Benefits
- Former drivers will be able to use their travel time more efficiently, for work or leisure.
- Fewer accidents by eliminating human error caused by inattention, impairment, or just stupidity.
Current status of the industry: Wild, wild west.
Public Misconception About Driverless Technology
- The public has overestimated the current capabilities of the existing technology.
- Visionaries like Elon Musk’s “future-talk” have confused the public.
- Most people focus on DRIVERLESS technology when there are many, many steps between here and there.
- Current capability is more akin to advanced safety features.
Current State of Autonomous Vehicles
- Among the major automakers testing self-driving cars are Audi, Ford, Mercedes, Nissan, Tesla, Toyota and Volvo. Technology companies including Apple, Waymo, Lyft and Uber are also considerably invested in testing autonomous vehicles.
- Developers are testing components and systems through simulation and modeling, controlled track testing and limited on-road testing with vehicle operators and monitors.
- As of March 2019, NHTSA had identified on-road testing and development in 34 States and the District of Columbia.
- Basic Risks of Autonomous Vehicles - software reliability and cyber-security
6 Levels of Autonomy - Describes The Sophisticated Level of the Technology
Definitions defined by the Society of Automotive Engineers and adopted by the U.S. National Highway Traffic Safety Administration (NHTSA).
- Level 0 – Most cars on the road today fall into this category. No automation.
- Level 1 – Driver Assistance – The vehicle can control steering or braking, but not both simultaneously.
- Level 2 – Partial Assistance – The vehicle can assist with steering and breaking simultaneously but the driver’s attention is required continually.
- Examples: General Motors Super Cruise Feature, Tesla Autopilot Feature
- Level 3 – Conditional Automation – Certain circumstances allow the car to handle most of the driving. Driver can temporarily take their eyes off the road.
- Level 4 – High Automation – In the right conditions the car can take full control of driving, giving the driver the opportunity to focus on other tasks.
- Level 5 – Full Automation – The car takes care of 100% of driving and does not require steering or controls.
Most experts agree that the technology is at level 2.
Case Study – Tesla Features
Every Tesla built since late 2016 comes with 8 cameras around the car, 12 proximity sensors embedded into the front and back bumpers and radar in the front bumper. Features include:
- Automatic Emergency Braking
- Front Collision Warning
- Side Collision Warning
- Auto High Beams
- Autopilot – Introduced in 2015 - Autopilot enables your car to steer, accelerate and brake automatically within its lane. Current Autopilot features require active driver supervision and do not make the vehicle autonomous.
- Navigate on Autopilot - Suggests lane changes to optimize your route, and makes adjustments so you don’t get stuck behind slow cars or trucks. When active, it will also automatically steer your vehicle toward highway interchanges and exits based on your destination. ***Driver must still stay in control and confirm every move the computer suggests.
- Smart Summon – Introduced October 2nd - If you’re in a private parking lot or driveway and no more than 200 feet away from your car, you can pull out your phone, navigate through the Tesla app, and press COME TO ME.
Issues With Current Driverless Technology
- Example: Tesla drivers need to be ready to grab the wheel if the lane markings disappear, or lanes split.
- Problem: Semiautonomous driving systems are designed to ignore unmoving obstacles.
- Big Issue: Tesla Autopilot does not work correctly when driving towards the sun since its rays hit the cameras directly.
Who Reads The Vehicle Manual? Nobody!
Excerpts from vehicle manuals:
- Tesla Manual - “Traffic-Aware Cruise Control cannot detect all objects and may not brake/decelerate for stationary vehicles, especially in situations when you are driving over 50 mph (80 km/h) and a vehicle you are following moves out of your driving path and a stationary vehicle or object is in front of you instead.”
- Volvo Manual - "Pilot Assist will ignore the stationary vehicle and instead accelerate to the stored speed. The driver must then intervene and apply the brakes.” In other words, In other words, your Volvo won't brake to avoid hitting a stopped car that suddenly appears up ahead.
Will traffic accidents become a thing of the past?
- Not right away.
- Scenario. Level 3 Vehicle. Car can drive itself under some conditions and will notify drivers when a potential problem arises. But how much time is enough to allow the human to regain control of the vehicle? 15 seconds?
- Scenario. Level 4 Vehicle. Car will operate autonomously only under certain conditions such as good weather during the day or on a road with certain features. What happens when the driver uses poor judgment when engaging the autopilot?
Hardware and software reliability and compatibility will be the biggest issues.
Top Reasons Why New Hardware & Software Products Fail Or Are Slow To Improve
Think about your laptop or PC and all the problems that you have had with them over the years. No apply it to an automobile. Scary!
- Lack of Expertise - These are NEW technologies. There are no experts. They are making it up as they go along.
- Unclear Requirements - Understanding EXACTLY what the software should do and how it will interact with the consumer.
- Poor Communication - Hardware and software must have interfaces that enable them to communicate. Multiple hardware and software components creates increasing levels of complexity. If component gets 'updated' then it may interfere with how they all communicate and work together.
- Lack of Standards - There are few, if any, industry standards. Each auto manufacturer is creating their own technology. Each is reinventing the wheel. Little or no technology sharing.
- Complexity - These new hardware and software technologies are incredibly complex. THE STUFF IS JUST DIFFICULT TO FIGURE OUT!
Tesla Crash Examples
- May 2016 – Florida - First known death from an accident while using a Tesla in Autopilot mode. Vehicle crashed into a truck that turned across it’s path. The National Transportation Safety Board investigation and report concluded that Tesla should bear some of the blame for selling a system that is too easy to misuse.
- 2016 – Tesla in autopilot mode crashed into a tractor-trailer that made a left turn in front of it. At the time of the accident the car was warning its driver to disengage the autopilot mode and take control of the vehicle.
- March 24, 2017 – Tempe, AZ – Uber self-driving SUV hits and kills a pedestrian on a bicycle..
- January 2018 – San Francisco, CA – Drunk driver (2x legal limit) arrested when he was found passed out behind the wheel of a Tesla in autopilot mode. Driver tried to convince officer that it was okay because the car was driving itself.
- January 22, 2018 – Culver City, CA – Tesla in autopilot mode crashed into a stopped firetruck that as responding to a freeway accident. NTSB investigation and report found Tesla partly to blame.
- March 23, 2018 – California – Tesla with autopilot feature turned on slammed into a concrete highway lane divider and burst info flames, killing the driver. The driver’s hands were not on the wheel despite multiple visual and audible warnings asking for for driver engagement
- March 18, 2018 – Tempe, AZ – Self-driving Volvo operated by Uber struck and killed a 49-year old homeless pedestrian. First time an automobile driven by a computer killed a human being by the force (38mph) of impact.
- May 2018 – Utah – Self-driving Tesla hits a firetruck.
- August 25, 2018 – San Jose, CA – A self-driving Tesla crashes into a stopped firetruck.
What is holding back driverless technology and adoption?
- US Roads – Most US roads and infrastructure cannot currently safely support driverless technology. Problems: Potholes, poor lane markings, lack of signs, no traffic infrastructure, etc.
- Connectivity - Vehicles need to be connected wireless with traffic infrastructure as well as each other to make Level 4 & 5 driverless technology work flawlessly. Vehicle-to-infrastructure and vehicle-to-vehicle communication capabilities continue to develop.
- US Laws – New technology needs new laws.
New Laws Needed To Address Autonomous Vehicles
How will the government regulate AVs?
- What weather conditions are appropriate for automated vehicles?
- Designated lanes for automated vehicles? Similar to bus and HOV lanes.
- Laws about liability?
- Congress is now considering legislation that would allow AV-makers to deploy the cars so long as they are deemed as safe as current vehicles. But how do you compare an apple to an orange?
- A patchwork of laws and regulations across multiple states and jurisdictions?
- Congress doesn’t understand the technology
- Question To Ponder – Should the human driver be responsible for traffic infractions while he or she is in a car in full autonomous mode?
- Question To Ponder - At would point would an intoxicated or unconscious person no longer be guilty of DUI or falling asleep at the wheel?
Legal Implications Of Autonomous Vehicles
- Common Carrier Doctrine - Will autonomous vehicles be subject to the common carrier doctrine (in some states)—the law that holds buses, limos, taxies, etc to a higher standard of care than ordinary operators?
- State Laws: Nevada was the first state to allow the use of autonomous vehicles in 2011. As of June 2018, 29 states and Washington, D.C., have passed autonomous vehicle legislation. The state laws vary widely in intention and implementation.
- Federal Regulations: On September 12, 2017, the U.S. Department of Transportation released revised voluntary guidelines for companies developing self-driving cars. Manufacturers are "encouraged" but not required to submit to voluntary federal assessments.
- Died In Congress - Federal lawmakers wanted to ease the way for AVs. Companion bills with broad bipartisan support. One passed by the House of Representatives (H.R. 3388) and the second moving through the Senate (S. 1885). Both would have given companies a relatively free hand to test and deploy millions of experimental vehicles on U.S. roads.
- AV Start Act - Car companies are urging law makers to pass legislation that would push complaints or injuries arising from autonomous-vehicle crashes into mandatory private arbitration. A person badly injured in an accident involving a self-driving car would not be able to sue the manufacturer or take part in a class action lawsuit. Disputes would be decided in arbitration. This move would reduce citizen’s rights and prevent the courts for hearing cases that might result in statutory precedents.
Timing: When Will We Start To REALLY See Driverless Cars?
- A RAND Corporation study urges the government to allow AVs on U.S. roads once they can achieve a 10% reduction in fatalities from current levels.
- The study assets that safety improvements will occur more rapidly if the self-driving algorithms can learn from real-world driving rather than from computer simulations or endless trips around test tracks.
- Ethical Question: How many fatalities are acceptable while the software is learning?
What Is A ‘Safe’ Vehicle?
According to NHTSA regulations and standards, at the most basic level a safe automated vehicle must be able to achieve four performance goals?
- Avoid Crashes
- Protect Occupants
- Obey Traffic Laws and Norms
- Complete Intended Travel Mission
NHTSA is working with industry and academia and performing research on how self-driving vehicles could reliably and objectively demonstrate that they can achieve these four critical performance goals.
Autonomous Vehicles And Insurance
- How will insurance companies deal with driverless cars?
- Traditionally, auto insurance has followed the driver, regardless of what vehicle they’re driving, so when the car is driving itself, that flips everything on its head.
- Regulation: Insurance is state-regulated. Each jurisdiction has its own set of rules and regulations for auto insurance (and so far for self-driving cars).
- Basically, there are two kinds of liability systems.
- No-fault System - Where insurance companies pay the injured party regardless of fault.
- Tort System – Injured party and at-fault party duke it out in the legal system to determine whose insurance company pays.
- Basically, there are two kinds of liability systems.
- Underwriting: Initially, many of the traditional underwriting criteria (demographics, past accidents, tickets, etc.) will still apply, but the make/model/features of an AV-enabled car may assume a greater importance.
- Liability: As cars become increasingly automated the onus may be on the manufacturer to prove that technology failure was not responsible for a crash.
Who Might Be Liable For A Driverless Car Accident?
- The driver who chose to engage autopilot mode inappropriately?
- The automobile manufacturer when technology fails or is ‘buggy’?
- The network service provider that connects the vehicle to infrastructure systems and other vehicles? Weak signal strength?
- Product liability law?
More Legal Implications
- Evidence – More computer controls and data collection create more potentially discoverable electronic information: sensor data, cameras, radar, ultrasonic directions, etc. Much will require expert interpretation.
- Privacy/Data Security – When vehicles record more data on how, when and where people drive there are more privacy concerns should information be stolen or improperly handled.
- Who Is At-Fault / Civil Liability Shift – In the case of an accident will the car’s algorithm shares liability with the human operator.
Big Autonomous Vehicle Problems To Tackle
- Learning – The technology is new. Scientists, programmers, and manufactures are making it up as the go along. Perspective: How often does your computer, cellphone or other technology fail?
- Dirt – Dirt on unwashed cars can cover sensors making them less reliable or completely incapacitated. Perspective: Has your vehicles backup camera ever been too dirty to see?
- Weather – Rain and snow can disrupt how sensors ‘see’ the area surrounding the vehicle.
- Legacy Vehicles – How will automated vehicles operate on a road with traditional vehicles?
- Cyber Security – How do we protect a connected automotive world from hackers and foreign adversaries?
Other New Problems Created By Driverless Cars
- When freed from driving will people rely on cars more heavily—increasing congestion, energy consumption and pollution? Will this require more city planning?
- How will a pedestrian know if a driverless car has seen them?
- Will cars talk to passengers to reassure them that the vehicle is own track?
- Will unexpected software glitches lead to massive vehicle recalls?
"After all, we are only human."
- Society currently tolerates a significant amount of human error on our roads.
- The public (and juries) will be much less accepting of crashes caused by software glitches or malfunctioning hardware rather than human error.
Random stuff to mention.
- M City – 32 acre mock city at the University of Michigan whose vision is “Mcity is leading the transition to a new world of connected and automated vehicles. Our work goes beyond technology and considers all aspects of the future of transportation and mobility.”
- Volvo has already started adding technology to new cars to allow Volvo vehicles to communicate with one another in the cloud to share with one another road conditions and hazards.
Experts say we're decades away from fully-autonomous cars., Business Insider, August 29, 2019.
"We're heading towards hell": Expert shares concerns with self-driving cars, CBS News, August 31, 2019.
Are we going too fast on driverless cars?, Science Magazine, December 14, 2017.
DIED IN CONGRESS - S.1885 - AV START Act,
https://www.congress.gov/bill/115th-congress/senate-bill/1885 and https://www.govtrack.us/congress/bills/115/s1885
PASSED THE HOUSE - H.R.3388 - SELF DRIVE Act,
INTRODUCED - H.R.3388 - Moving and Fostering Innovation to Revolutionize Smarter Transportation Act,
Automated Driving Systems, A Vision For Safety, U.S. Department of Transportation (DOT) through the National Highway Traffic Safety Administration (NHTSA) https://www.nhtsa.gov/sites/nhtsa.dot.gov/files/documents/13069a-ads2.0_090617_v9a_tag.pdf
Automated Vehicles for Safety, NHTSA,
Overview of Automated Vehicles, NHTSA,
Background on: Self-driving cars and insurance, Insurance Information Institute,
MCity Website: https://mcity.umich.edu/
Research Study: Effects of Monitoring Technology on the Insurance Market, Washington University, Production and Operations Management, March 2019
How Do Those Car Insurance Tracking Devices Work, US News & World Report, February 25, 2018
The effectiveness of real-time monitoring of drivers by insurance companies, Institute for Operations Research and the Management Sciences, February 7, 2019
Insurance Market and Regulatory Implications, National Association of Insurance Commissioners & The Center for Insurance Policy & Research, March 2015.
https://www.naic.org/documents/cipr_study_150324_usage_based_insurance_and_vehicle_telematics_study_series.pdf VERY INTERESTING TO READ.
Why Tesla's Autopilot Can't See a Stopped Firetruck, Wired Magazine, August 27, 2018.
Sleeping With Tesla Autopilot May Explain Some Of Tesla's Safety Numbers, Forbes, September 13, 2019.
People Keep Confusing Their Teslas for Self-Driving Cars, Wired Magazine, January 24, 2018.
Are Tesla's Self-Proclaimed 'World's Safest Cars' Actually Among The World’s Deadliest?, ZeroHdge, May 29, 2018.
Loophole would protect self-driving car companies from lawsuits, CNN, March 14, 2018.