ADAPTING TO BIG DATA, CONNECTIVITY AND TECHNOLOGY
Should the individual or vehicle risk have the most influence?
The relationship between ADAS and insurance
Most cars rolling off the production line today have some sort of Advanced Driver Assistance System (ADAS) fitted. Indeed, analysis from LexisNexis Risk Solutions highlighted at least 75% of new cars on sale come equipped with driver assistance systems and close to 52% have overtaking sensors and/or adaptive cruise control. While proven in the test environment, how these safety features are performing in the real world will create both challenges and opportunities for dealers and manufacturers.
To explore the topic further, LexisNexis Risk Solutions analysed 11 million randomly selected vehicles within model years 2014-2019. Using proprietary information, the team compared vehicles equipped with a set of core ADAS features against vehicles without those features. The research was controlled for driving factors such as age, driving history and years the licence has been held.
- Vehicles equipped with certain ADAS features show a 27% reduction in bodily injury claims frequency and a 19% reduction in property damage frequency
- Vehicles equipped with a cluster of certain ADAS features, such as lane departure mitigation, forward collision warning and blind spot mitigation, reduce the chances of a claim by well over 25%
By combining the benefits of ADAS, car connectivity and data sharing at point of sale, the expectation is that dealers and manufacturers should be able to encourage consumers to part with their information. Allowing the consumer to share detailed information about their vehicle and driving behaviour with insurers should mean that those data points can be priced into the consumer’s policy.
What do we mean by ADAS features?
Image: Lexus Nexus
Connectivity and road safety
EU road fatalities reduced by more than half between 2001 and 2017; but human error is cited as a major contributing factor in 90% of the accidents which still occur. As such, active safety systems have been a primary focus for car manufacturers and legislators in recent years, with the potential to reduce both the overall number of accidents and the severity of those which do still occur. According to an SMMT-commissioned report in 2015, the impact of connected and autonomous vehicles is expected to include the prevention of 25,000 serious accidents and 2,500 lives saved in the UK up to 2030.
Ongoing investment in Cooperative Intelligent Transport Systems (C-ITS) is facilitating networking between connected vehicles and their environment, allowing for variable speed limited and the opening or closing of traffic lanes to be communicated direct to the vehicle. V2X (vehicle-to-everything) communication technology is also expected to increase road safety, integrating with smart infrastructure and other connected vehicles to manage traffic flow and accident response.
Bandwidth, latency and reliability remain a key challenge, while there remains global disagreement about the preferred V2X standards, with China, the US and Europe all proposing slightly different routes. As it stands, vehicle manufacturers are currently deploying slightly different technology in each of the major global markets. Whether this will remain sustainable in an era of tightened purse strings and global recession remains to be seen.
"The role of the dealer and manufacturer should be to make the benefits of ADAS clear and simple for the consumer. That supports cleaner and safer vehicles on the road, contributes to dealer profit margins and supports OEM zero harm strategies."
Sherezad Rehmann, Senior Director Product Management, LexisNexis
The role of the dealer with ADAS
While technology marches on at pace, there are two key concerns in the roll-out of ADAS. The first revolves around consumer scepticism – do they want to be connected? Won’t they just switch the technologies off? The second, linked, factor is education. Do consumers understand how the technology in their new car works? Dealers and manufacturers have all heard of drivers who returned their ‘faulty’ vehicle because they did not understand how start-stop worked.
The first may be dealt with through legislation, with technologies mandated and overrides made more difficult. The second provides an opportunity for the retail journey. By promoting ADAS option packs and providing education to drivers on how the features work, dealers can benefit from higher margin unit sales, while manufacturers contribute to their zero-harm strategies.
Greater understanding of potential resale costs may also support initial purchase choices, while whole life costs become easier to compare when everyone is upfront about what technology is in their vehicle. If the industry can effectively communicate the safety and emissions benefits of ADAS, there is every chance the pace of vehicle replacement can be accelerated (economic impacts notwithstanding).
What else is the car telling the insurer?
With increased connectivity, smartphone integration, infotainment systems and navigation solutions, the sheer volume of data being collected by vehicles is phenomenal. Connecting a phone to a vehicle can provide information about entertainment and eating habits, contact databases, regular journeys, where consumers shop and more.
Many insurance policies offer a discount for fitting a telematics device, aiming to lower the risk profile of the driver and provide additional information when it comes to at-fault claims. The question is whether insurers will also factor in information about driving locations, type of music being listened to in the vehicle or fast-food consumption habits.
Wiping the car’s memory
As data sharing becomes a more integral part of vehicle design, questions continue to be raised around cyber security risks. Two new UN Regulations on Cybersecurity and Software Updates, adopted summer 2020, will enter into force in January 2021. Applicable to passenger cars, vans, trucks and buses, they will focus on managing vehicle cyber risks; securing vehicles by design; detecting and responding to security incidents across vehicle fleets; and providing safe and secure updates that ensure vehicle safety is not compromised by ‘Over the Air’ (OTA) updates.
Increasingly, rental firms, lease companies and manufacturers are investing time and resource in ensuring the vehicles are wiped clean of all personally identifiable data before being passed on to the next owner or driver. Consumers are often happy to trade a degree of privacy for convenience, but they don’t want that information passed on to just anyone. Manheim is working closely with clients to offer services that ‘clear down’ the previous users’ data, providing peace of mind for all in the vehicle life cycle.
What do we mean by ADAS features?
Image: Lexus Nexus