Carla Hopkins, Senior Vertical Market Manager, LexisNexis Risk Solutions UK & Ireland, explains why the insurance industry has an opportunity to make more of the new technology that is driving greater vehicle autonomy.
Eight out of ten[i] new cars are sold in the UK with some form of self-activating safety system, or Advanced Driver Assistance System (ADAS), representing the first level of vehicle autonomy. Yet the investment being made by car buyers in car safety technology is largely going unrecognised by motor insurance providers when the customer applies for an insurance quote. It has taken the creation of a common classification of ADAS to help solve this problem for insurance providers and motor manufacturers.
There is little doubt ADAS can assist in reducing claims losses but they can also be costly to repair[ii]. To price effectively, insurance providers need to appreciate exactly how a car is equipped at the point of quote, and how those fittings impact claims. This is where they have hit a roadblock.
Each car manufacturer has created their own unique terminology, definitions and naming structures for ADAS – sometimes releasing multiple features within the same model year. While this has supported differentiation in a very competitive market, it has made it virtually impossible to understand the purpose and performance of different ADAS features. Underlining this challenge, LexisNexis Risk Solutions found that there are over 40 different names for automatic emergency braking and over 20 different names for adaptive cruise control. That’s 24,000 possible combinations, for just two safety features[iii].
As a consequence, the insurance market has had no way of knowing what specific ADAS features are fitted to each individual car at a Vehicle Identification Number (VIN) level. Assuming ADAS is standard for a particular model would be a mistake as some ADAS features are chosen as additional options when the car is purchased from new.
Without that base level knowledge, the market has not been able to build an understanding of the link between the presence and performance of different forms of ADAS with claims severity and frequency. It’s not just how one feature works. Insurance providers need to know how different features, when available in combination on a vehicle or as part of a custom package, may support a reduction in accident risk in order to use that information in pricing.
This roadblock, an ADAS classification system has been created using machine learning to scan millions of lines of car manufacturer vehicle data to logically sequence and classify vehicle safety features and the component’s intended operation or purpose. This means that for the first time, confirmation of the safety features of a car, along with how they behave (for example, if a feature will provide an alert or warning to the vehicle’s driver when a potential danger or hazard is detected), is accessible to insurance providers at a Vehicle Identification Number level for insurance quotes.
Fundamentally, insurance providers should be able to identify the specific ADAS features on the vehicle, understand what their purpose is, how they work to help prevent claims and use that to influence underwriting and better pricing for consumers.
Testing of the data to build intelligence around how ADAS fitments relate to claims is now underway with motor insurance providers in the UK and Europe.
Car manufacturers continually develop and deploy new ADAS features and promote their efficacy in reducing accidents as part of their zero fatalities objectives. It won’t be too long before all new cars will be ‘born’ with ADAS features. The insurance industry therefore needs the confidence to price or create products to reflect the increasing penetration of ADAS in the car parc. With greater insight into the presence and performance of ADAS, it not only becomes possible to price more accurately based on real world claims experience, it opens the door to creating new products and services for consumers who have invested in car safety technology.
Greater knowledge of claims risk correlated to the presence of ADAS will also help car manufacturers benchmark their ADAS against their competitors and use this insight to demonstrate the benefits of specific systems to their customers. In time, as both the automotive and insurance industry learns more about the impact of specific ADAS features on these claims losses, more awareness may support greater investment in these car safety systems and in turn improve road safety standards.
As levels of autonomy increase in vehicles, insurance providers will have an ongoing challenge to understand the direct impact of these developments on claims to support insurance pricing and evolve their offerings. The static vehicle build data now being tested by the market on the car’s safety technology is the first step on that road. The next is using dynamic data direct from the connected car to understand if ADAS features are enabled/disabled in real-time. This will be facilitated by a connected car data exchange linking the insurance and OEM markets.
Data on the car and from the car will be at the heart of motor insurance services of the future. By getting ‘ADAS aware’ insurance providers can keep pace with the advances in car safety technology and better meet their customers’ expectations.
[i] Society of Motor Manufacturers and Traders: https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-JUNE-2020-FINAL.pdf
[iii] LexisNexis Risk Solutions analysis