1

CALIFORNIADEPARTMENTOFINSURANCEPublicHearingonAutonomousVehicleInsuranceIssues

UnofficialTranscript

September15,2014

The following is an unofficial transcript prepared by a California Department of Insurance intern. The Department provides the transcript for ease of reference but does not guarantee its accuracy. The Department advises those relying on the hearing to review the official video available online at http://www.insurance.ca.gov/0400-news/multimedia/0030VideoHearings/.

*** 0:00–TitleCard+IntroMusic0:22‐AudienceConverseamongThemselves+RemainingSetUp

*BeginningofHearing*

0:49‐INSURANCECOMMISSIONERDAVEJONES:

GoodMorning.MynameisDaveJonesandIhavethepleasureandprivilegeofservingas

California’sInsuranceCommissionerandIamtoldthatIhavetospeakrightintothis

mikeinorderthatit’spickedupbyallwhoarewatchingathomebecausewearelive

streamingthisevent.Iapologizeforthoseintheaudienceifmyvoiceisboomingalittle

bitbutwearetryingtoaccommodateboththeaudiencepresenthereaswellasthe

audiencesathome.Welcome,Iwanttothankeveryonewhohaseithertunedinoris

presenthereattheTechMuseumofInnovation.Weareexcitedtobehereintheheartof

SiliconValleywhereinnovationisaconstant,wherenewtechnologies,newbusiness

models,andentrepreneursarehardatworkbringingtomarketallsortsofthingsthat

improvethelivesofconsumersandcommunitiesacrossCalifornia,thenation,andthe

2

world.Iapologizeforourlatestart.Perhaps,ifthereweremoreself‐drivingcarsonthe

roadsalready,Imighthavebeenherealittlemoreontime,butweranintoalittlebitof

trafficandsoweareexcitedtobehereandexcitedtohaveallofyouaswell.Forthoseof

uswhoarejoiningusviaourlivevideofeedontheweb,theagendaandbackground

paperareavailablefordownload.Youcangotoinsurance.ca.gov,clickonthebuttonfor

thishearingontheCaliforniaDepartmentofInsurancehomepage,andyoucanviewthe

documentsthathavebeenpreparedforthishearing.Thisisapublichearingandweare

invitingpanelistswhoareexpertsinthesubjectthatwearegoingtotakeuptoday,which

areself‐drivingcarsandinsurancetopresenttous,butaswelltherewillalsobean

opportunityatthecloseofthehearingformembersofthepublictotestifydirectlytous.I

actuallyhadtheopportunity,theotherweek,tobedriveninoneofthesefullyautomated

self‐drivingcarsanditwasafascinatingexperience,averyexcitingoneandoneinwhich

thecar,foressentially25minutes,navigatedaverycomplexintercitystreetscapeanddid

soflawlessly.IhavetosayitwaswithalittletrepidationthatIfirstsatdowninthecar,

butafterafewminutesIwasquitecomfortabletoseethesteeringwheelmovingbyitself.

Ithinkthatthistechnologyholdsgreat,greatpromise.Andwearegoingtohearalittle

bitaboutthattoday,thepossibilityoffeweraccidents,fewerinjuries,fewerfatalities,and

saferdrivingforallofus.Ithinkatthesametime,weinthepublicsectorandthosewho

areintheinsurancesectorhavetothinkabouthowwearegoingtoaccommodatethis

newtechnologyandhowdowemakesurethatthereareinsuranceproductsavailablefor

themanufacturersofthesevehicles,forthosethatwritethesoftware,forthosethatmake

orinstallthedevices,insomecaseswearetalkingaboutcarsthataremanufacturedthat

3

areself‐automated,insomecasescarsareretrofittedandalsoforthedriversthemselves

–howdowemakesurethattherecontinuestobeinsuranceproductsavailableand

insuranceproductsthatprotectconsumersinallfacetsoftheoperationoftheself‐

drivingcars.That’saveryexcitingprospectforallushereandthereasonIhave

convenedthispublichearingasthisstate’sinsuranceregulatoristomakesureweare

ready.IthinkitwouldnotbegoodforgovernmenttobebehindonthisandIthinkwith

manytechnologieshereinCalifornia,thoseofusinthepublicsectorareacutelyawareof

theimportanceofmakingsurethatthepublicsectorkeepspacesoourgoaltodayistodo

exactlythatandtocollectasmuchinformationaspossiblefromthosethatareinvolvedin

creatingthesecars,thosethatareinvolvedininsurancemarkets,thosethatareinthe

publicwhocanprovideuswithinputattheDepartmentofInsurancesothatitwill

informourthinkingabouthowwegoforwardtomakesurethereareinsuranceproducts

availableandwhattheappropriateregulatoryframeworkis.So,withthatinmindIlook

forwardtohearingfromthefolksonthepanelstoday.Ialsowanttothankourpartners

inthisendeavor,whoincludetheDepartmentofMotorVehicles.Thedirectorhasbeen

veryhardatworkleadinganinteragencytaskforcetoconsidernotonlythequestionswe

aregoingtobecoveringheretodaybutabroadersetofregulatoryquestions,whichare

notthesubjectofthishearing,butweappreciateherleadershipandtheleadershipofthe

finestaffattheDepartmentofMotorVehiclesandtheirpartnershipasweconsiderthese

issues.Ourhopeistotrytowrapupaboutahalfanhourafterthanweoriginally

intended.Originallywewerescheduledtocloseat12:30,butnowourgoalistotryto

closeat1:00.Withthat,itismypleasuretowelcomeourfirstpaneltothehearingandI

4

wanttothankspecificallythemembersofthatpanel–wearejoinedbyProfessorAlain

Kornhauser,whoisaprofessorofoperationsresearchandfinancialengineeringat

PrincetonUniversity,aswell,wearejoinedbytheDeputyDirectoroftheCalifornia

DepartmentofMotorVehicles,BernardSoriano,andIwanttowelcomeyoubothand

thankyouforyourpatienceinourgettingstartedandalsothankyouforyour

participationinthishearingandforthetestimonythatyouareabouttoprovideus.So,I

thinkwhatwewouldliketodoisstartnowwithMr.Kornhauserandreceivehis

testimonyandthenmovetoMr.Sorianoandthenwemayhavesomequestionsfromthe

panel.IamjoinedhereontherostrumbyDeputyCommissioner,ChrisShultz,who

overseesourcommunityprogramsbranchandalsoSummerVolkmer,whoiswiththe

legaldepartment–legalbranch–oftheDepartmentofInsuranceandIwanttothank

thembothforhelpingusgetthishearingorganizedandforthematerialsthatwere

preparedaswell.Withthat,whydon’twestartwithProfessorKornhauser–Welcome.

6:45‐PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY: Thankyou.Goodmorning.Itisapleasureformetobeherebecauseitismyviewthatthe

insuranceindustryanditsregulatorsarethekeyplayerspositionedtoacceleratethe

consumeradoptionofautomationinroadvehicles.Automationofvehicleshastwo

distinctmarketopportunities,initially,thesubstantiallyenhancedsafetyand

unburdeneddrivers.Tobefollowedbythedeliveryofsafe,economical,highquality

mobilitytoeveryone.Inthepast,wehavebeenreluctanttobuysafety.No–everyone

wouldbedrivingVolvos–Why?BecauseIamasafedriver‐it’stheotherguy,heneedsit.

Idon’t.Can’taffordit.Alsoinsurershaven’tbeensothrilledwithpastcrashsafety

5

measures–sureliveshavebeensavedbutthecostofaccidentshasactuallygoneup–

Why?Becausethefocushasbeenoncrashmitigation.Crushzones,seatbelts,airbags–

liveshavebeensaved,andinjuryseverityreduced,butsavedlivesincuragreater

financialcost–fixingthecrushcarismoreexpensive,insuranceburdenhasincreased,

automationtechnologyapproachessafetyfromadifferentperspective,thatofavoiding

theaccidentinthefirstplace.Thepurposeofanalogbreaksistohavethevehiclestop

faster,that’savoidingaccidents.Similarly,electronicsstabilitycontrol.Interestingly,both

ofthesesystemsmonitorthedriver’sbehaviorandatsomepointautomaticallydecideto

takeoverbecausetheydeterminethedriverisnotdrivingproperly.Withrespectto

analogbreaks,I’mpushingtoohardonthebrakepedal,theywon’tletme.Withstability

control,I’mtakingaturntofast,steeringaloneisn’tgoingtosafelynegotiatethecurve,

whatisimportantisthatthesesystemstakeoverautomaticallyandcounterwhatIam

doingwrong.Theydon’twarn,theydon’taskforpermission,Ican’tturnthemoff‐they

justdoit.Automateddrivingextendsthesecrashavoidancesystemsandwill

substantiallyreduceaccidents–reducingthefinancialliabilityofthisillequipped

vehiclesirrespectiveofwhoisinthedriver’sseat,thusinsurancehasagreatdealtosave

andgainfromtheacceleratedadoptionofthesetechnologies.Ibelievethatwewillbe

abletoofferthesetechnologiesatapricethatislessthanthepresentvalueofthe

expectedliabilitysavingsthatthesetechnologieswilldeliver.Thus,atexistingrates,the

insurercanpayfortheautomatedtechnologiesandmakemoremoneyandatno

additionalcostlivesaresaved,injuriesavoided,socialpainisdiminished.Thishastobe

theidealarbitrageopportunityfortheinsuranceindustryanditsregulators–keeprates

6

thesame,makemoremoney,savelives–wow.Thisissuchafantasticopportunitythata

substantialpartofthismeetingshouldbefocusedonfiguringouthowinsurance

regulatorscanhelpacceleratetheresearch,certification,andcommercializationofthese

technologies.Moreover,thesetechnologieshavetheopportunitytoevolvenaturally,

propelledbyever‐increasingvaluedeliveredtotheinsuranceindustryandtosociety.

Initially,atNHTSALevel2s,wheresubstantialactionandreduction,reducesinsurance

liabilitiesandsaveslivesasthesystemimprovetoLevel3,theopportunityforthe

driverstotextsafelyduringsanctionedportionsoftheirdrivecyclecreatesatangible

incentiveforconsumerstopurchasethisincrementaltechnology‐enhancingthe

arbitrageopportunityforinsurersandthepublic.WithrespecttodriverlessLevel4cars

thatcangoemptyforAtoB,Ianticipatetherewillbeverylittleconsumerdemandfor

personalownershipofdriverlesscars.Thus,littleneedforprivatepassengerauto

insurance.However,driverlesscarcreatetheopportunityforafleetownertooffer

commoncarrier,ondemandubiquitouselevator‐likemobility24/7withoutincurring

laborcosts.Noneedtoownacarwhenthiskindofmobilityisavailableinexpensively.

Summarizing,Level2isanidealarbitrageopportunityfortheinsuranceindustryandthe

publicatlarge.Accordingly,itsinsuranceproductsshouldtheincentivizeresearch

certificationandcommercializationofthesetechnologies.ThepersonalbenefitsofLevel

3willacceleratetheadoptionofevensafertechnologies‐expandingthearbitrage

opportunity.Consumersand/orthecommunicationsproviderswillgladlypaytheextra

technologicalcostsbecausenowdriverscannowtextsafely.Societybenefits.Level4

driverlesscarswillcausefleetoperatorstosubstantiallyerodeconsumerdemandfor

7

Level2orLevel3carsbutthesenewandexpandedfleetswilldeliverunprecedented

mobilityforallwhilerequiringfleetorientedinsuranceproducts.Thankyou.

12:30‐INSURANCECOMMISSIONERDAVEJONES:

Thankyouverymuch.Ithinkwhatwewilldois,we’llholdourquestionsuntilwehear

fromthesecondpanelistwhoisMr.BernardSoriano,theDeputyDirectorofthe

DepartmentofMotorVehicles.Welcome.

BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

Thankyou,CommissionerJones.Iwouldliketothankyouforgivingustheopportunity

totestifyatthehearing.Asyousaid,I’mBernardSoriano.I’mtheDeputyDirectoryofthe

CaliforniaDMV(DepartmentofMotorVehicles).I’moneoftheco‐sponsorsofthe

autonomousvehiclesprojectandtodayIwouldliketospeaktothedifferentregulations

thatwearedevelopingwithinthedepartment.First,wehavefinisheddeveloping

regulationsformanufacturerstestingautonomousvehicles.Infact,thoseregulations

wereapprovedinMayandtheywillbeeffectivetomorrow.So,asoftomorrow,any

carmakerthatwantstotesttheirautonomousvehiclesonCalifornia’spublicroadways

willneedtomeetcertainspecificationstodosoandtheyneedtohaveavalidpermit

fromustodoso.Inorderforthemtoreceivethatpermit,theyneedtoidentifytous,the

testdriversthatwillbetestingthevehicles.Thosetestdriversneedtomeetcertain

qualificationsforexampletheyneedtonothavemorethanonepointontheirdriver’s

licensewithinthelastthreeyears.Theycan’tbeanat‐faultdriverinacrashinthe

previous3yearsandtheycan’thavehadaDUIinthepast10years.Wehaveputinplace

certainrequirementsforthosetestdrivers.Inaddition,wearerequiringthatthe

8

manufacturershaveafullydevelopedtestdriverprogram,thatthosetestdrivers

successfullycompletebeforetheytakevehiclesoutonourroadways.Anotheritemthat

wehaveisthatwearerequiringmanufacturerstorecordanyunanticipated

disengagementofthetechnologyduringtestingaswellasanyaccidentthatoccursduring

testing–andtheyneedtoreportthatonanannualbasis.Andthen,finally,thereisa

requirementthatthemanufacturerscarrya5milliondollarinsurancepolicyinorderto

moveforwardwiththetesting.Therearesomeotherprovisionsaswellthatareinthose

testingregulationsbutthosearethehighlightsthatIwantedtoreporttoday.Inaddition

tothetestingregulations,weareworkingonthedeploymentregulationsorthe

operationalregulationsasweliketocallthem,andthesearetheregulationsforthe

carmakerstomeetinordertodeploythosevehiclesaswellastheregulationsforyouand

Itomeetinordertooperatethemwhentheyareonpublicroadways.Wehavemadealot

ofprogress,thoseregulationsareinthevettingprocessandwearehopefulthattheywill

beavailableforpubliccomment–theyneedtogothrougha45daypubliccomment

period–andwearehopefulthatthatperiodwillbeginsoon.SomeoftheitemsIcansay

willbeinthoseregulationsareinstatute,soit’ssafetosaythattheywillhavetheminthe

regulations.Oneofthemisthatthereneedstobearecordingdevicethatisseparatefrom

theEDRdatarecordedthatiscurrentlyonvehicles–ontheroadway,thereneedstobea

separateone‐thatwouldrecordatleast30secondsofsensordatapriortoacrash.We

willhavethatintheregulations.Inaddition,whatwearecontemplatingisfora

completelyselfdrivingcar–aNHTSALevel4car–wearecontemplatinghavingspecial

licenseplatesforthosevehiclesandwearealsocontemplatinghavingthemanufacturers

9

disclosetotheoccupantsanydatathatisbeingrecorded–notdisclosethedatabut

disclosethatfactthatdataisbeingrecorded–datathatisnotnecessaryforthesafe

operationofthevehicle.Wearenotbeingprescriptiveintermsofhowthatdisclosureis

made,givingthemthefreedomtobeabletodesignitwithintheirvehicle.Ifa

manufacturerisgoingtodeployacompletelyself‐drivingcar,again,aNHTSAlevel4

vehicle,thereisaprovisionfortheDepartmentofMotorVehiclestonotifythelegislature

andthereis180dayperiodbeforewecanissueapprovalfordeployment.Inessence,

thereisa6‐monthwaitingperiodfromthetimetheapplicationismadetous.Then

finally,thereisaprovisionfora5milliondollarinsurancepolicythatthecarmakersneed

tohave.Withthat–Iwantedagainsummarizethatweareworkingoncompletingthe

deploymentregulationsandwehopetohavethatavailableforpubliccommentvery

soon.Thankyoufortheopportunitytotestifytoday.

17:39‐INSURANCECOMMISSIONERDAVEJONES:

Thankyouandweappreciatethepartnershipwithyourdepartmentandthankyoufor

yourleadershiponthisissue.Perhapswecangoback,bothofyouIhavereferredyouas

theNHTSAarchitecturetypologyfordifferentdegreesofautomationofvehiclesand

that’sspelledoutinthewhitepaperthatwereleasedforthishearingbutitmaynotbe

immediatelybeunderstoodbyeveryoneintheaudienceorthosethatareonlineand

watchingthisinthefutureso–Professor,I’mwonderingifyoucouldwalkusthrough,if

youcan,theNHTSAtypologysothatweareallclearastowhatitisandwhatthe

gradationsare.

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:

10

Yes.Thereare5minutes.Ididn’thavemynormal80minutesorwhatever,400slides.INSURANCECOMMISSIONERDAVEJONES:Ihavenodoubtyouwouldhavedoneithadweallowedyoutoearlier.

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Yes,letmejuststartwithLevel2whichisreallytheimportant–itisacombinationof

technologies.Themainpurposeistodocollisionavoidanceandkeepyouinlanes.The

primarythingisforthevehicleitself,byitselftodeterminewhetherornotit’sgoingtoor

itneedstoapplyitsbreaksoritneedstosteersothatitstaysinthelane.Ifonereally

looksatthedrivingfunction,mostofthetime,wepickalane,stayinthelane,don’thit

anything,soinfactthisisprobablytheaspectofitthatdeliversthemostvalue,butthis

piecerequiresthedrivertoremainvigilant,inotherwords,whileyoucantakeyour

handsoffthewheeloryourfeetoffthepedal,itrequiresthedrivertoremainvigilant.

Somesuggestthatthecurrent,reallybigproblem,withrespecttoaccidentsinthecars,is

thethingsthatgoonwhenwearenotvigilant.Texting,Iusetextingtomeanalotof

differentthings.Itisnotuntilwegetthistechnologytobesogoodthatitthenbecomes

certifiedthatwedon’thavetostayvigilanttotakeoverthatthelastinstance–notifwe

couldreallysavethedayIdon’tbelievethatwecan,Ithinkthesesystemscandoitbetter

thanwecan,butLevel3basicallysaysokay,it’sokay,Icantextandtheanticipationis

thatcertainroadwaysatcertaintimeswouldbecertifiedsothatyoucouldactually‐you

don’tneedtoremainvigilant.Youdon’tneedtohavealltheroadways,ifyoudo,justthe

11

roadwaysthattake80%ofthevehiclemilestravelled‐that’snotthatmanymilesofroad.

Wecouldhavesafehavenscreatedthere,goodpaintoutthere,goodcapabilitiesforthese

systemstowork,itwouldn’ttaketoomuchofaninfrastructureinvestmenttohaveit.

That’satLevel3.Level4,infactthesevehiclesaregoingtogofromAtoBwithout

anybodyinit.That,inasense,isthegreatvaluethatcandeliverthemobility,becauseif

onelooksattheproblems–lookatthetaxidriver–realvalueofacabdriveristotake

theemptyvehiclefromwherethelastpersongotofftowhereIgetinandsoinfactifyou

coulddothiswithoutadriverthenthecostofoperationofthiscouldprobablygodown

byinorderofmagnitude.That,tome,isthegreateconomicandmobilityopportunityof

Level4.It’snotformetojustbeabletohopinthebackseatandhaveitgofrommy

garagetomyparkingspaceatworkwithoutmebeinginit,Icouldhandlethefrontend

andthepieces.Butifthevehiclepicksmeupathomeanddropsmeoffatthemovies,

goesanddoessomeotherstuffwhenthemoviecomesout,it’sthereIgetin,gobackto

whereverI’mgoing–it’sanenormousmobilityopportunity.Andthattomeisthe

fundamentalconceptofLevel4andwherethevalueoftakingthelaborcostoutofthat

transportationelementreallydeliverssocietalvalue.Iguessthatwasalittlelong.

INSURANCECOMMISSIONERDAVEJONES:No.Thatwasveryhelpful.AndIsaid5levels,thereare5levels,thereisactuallyaLevel0,

whichIguessisnoautomation.

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY: Level0,Icallthata’55Chevy.IcallLevel1justtheanalogbrakesorthestabilitysystems

thatarecurrentlyincars.Level2isreallythesafetysystems;thisisthecollision

12

avoidance.Tomethisiswherethebigsocietalvalueofimprovingsafetyreallyexists.I

havecalledLevel3textingmachines.Why‐becauseitliberatesmeandallowsmetodo

stuffinthecar.WhenIgotintheairplanelastnight,Ididn’trunuptothepilotandsayI

wanttoflybutIsatbackthereandIdon’tknowwhatIdid,Idrankacoke.Thisisthe

opportunityofLevel3istobeabletodothatofcourseandLevel4justdoesitformeand

Idon’tneedtoownitandwearelikegood,wejustgetaround.

INSURANCECOMMISSIONERDAVEJONES:ArethereinthemarkettodaycarsthatareavailablethathaveLevel2underNHTSA’s

typology‐combinedfunctionautomation?

23:22‐PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Youknow,Iboughta2014SClasswiththe997Packageanditcomesclose.Itreally

comesclosebecauseinfactthecollisionavoidanceandthejamassistreallyworkwell.

Lanekeeping,theyhavegotawaystogobutit’sthefirstoneandIthinkthattheywill

haveit.AndIcanseethateasily,withthenextgeneration–andhopefullytheywillgive

mealittlebitofanelectronicupgrade–Ithinkthatthesensorsaretherebutthe

softwareneedsalittleworkbutIthinkthatshouldbeheresoon.Thepointatwhichwe

allagreethat,infact,youcantakeyourhandsoffandsitthereandtextbetweenmobpost

andsoandsoonU.S.whatever–that’sprobablygoingtotakealittlebitoftimeandit’s

goingtotakecoordinationandsoontobesurethatit’sgoingtobelegitandthat’sgoing

totakesometime.WecouldhaveLevel4ingatedcommunitiesverysoonbecauseinfact

thereissomedemosthataregoingoninEurope,inrespectto,puttingtheseinatlow

speeds,inmixedenvironmentsthatinfactyoucangetstartedinaretirementcommunity

13

andagatedcommunity,onecouldhaveademonstration,workoutthebugs,getthemout

there,andhavethemleakoutinsociety.Iseethatinthewayitwouldevolve.

INSURANCECOMMISSIONERDAVEJONES:

Great.Iknowyouarefromadifferentstatethanours,Ibelieve,soyourrulesmaybea

littlebitdifferent–Iwascurious,ifyouwouldbewillingtoshareorcanrememberhow

wasyourcoastalLevel2carratedbyyourinsurer,inotherwordsarethereany

acknowledgementthatithadthesefeatures,wasthereanycorresponding–I’llposethis

questiontotheinsurersaswelltogivethemachancetoansweraboutCalifornia.I’mjust

curious.

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:OnOctober3rd,I’moutholdingathingatFortMammothinNewJerseyandBernieFlynn

–theCEOofNewJerseyManufacturers,myinsurancecompany,isgoingtobethereand

I’mgoingtosay,HeyBernie.Youknow2grandforayeartoinsurethisvehicle–yougave

menocreditforthis.Ipersonallybelievethatthecarreducedtheprobabilityofmedying

inthatcarbecauseofitstechnologyby.25.Ibelievethatthecarreducedtheprobability

ofmebeinginjuredinthatcarby.25.Thatisanenormouslylargenumber.Forwhatare

costs,thatisvaluableandIthatitwillsubstantiallyreducetheexpectedliabilitytoNew

Jerseymanufacturersforthatcar.BernieFlynnisgongtomakeatonofmoneyoffofme

butthat’sfine,I’mwillingtocontributeatthispoint.Wehavereachedapoint,thatwas

mypresentvaluecomment,thatthistechnologyissoinexpensivethataninsurercango

outandgiveapersonacoupontogodowntoPepBoysandhavethisputin,justcontinue

topayyourratesandwe’llbuythetechnologyforyouandtheywillmakemoremoney

14

andthelivesandtheinjurieswillbesaved.Thisisthewaytorapidlyintroducethe

societalvalueofallthistechnologyand–ofcourseI’massumingitworks–butnoneofus

wouldbeinthisbusinessifwedidn’tthinkithadtheopportunitytoworkorwasgoingto

work.

INSURANCECOMMISSIONERDAVEJONES:

Great.Thankyou.Ourjurisdictionisinsuranceandmakingsurethatthereareinsurance

productsavailable–ofcourse,theDMVisheadingupaninteragencygroupthat’slooking

atavarietyofdifferentissuesandoneissueI’msurethatisbeingconsideredthereisthe

questionof–wellfromatrafficviolationsstandpoint–whoisorshouldbeheld

responsibleifthecompletelyautomatedorthepartiallyautomatedcarengagesinsome

sortofatrafficinfractionandthatdecisionastowhoshouldbeheldresponsibleanddo

youcontinuetoholdthedriverresponsibleorsomeoneelseresponsiblehasimplications

Ithinkontheinsurancesidebecausewereallyallaregrapplingontheinsurancesideis

liability–who,inthischainofcommercerunningfromthemomentofdesignand

manufacturerallthewaytothedriver,whomightbeheldliableintheeventofan

accidentandthenisthereinsurancetomakesurethatallofthoseactorshavesomething

tofallbackontomakesurethattheyarenotwipedoutfinancially.OnethingIthink

aboutisthemanufacturer,thedesignerofthesoftware,theinstalleroftheself‐driving

cardevice,ifthereisaretrofitofanexistingvehicle,thedriverhimselforherself,dowe

haveinsuranceateachstepofthatcontinuum,butcorrespondingly,thereisasimilarand

relatedquestiontowhoisresponsibleforsomethinggoeswrongandI’mjustwondering

ifthereareanythoughtsyouwouldhazardinregardtotrafficviolations.Thatseemsto

15

beaveryspecificexamplewhereapartiallyautomatedormaybeacompletelyautomated

cardoessomething,whichviolatesourtrafficcode,whoshouldbeheldresponsiblefor

thatbecausethatmayhaveimplicationsforliabilityandforinsurancetoo.

29:15‐BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

RightandProfessorKornhausergaveareallygooddescriptionofthoseNHTSAlevelsand

oneofthethingstoseparatetheLevel2andtheLevel3vehiclesisthatwiththeLevel2

vehicle,thedriverisstillincontrolandthatdriveristheonethatisdrivingthecarand

whenhe/shedoesnotwanttobeincontroltheypushabuttonandthecartakesoverbut

thatdriverstillneedstobevigilantandbereadytotakeover.WiththeLevel3car–that

linehasbeencrossedandthecarisonethatisprimarilydrivingandcanoperateitself

undermostconditionsandtherearesomeconditionswhereitwon’tbeabletooperateif

youtalkaboutconstructionzoneorsomethinglikethat–atthatpointthedriverneedsto

takeoverbutProfessorKornhauserisright–whilethecarisbeingoperated,thedriver

couldbedoingsomeothertasksbuttheystillneedtobereadytotakeovershouldthe

situationarise.Whenwearedevelopingtheregulations,theissueofthetrafficviolation

isbeingdiscussedanditcomesdowntothepointofwhoisthe(operatorofthatvehicle)

–thevehiclecodeisveryspecificintermsofwhotheoperatorisnowbecausethat

vehiclecodewasdevelopedwithoutany–atatimewhenadriverwithadriverlesscar

wasnoteventhoughtof–wearelookingatthevehiclecodeandwearealsolookingat

thedefinitionofthedriverandthedefinitionofoperatorforaLevel4vehicle,noneofthe

occupantscouldpotentiallybeconsideredanoperatorofthevehicle,infact,theoperator

ofthevehiclemaynotbewithinthevehicleitself.Theoperatorofthevehiclecouldbe

16

outside–thatpersoncouldbewithinanofficebuildingandsoallofthosearebeing

discussednowandwearetryingtocometosomeconclusionastothedefinitionof

operatorwhenitcomestoaLevel3aswellasaLevel4vehicle.WithaLevel3vehicle,it

issafetosayitwouldbesomeoneinthevehiclebecausesomeoneneedstobeincontrol

ofthatvehicleshouldthesituationarise.Butitisaverycomplexquestionthathasalotof

differentinputstogettotheanswerto.

INSURANCECOMMISSIONERDAVEJONES:�

Ithinkit’saquestionof–theanswertoofwhichweareallcollectivelyengagedintrying

toprovide–andatpointthelegislaturemaydecidetoprovideanansweraswellbutit

hassignificantimplicationsforlicensingfortheCaliforniaDepartmentofInsurance.The

insurancecompanies,whethertheyareprovidingcommercialproductorapersonal

automobileproduct,becausewherethatlinegetsdrawneitherstatutorilyorfroma

regulatorystandpointasimplicationsforthemaswellintermsofwhattypeofproducts

theymightwanttoprovideorwhattheywillbeabletoprovide,soweareappreciativeof

theopportunitytoparticipatewithyouandyourtaskforceandprovidingourinputon

thatandthat’sabigpartofthishearingtodayistohearfromthepublic,other

stakeholders,andinsuranceindustryaswellastotheirthoughtsonthequestionstoo.Le

measkDeputyCommissionerShultzorMs.Volkmeriftheyhaveanyadditionalquestions

forthispanel.

CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Mr.Soriano,IwanttomakesureweunderstandSenateBill1298andwhatitallowsDMV

tohypotheticallydo–settingasidethetestingregulations–fortheoperational

17

regulations.DoIunderstandcorrectlythatthemanufacturersmightproposeunderthe

regulationsyouwillsoonadoptbothaschemewherethereisalicenseddriverinthe

vehicleengagingthebuttonandalsoaschemewheretheremightnotbealicenseddriver

inthevehicleatall–bothofthosethingsmightbepossibleunderyour2ndsetof

regulations.

BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

That’scorrect.

CHRISSHULTZ,DEPUTYDIRECTORY,CALIFORNIADEPARTMENTOFINSURANCE:Andifthoseregulationsareadopted,let’sjustpickadate,January1st,then181daysafter

thatdateamanufacturercanproposetoDMVforadriverlessvehicleand180daysfor

thelegislaturetoconsiderthat?I’mjusttryingtowrapmyheadaroundthetiminghere.

BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

Fromatimingperspective,whatweareshootingforistheregulationstobeapprovedby

theendoftheyearandshouldthathappenamanufacturercouldsubmitanapplicationto

usthatwouldhavetheirintentiontodeployacompletelyselfdrivingvehicle–atthat

pointweneedtonotifythelegislatureand180daysfromthatdateiswhenwecanissue

approval,soessentially6monthsfromthetimeanapplicationarrivesinourofficeis

whenwecanapproveamanufacturertodeployacompletelyself‐drivingvehicle.Ifit’s

notacompletelyself‐drivingvehicle,wedon’thavetonotifythelegislatureofthat

application.

CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Thankyou.

18

INSURANCECOMMISSIONERDAVEJONES:

AndIwouldimaginethatthatisdesignedtotrytogivethelegislatureachancetoweigh

inbutit’snotthecasethatitissomethingshortofafullblownenactmentofalawthat

wouldimpedethemanufacturerfromcomingintothemarket,oncetheyhavemetyour

regulatorystandardsprovidedthenotice,sometimeslegislationprovidesforalegislative

vetoifyouwill.Aparticularcommitteeorparticularcommitteeshavetoact,notactin

orderforsomethingtobeallowedtooccur–inthiscaseitisanoticerequirementsolely‐

butunlessthelegislatureactsorenactsnewlegislation,whichIguessisthensignedby

theGovernor,thatmanufacturerisfreetomoveforwardiftheyhavemetallyour

regulatoryrequirements.

BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

That’scorrect.

INSURANCECOMMISSIONERDAVEJONES:

Ok.Great.IguessI’msortofcurioustoo,Imeanmaybethisissomethingyouarestill

consideringasapartofthisfullblownregulationbutobviouslyasdriver’shave

infractions,theyhavepoints,thatisimplicationsultimatelyforwhethertheykeeptheir

license,thatisimplicationsalsoforthemfromaninsurancecontext–istherebeenany

thoughtbeengiventosomeparallelstructureforautomatedvehicles,inotherwords,say

youareinatwoorathree,whereyouarestillsupposedtoengageinsomeway.Level2

orLevel3wassupposedtostillengageinsomeway.There’saninfraction;youdon’ttake

astep.Doyougetahalfpoint,aquarterpoint,what’sthe–generically–theappropriate

publicpolicyresponse?Ordoyougetdingedasyouwouldfullyinthecaseofany

19

infraction.

BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:

Thosearethequestionsandtheissueswearediscussingnowbecauseoneofthethings

wehavebeenlookingandwearelookingatiswhetherornotthereneedstobea

separatelicenseforsomeonetooperatethesevehiclesandifso,whattypeofexamdowe

give,whatdowetestthoselicenseesfor?Thatissueiscurrentlybeingdiscussed.

INSURANCECOMMISSIONERDAVEJONES:

Great.Rightnowtoo,asapartofgettingapermittotestthesevehiclesnotonlyistherea

requirementthatyouhave5milliondollarsintheformofabondorsomesortofproofof

insurancethatisifyou’retheentitythatistestingthesethings,butyoualsohavetomake

surethatthedriversmeetthestate’smandatory,minimuminsurancerequirementsas

well,Iunderstand.

37:04‐BERNARDSORIANODEPUTYDIRECTOR,CALIFORNIADMV:

Thatisright.Thatisabsolutelyright.Becausedriver’sthemselvesneedtomeetthe

mandatoryinsurancerequirementssotheprovisionsforthosetestdriversmatchwhat

thegooddriverwouldbe.

INSURANCECOMMISSIONERDAVEJONES:

Ok.Verygood.Ms.Volkmer?

SUMMERVOLKMER,ATTORNEY,CALIFORNIADEPARTMENTOFINSURANCE:

IhaveaquickquestionforProfessorKornhauser.DidIunderstandcorrectlythatyoudo

notbelievethatapersonalownershipmodelisrealisticforaLevel4vehicle?

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:

20

WhywouldIwanttobuyacarthatIcan’tdrive?Imean,Ijustdon’tthinkthereisa

marketforit.

INSURANCECOMMISSIONERDAVEJONES:

Iwouldliketobuymykidacarshecan’tdrive–I’dgethertwo.

PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Yeah,no,especiallyIthinkthisissuchanincentiveforanyhostoffleetoperatorstogo

outthereandputthesethingsoutthereandprovidemobilityandifyoudon’thavelabor

costsassociatedwiththat,youshouldbeabletoofferthatataveryattractivepriceand

opportunitiestosharerideswiththisthing,youcanactuallyeliminatecongestion,you

canreduceenergyandpollutionby50%.Theforcesonthefleetsidearegoingtobeso

greatthatthecompetitivemarketouttherearegoingtosaythereisnoneedforyouto

buythattechnology,thefleetwillbuythat–offerthatupandIthinkthat’sthedynamics

ofthemarketthataregoingtoplayout.Suretherewillbeacoupleofguyswhatever,just

toysIdon’tknowwhy,andthat’smybelief.

INSURANCECOMMISSIONERDAVEJONES:

Verygood.Wellthankyouboth;Ireallyappreciateyourtestimonyandyourtakingtime

tojoinusthismorning,thankyouforyourresponsetoourquestions.So,whatwewould

liketodonowistoexcusethispanelandinvitethenextpanel.Ifyouhavethetime,both

gentlemen,ifyouhavetimetostaythat’swonderfulbecausewewillhavepublic

questionslateron.Iunderstandifyouhaveotherpressingthingsthatdon’tallowyouto

staybutifyoucancontinuetostaywithusthatwouldbewonderful,andthankyouagain

21

verymuch–wereallyappreciateit.Whydon’tweinviteoursecondpaneltotaketheir

seatsnowandastheyaredoingthat,I’llidentifythemandwe’lltaketheminturn.Next,

we’regoingtohaveapanelthatlooksatquestionsaroundinsuringautonomousvehicles,

intheshortandlongterm.WearejoinedbyRobertPeterson;ProfessorRobertPeterson

istheDirectoroftheCenterofInsuranceLawandRegulation,whoisalsoaProfessorof

LawattheSantaClaraUniversitySchoolofLaw.We’rejoinedbyHillaryRowen,whoisa

partnerattheSedgwicklawfirm,andwereallyappreciatebothofyourparticipation.

We’rejoinedbyMichaelStienstra–whoisthechairmanoftheCasualtyActuarialSociety

TaskforceonAutomatedVehicles.Trytosaythatquickly.Mr.Stienstraisanactuaryin

hisownrightandwereallyappreciatehisparticipationaswell.Weareverypleasedas

welltohaveKathySchwambergerwho’swithus,who’sanassociategeneralcounselfor

oneofthenation’sleadinginsurers,StateFarm.Thankyouforjoiningus.Aswell,

MatthewGilbert,whoalsorepresentsoneofthenation’sleadinginsurersandwhoisthe

CaliforniaAutoProductmanagerforNationwideinsurance,andfinallybutcertainlynot

least,RichardHolober,whoistheExecutiveDirectorofaveryimportantconsumer

organizationhereinCalifornia–TheConsumerFederationofCalifornia.Sowelcome,I

thankeachandeveryoneofyou;thanksforyourpatiencewithourdelayedstarttime

andwhatwewouldliketodoistohearfromyouinturn,startingwithMr.Peterson,Ms.

Rowen,Mr.Stienstra,Ms.Schwamberger,Mr.Gilbert,andthenMr.Holober.We’ve

allottedfiveminutesforeachandthenwearegoingtohavequestions.Ithinkwhatwe

wouldliketodoishearfromallofyoufirstandthenwe’llhavequestionsfromthepanel

andletmebeginbywelcomingProfessorPeterson.Welcome.

22

41:20‐PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,THEUNIVERSITYOFSANTACLARA:ThankyouverymuchCommissioner.Iwasgoingtosaythatasaregulator,insurance

ratingisdrivenbydataandIthinkyouaregoingtobeveryfrustratedwhenthesecome

beforeyoubecausewhetheritispersonalliabilityorcommercial,thereisnotgoingtobe

alotofdataabouttherisksthesecarspresent.Theywillbetestedwithexpertdriversin

them.Theywon’tbetestedwithordinarypeopledrivingthemorwithexpertdiversat

theirside.They’llbetestedinsimulationsandthat’sgoingtobeaboutit.There’sgoingto

bealotofinformationreportedtotheDepartmentofMotorVehicles,butthat

informationmayormaynotbeavailabletousasinsurersbecausealotofthedevelopers

considerthattobeatradesecretandconsequently,insurersaregoingtohavetodoalot

ofguessingwhentheyfirsttrytoratethesecars.Iknowsomeinsurersareworkingvery

closelywithcarmanufacturerssothattheycanunderstandthetechnologyandmake

theirbestguessbutIthinkinthebeginningtherearegoingtobesomeroughedges

aroundhowyouratethese.Nowwhenthesecarsactuallycomeintothemarketplace,we

aregoingtostartgettingsomefrequencyandseveritydatathatIthinkisgoingtouseful

butitsnotgoingtobelikethekindofdatayouareusedtodealingwith–that’sbecause

itscredibilityisgoingtochangeveryquicklybecausethesearecomputersonwheels–

thesearen’tordinarydrivers.Soanydownloadthatupgradesoneoftheseautomobilesis

goingtoprobablydramaticallychangeitsprofileofriskandreducingtheinsurance

burdenonthedriversofthesecarswillincreasetheacceptanceofthesevehicles,which

willmakealotmoresafercarsontheroad.Unfortunately,Californiaandalotofstates

butparticularlyCalifornia,hasnotpositioneditselftonimblyadjustitsinsuranceratesso

23

thatsavingscanbepassedontoconsumersasthesecarsquicklydevelop.Therewillbea

lowerfrequencyofaccidents,weallhopethat,ifthereisn’tthenthecarsshouldnotbeon

theroad,andtherewillalsobesomeeaseinassigningresponsibilitybecausethat

informationwillbestoredinthatblackbox–thelast30seconds.Thereareacoupleof

thingsthatmaypushusinanotherdirection.Letmeputittoyouinthreeverysimple

hypotheticals.Youandyourfamilyaregravelyinjuredbyanimpecuniousdriverwitha

15/30/5policy,theminimumpolicyinCalifornia.Bigcasebutyouwillsettlethatcasefor

15/30becausethatisallthatthereis.Nomatterhowseverethosedamagesare,theyare

notgoingtobereflectedintheratesthatinsurerschargebecausetheyhaven’tbeenpaid.

Hypotheticalnumber2.Younegligentlydriveyourselfandfamilyintoatree.Grave

injuriesagain.Youarenotgoingtorecoverobviouslybecauseyouranthethingintoa

tree,buthowaboutyourfamilymembers?Youareliabletothemfornegligentlyinjuring

thembuttheyarenotcoveredbecausethereisfamilyexclusioninthestandard

automobilepolicy.Majorinjuriesbuttheyarenotgoingtobereflectedintheratesthat

personalinsurerscharge.Thirdhypothetical:Yourignitionswitchfailsanddrivesyour

carintothesametree.Nowyoucanrecover,yourfamilycanrecover,andyoucan

probablyrecoverclosertothefullvalueofthoseinjuriesbecausenow,it’stheOEMthat

isresponsible.Sothosecostswillbefoldedintothecostofautomobilesandpassedonto

peoplewhopurchasedthecars.Consequently,thereisachancethatthosecostsaregoing

togoup.Whetherornotthatisbalancedbythelowerfrequencyisaquestionthat

remainstobeseen.TurningtoProposition103–theverygoodbackgroundmemothat

wascirculated‐coversalotoftheissuesthere.ThedifficultyisthatProposition103is

24

it’sdriver‐centric.Itisnotvehicle‐centric.Twoofthemandatoryratingfactors,your

drivingrecordandyouryearsofdrivingexperience,assumethatthereisadriverwhois

legallyresponsiblefordrivingthevehicleandlikewisethegooddriverdiscount–the

20%gooddriverdiscountassumesthatthereisadriver,whoifgood,deservesthe

discountandifnotgood,willnot.Thesemandatory‐ratingfactorscancausesome

unreasonablevariationsoftherates.Agooddriverforexamplemaypaylessforaself‐

drivingautomobileeventhoughthegooddriverseldomactuallydrivestheautomobile.A

driverwhoisanot‐gooddrivermayhavetopayagooddealmoreforthatautomobile.

That’stheverykindofpersonyouwantinaself‐drivingcar.Thisstrikesmetoasboth

discriminatoryandpoorpublicpolicies.It’salittlebitlikechargingapoordrivermore

forabusticket.Whatcanwedotogetaroundit?Thereareacoupleofpossibilitieswe

couldexplore.OneiswecouldinterpretorpossiblyamendInsuranceCode,Section660,

whichisincorporatedbyProposition103.Thereisaliveryexclusioninsection660.

Thesecarsarebeingdrivenbysomeoneelse–theyarebeingdrivenbyaprogram.And

moneyischanginghandstodothat.Theylookanawfullotlikeliveryvehicles–maybe

wecouldshoehornthemintothat.Wejustwentthroughtheprocessofdoingsomething

verysimilarwherepersonalautomobilesthatarebeingdrivenby‘Uber’and‘Lift’and

others–theTNCs.Ithinkwehaveestablishedtheprecedentthatacarmaybealiveryor

livery‐likevehicleforpartofthetime–whileitisstillapersonalautomobilewhenyou

aredrivingitpersonally.Thismakessensebecauseifyoutrytoapplythemandatory

ratingfactorstoliabilitythatwillultimatelybepassedupthechaintothecommercial

line,thepeoplewhosuppliedthecar,theywillfoldthosecostsintothecostofthecarand

25

theywillsellthecarfreeofanyoftheconstraintsofProposition103.Putinanotherway‐

thegoodandthebaddriveraregoingtopaythesamepriceforthecar.It’snotgoingto

makeanydifference.It’sapointlessexercisewhenultimateliabilityisgoingtopassup

thecommercialchain.Wemighttakealookataffinitygroups.Thatissomethingthatis

somewhatcontroversialrightnow.Butmightn’tweputallself‐drivingcarsintoan

affinitypoolsothatatleasttheyareallbeingratedtogetherandnotmixedinwithalotof

othercars.YouCommissionerhavequiteabitofdiscretionwithrespecttohowyou

manipulateboththerelationshipbetweenthemandatoryratingfactorsandthe16

optionalratingfactors.Youareprobablyfamiliarwiththehistoryofterritorialratingand

thecaseofSpanishSpeakingCitizens,whichactuallyconfirmsyourdiscretion.Theremay

besomethingsyoucandointhatregardtoelevatetheimportanceofthecarasthe

importanceofthecarbecomesmuchmoreimportant.Youalsohavetokeepinmymind,I

suggest,isthebroodingomnipresenceofthefederalsystem.Carsafetyisafederal

concern.NHTSAsetstandardsforcars;theypreemptstatelaws.NHTSAwillundoubtedly

participatewithrespecttodevelopingthesecarsbutifinsuranceregulationsofthestate

impedetheintroductionofsafervehicles,thatisaninvitationandpossiblyanincentive

forthefederalgovernmenttostepinandsaylook,withrespecttothesekindsofcars,you

can’tdothis.JusttwootherpointsandthenI’llshutup.Aswegetmoreofthesecarsin

themarket,itmaybethatpeopleprefertoinsurethemselvesagainstinjuriesarising

fromfaultycarswiththoughtlessdrivers.Firstpartyinsurance,theremaybea

marketplaceforUM/UIMrightnow.Wehavealreadydonethatwithhealthcare,allofthe

healthcarecoststhatarisefromanautomobileaccidentareeithercoveredbythe

26

healthcareyouhaveorbyoneofthegovernmentprograms,sowehavealreadymoved

thattointofirstparty.Thesecondpointisthatasgoevenfurtherdowntheroadandget

intowhattheycallV2VandV2I,therearecarsthataretalkingtooneanotherandwe

haveanaccident,theremaybedozensofcarscommunicatingwitheachotheratany

particulartimeanditmaybeeitherbeimpossibleornearlyimpossibletofigureoutwho

isatfaultorevenwhatthecausewas.Thatmightbeatimewhenwewanttomovetoa

completelydifferentcompensationsystemandtheonethatsuggestsitselforsomething

alongthoselinesistheNationalVaccineInjuryCompensationProgram.Youdon’thaveto

showfaultifyouhaveabadreactionfromavaccine.Youcanrecoverwithincertain

limits,sowesimplymoveawayfromafault‐basedsystemalltogether.Thatwaslikea

rapiddisclaimerattheendofaradioad.Thankyou.

INSURANCECOMMISSIONERDAVEJONES:

Thankyou.Thanks,Professor.Ms.Rowen.

HILARYROWEN,PARTNER,SEDGWICKLLP:Yes,IamgoingtoelaborateandexpandonsomeofthepointsthatBobraisedandfillin

someoftheintersticeshedidnotaddress.First,Ithink,I’mgoingtolayoutwhatIthink

isalikelyscenarioforhowthefleetisgoingtochangeinthenextyears,beingdefinedas

inthetwototenyeartimehorizon.IthinkwewillseeincrementalmovementintoLevel

2andtowardsLevel3.Ithinkitisgoingtobeveryhard,insomecircumstances,todraw

thetypeofbrightlinethattheNHTSAcategorysetsbetween2and3.Wearegoingtosee

thesortofcarsthatareat2.3,2.5,2.7,andit’sgoingtobeveryfuzzyline.Incontrast

however,theleapfromLevel3toLevel4isgoingtoabsolutelybeaclearcutdistinction

27

thatisyou’regoingtohavevehiclesinwhichthedriverhasatleastthepotentialtotake

overoroverride,I’llgetbacktotheoverrideprobleminasecond,theselfdriving

autonomousfeatures,whereastheLevel4vehicles,maybemovingoutofour

commonsenseunderstandingofanautomobile,it’saseparatequestionwhetheritis

movingoutofthevehiclecodedefinitionofanautomobilebutwhatitreallyisorwillbe

isastreetlegalrobot.Itisarobot.Youcan,leavingasidethequestionofwhatpeoplewill

orwillnotdotoactuallypersonallyownoneofthese,butfrommyparadigm,I’mgoingto

assumetheywillbecauseoftheprivatepassengerautoissuesfrontandcenter,atleast

that’swherewewantthemfordiscussionpurposes.LetusassumeyouownaLevel4

vehicleandinfactyouhavean8yearoldandperhapseverymorningthatisnotaschool

holiday,thevehicleisprogrammedtosuchthatyouplopthekidintothecar,ittrundlesit

offtoschool,itdropsthekidsatschool,itthentrundlesitselfhome.Endofschool,it

repeatstheprocess.Thenavigationsoftwarehasbeenriggedsoyourkidcannotoverride

andgotoDisneyland.Somecleverhackerkidiseventuallygoingtooverrideandyouare

goingtohavetohaveacarwitha10or11‐year‐oldtakeofftoDisneylandandthemedia

willhaveafieldday.Thatvehicleisprobablyastreetlegalrobot.Rightnow,probably,

welltodayitisastreetillegalrobotbutpresumablybythetime,peopleareactually–

they’reinthefleet,itwillbestreetlegalrobot.YourLevel3car,yourLevel2car,yourcar

issomewherebetweenwhatiscurrentlyontheroadrightnowandLevel3cars,pose

interestinginsurancequestionsbecauseyouhaveascenarioswherethecarisdriving

itselfwithmoreorlessinputsomeofthetime.Itisdrivingitselfentirely,butonlysome

ofthetime.Thedriverhas,atleastintheory,thecapabilityoftakingitoutofautonomous

28

modeatjustaboutanytimeandthereforeyougetawholebunchofquestionsbothin

termsofthestandardliabilitycausation.Idon’tthinkweneedtochangetheliability

rules,thebasicliabilityrulesstillapply:whathappened,who’satfault,howmuchwere

theyatfault,dotheyhaveinsurance.Thedetailsintermsofhowdowedetermine

causationandtowhatextentarewerelyingorourinsurersarerelyingon,orevenlaw

enforcementofficialsifit’saveryaveryseriousaccident,arerelyingonblackbox

informationforexample.Howisthisgoingtoimpactessentiallythelossadjusting

expensesandtheinsuranceproductbecauseIthinkeverybodyisanticipatingthe

frequencyisgoingtogodown,yeahseverityisgoingtogodown.Bigquestionmarkon

propertydamageseverity,verywellbesaidthattherepaircostsgouponaperinstance

basis,butthefrequencygodownsoyouarelikelytoseetheoverallcostofinsuranceto

godown.Asthelosscostcomponentgoesdown,itisnotatallclearabouttheloss

adjustingexpensesoratleastintheinitialphaseorastechnologykeepschanging,going

togodownatthesameratesoyoumayverywellseeasystemwheretheProp.103

historicaldata,whichassumesacertainrelationshipbetweenlosscostsandnon‐loss

costs,rapidlygetsoutofwhack.Particularlyaslostcosts,youknowtheoverheadisgoing

togoupaslostcostsdropbecausethereisonlysomuch,youcanskinfatoutofthe

systembeforeyouarereallycuttingmuscleandfurthermore,it’smorecleartotheextent

youhavesituationswherethedrivercantakeover.Thoughyouaregoingtohavealotof

causationargument,wasthisaccidenttheresultofatruesoftwareorsensorfailureor

wasittheresultofthedrivertakingoveranddoingsomethingfoolish.Notthingsthat

lendthemselvesperhapsreadytoreallygoodbulk,productliabilitysegregationclaims,

29

asyouwouldbethecaseifyouactuallyhadatruesoftwareflawthatcausedtheaccident,

youwouldkindofhaveasimilarpatternofaccidents.Youmighthavealotofclaimsbut

theprocessofactuallyresolvingthemonabulkbasisbetweentheaffectedinsurersand

whoareresponsibleforbonefidesoftwaredefectorbonefidesensordefectwould

probablybeprettystraightforward.Butifyouhavealotofclaimsinwhichthereisan

argumentastowhetheritwasasoftwarefailure,aself‐drivingcarfailure:wasthecarat

faultorwastheclientatfault–yougetalotofclaimsalongthoselines–youarenotlikely

toseeaproportionaldropinLAErelativetotheoveralllostcost,sothat’sgoingtobea

factor.Thenyougetintotheclassplanissuesandthereyougetallofthecomplications

involvingthethingsBobalreadyaddressedinvolvinghowmuchdoesdrivingrecord

matterwhenthecarismostlydrivingitself,howmuchdoesmileagematter–thatis

somethingIthinkisaveryinterestingquestionbecauseIthinkitisgoingtobecome

increasinglytruethatnotallmilesaregoingtobecreatedequal.Thatisthemilesdriven

underautonomouscontrolaremuchsafermiles,butitmaybethecasethattransition

milesorthatmileinwhichthedriverhastoretakecontrolofthecarareparticularly

unsafemiles.Itmaybethatifyouareadriverwho,forwhateverreason,goesfrequently

fromautonomoustonon‐autonomousmode,andifitturnsoutanditprobablywill,

peoplehaveslowerreactiontimesthanwhentheyareretakingcontrolthanwhenthey

aresimplydriving.Thenyoumayagainhaveaquestiontothequantityofthemilesas

wellasthequantity.[Quality]maybecomemoreimportant,significantlymoreimportant,

thanthequantityofmiles.Now,Ithinkthatthatcanactuallybeaccommodatedwithout

amendingProp.103butitcertainlywillrequireaverydifferentsetofregulationsto

30

capturewhatvehiclemilestravelsmeantocapturebothtocapturethetypeofmileas

wellasthemodeoftravelaswellassimplytheaggregateself‐reportedmiles.

INSURANCECOMMISSIONERDAVEJONES:Verygood–Thankyou.Let’snowgotoMr.Stienstra.

59:15‐MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Allright.IwouldliketothanktheCaliforniaDepartmentofInsuranceforhostingthis

hearingandformyinvitation.Actuariesarenotinvitedtoalotofthings.Iamanactuary

atQBENorthAmerica,FellowattheCasualtyActuarialSociety,andtheChairmanofthe

CasualtyActuarialSociety’sAutomatedVehicleTaskForce.BothmyemployersandCAS

aresupportiveofmypresenceandtheywouldlikemetonotethatthefollowing

statementsandviewsonlyrepresentmyownopinions.Inordertobetterunderstand,the

riskofthepublicandtechnologyphaseandtherolethatactuariesintheinsurance

industrycanplay,Iwouldliketodiscussthreespecificissuesatthispointintime–they

allrelatetosafety.First,betterunderstandingofautomatedvehiclesriskenvironment

relatedisrequiredtounderstandthehurdlesthattechnologyfaces.Whilemanystudies

havefoundapproximately90%ofautomobileaccidentsareattributedtohumanerror,

noneofthesestudieswereaimedatorconsideredautomatedvehicles.UsingtheNational

HighwayTrafficSafetyAdministration’s2008NationalMotorVehicleCrashCausation

Survey,whichfoundthat93%ofaccidentsareattributedtohumanerror.TheCasualty

ActuarialSocietyAutomatedVehicleTaskForcehasreevaluatedautomotivevehiclesrisk

environment.Thefindingshavethreekeytakeawaysforthispanel.First,thetechnology

facesavastarrayofrisksasinclementweather,failinginfrastructure,andundesirable

31

driverbehaviorsmaydisablethetechnologyorreduceitseffectiveness.Forscale,

approximately49%oftheseaccidentshadoneormoreoftheseriskfactorsattachedto

them.Second,theserisksimportantwilldifferbylocation,withthemostobvious

examplebeingthevaryingimpactinclementweatherhas.Third,anumberofnon‐

technologicalsolutionsmightbeabletohelpovercometheserisks.Forexample,better

infrastructuremaintenancecanreducethepotholesorinoperabletrafficcontroldevices

risk.Drivertrainingprogramsorautomatedvehicle‐onlylanesmightincreasethe

likelihoodthetechnologyisusedcorrectlyandsafely.Longerterm,removingthedriver

fromtheequationcompletelymayactuallyproducethesafestresult.Understandingand

quantifyingthehurdlesthistechnologyfacescanhelppolicymakersestimatethevalueof

differentproposalsthroughanaccuratecostbenefitanalysis.Next,actuariesinthe

insuranceindustrycanalsohelpestablishamoreaccuratesafetybenchmarkoftoday’s

drivers.Thiscanbeusedtohelpmeasureautomatedvehicles’relativesafety.Accident

ratesvary/differacrossdifferentdrivingtypessuchashighwayorcity,timeofday–rush

hour,midday,ornighttime–anddrivercharacteristicssuchasage.Thusanaccurate

comparisonwouldrequiretheselectionofthemostappropriatebenchmark.Further,it

maybedesirabletocomparethetechnologytoboththeaverageaccidentrateandasyet

undefinedsafedriveraccidentrate,asthisaverageratewillincludebothteenagedrivers

anddrunkdrivers,miles,andaccidents.Lastly,Iwouldliketoofferthreeobservationson

therisksassociatedwithtransferringtheresponsibilitytothesystemthatcurrently

providesprotectionagainstautomobilemanufacturererrors.First,NHTSAregulatory

processdoesnotprovidesufficientprotectionforthemanufacturersorconsumers.The

32

1980caseofRichardDawsonv.ChryslershowsthatfollowingNHTSAregulationsisnota

sufficientdefense.Conversely,theillusoryparkcaseagainstFordinthe1970s,which

resurfacedChryslerinthe1990s,sothatknownriskswouldnotonlybeidentifiedand

fixedinatimelymanner.Second,it'sworthnotingthatpersonalautoinsurersspend

approximately60billiondollarsayearonexpensesdedicatedtowardssellingpolicies,

quantifyingrisk,anddeterminingfault.Thisis400timeslargerthanNHTSA’s150million

dollarannualvehiclesafetybudget.Third,theautoinsuranceindustryincentivesare

alignedverywellwiththesocietalroletheyareaskedtofulfill.Tochargeapremiumthat

accuratelyreflectstheaccidentriskandsettleclaimsfairlyandefficiently.Productsafety

regularsdonotfacethesamefinancialdownsidewhentheyoverorunderestimaterisk.

Manufacturerslikewisefaceaverydifferenteconomicoptimizationequationwhen

addressingaproductsliabilityclaim.Atthispoint,myonlyrecommendationwouldbefor

theCaliforniaDepartmentofInsurancetoengagemanufacturersandbothpersonaland

commercialinsurerstocreatearobust,transparent,andcollaborativetestingapproach.

Thiswillallowthepoliciestodevelopalongwiththetechnologyandhelpthetechnology

cometomarketassafelyandefficientlyaspossible.Thankyou.

INSURANCECOMMISSIONERDAVEJONES:

Thankyou.Ms.Schwamberger.

CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:

I’veneversaidthisbefore,butanactuaryjustkindofstolesomeofmythunder.Good

morningandweappreciateonbehalfofStateFarmtheopportunitytoparticipatein

today’shearing.IwouldliketobeginbyacknowledgingCommissionerJonesandyour

33

teamforputtingtogetherwhatIthinkisathoroughlistingoftheissuesthatweallneed

tobethinkingaboutasthistechnologyadvances.Briefly,ithasbeensuggestedbysome,

notherebutinthepublicdialogue,aboutthistechnologythatinsuranceoreveninsurers

couldbeanobstacletothedevelopmentofthetechnologypresumablybecauseitcould

disruptinsurers’businessmodels.AnytimeIhearthis,Idisagree,Ipushback,andIask

formoreinformationbecauseIdon’tbelievethatwillbethecase.Speakingonbehalfof

StateFarm,wehaveadecadeslonghistoryofstandingforautosafetyforthebenefitof

ourcustomersandbecausethistechnologyhasthepotentialofreducingcrashes,reduce

injuries,reducedeath–IwanttomakeitclearthatStateFarmdoessupportandour

officialpositionistosupportthedevelopmentofthistechnology.AsMichaelsaid,thereis

alotofinformationtobegainedandweareactivelyseekingtounderstandhowthis

technologywillreducerisksandwhetheranynewriskswillemerge.Aspartofthat

effort,weareamemberoftheCenterforAutomotiveResearchatStanford.Theyhavea

projectlookingatautomatedvehicles.WeareinvolvedinacollaborationwithFord

MotorCompanyrelatedtotheautomatedvehicletechnologyandjustonSeptember5th,it

wasannouncedthatStateFarmwillbeafoundingpartnerintheUniversityofMichigan’s

MobilityTransformationCenterwhichisapublic/privateR&Dinitiative,thegoalof

whichistoacceleratetheprogressinthedevelopmentandimplementationofboth

connectedandautomatedvehicletechnology.Isayallthattosaythatwearelooking

forwardtobeingapartofthedialoguehereinCaliforniaasinsuranceissuesare

addressedrelatedtothistechnology.Whenwethinkabouttheinsuranceconsiderations,

Ithinktheycanbebrokendowninthreeareas:theunderwritingarea,thepricingand

34

ratingarea,andtheclaimhandlingarea.Andfirstawordaboutunderwriting,andthis

hasbeensaid,historicallythecharacteristicsofthedriverhavebeenveryimportantin

assessingriskbutIthinkaswegoforward,thecar’scharacteristicmaybecomemore

importantwhilethedriver’scharacteristicswilldeclineinimportanceandthatincludes

drivingsafetyrecordsandyearsofdrivingexperience.Now,whenwethinkaboutpricing

briefly,weknowinCaliforniathatpricingissuesarecomplicatedbyProposition103.As

Michaelsaid,aninsurer’sgoalistoestablishapricethatmatchestheriskascloselyas

possibleandthat’salreadyachallengeunderProposition103sowearegoingtohaveto

thinkthroughsomeofthoseissues.Now,aswithunderwriting,evenwithpricing,the

vehicles’characteristicswillprobablybecomemoreimportantovertime,whiledriver’s

characteristicsmaydeclineinimportance.Atthebeginning,andthishasbeensaidas

well,insurerswillbechallengedtogatherthelossexperiencethatweneedtoestablisha

pricethatmatchesriskandobviouslythisisverynewandthatwillbeachallengefor

everyone.Finallythinkingaboutthisfromaclaim‐handlingstandpoint,againthe

importanceofdata.Insurerswillneeddatafromthevehicletounderstandhowthecrash

occurred.Andfortunately,thatisincludedintheCalifornialawastherepresentative

fromtheDepartmentofMotorVehiclestated.Wehavebeengoingforwardasdrivers

havebecomelessattentivetothedrivingenvironment,theywillbecomelessawareof

whatleadtoacrash.Sothecensordatafromthevehiclewillshedlightonthecauseof

theaccidentandthat’simportantbecauseweneedto–goingforward–ensurethat

injuredpartiesarecompensatedfairly,thatliabilityisapportionedappropriately,andto

theextentthatthedriverisnolongeragreatwitnessthatthedatafromthevehiclewill

35

beveryimportant.Nowhavingsaidthat,thereareotherissuesrelatedtoclaims.Ithink

Hilarymentionedsomeofthese.Theassumptionisthatcrashfrequencywillgodownbut

wereallyneedtoseewhatwillhappenwithseverity.Willtheaccidentsthatdooccurbe

worseperchance?Certainlyweneedtobethinkingaboutthecostofrepairofvehicles

thathavethistechnologyandsomethingthathasn’tbeenmentionedtodaythatIwould

considerthisaninsurancechallengeforallofus,willthereberepairersequippedtodo

therepairstoaddressthistechnology,that,Isuppose,willbeanimmediateconcernfor

insurersbutIthinkit’ssomethingforustobethinkingabout–whowillbeabletofix

thesecars.Inlightofthesecomments,Ididwanttobrieflyaddresssomeofthese

questionsthatwereraisedinthematerialthatcametousaheadoftime.Oneofthe

questionswaswhetheraproductwillbeavailablein2015andwillitwillbeatraditional

autopolicy.Wethinkthataslongasthedriverisresponsibleformonitoringthevehicle

andcantakecontrolasneeded,certainlyLevel2,maybetoacertaindegreethrough

Level3,wethinkatraditionalautopolicywillstillberelevantandwillstillbe

appropriate.Thecoveragesinthemincludesuninsuredandunderinsuredmotorist,

medicalpayments,comprehensive,andcollisionandofcourseliability.Manyofthese

coverageswillbeneededasthetraditionalvehiclecontinuestobeontheroad.We’ll

continuetofacehazardslikefallingorbouncingrocks,animalscrossingtheroad,bad

weather,asithasbeensaid.Withallthatsaid,wedothinkthatinsuranceproductswill

probablyneedtochangeovertimeasriskschange,especiallywhenvehiclesbecome

completelyautonomousandalsoifliabilitylawsevolveovertime.Ithinkasthis

technologymovesforward,Ithinkoverthelongerterm,insurancepoliciesneedwillneed

36

tochangetomatchtherisks,tomatchthelawsinplace,andeventhroughinnovation.

Second,youaskedhowdoinsurersratevehicleswithothersemi‐automatedsafety

featuresthatalreadyexists.Iwouldsaythisgoesbacktodata.Insurersgatherdata,they

gatherlossexperienceovertimeandthentheymaketheappropriateadjustmentbased

onthatdata.Wegenerallylooktoourownlossexperiencetodeterminethesethingsbut

sometimesifclaimexperienceisunavailablefornewtechnologyfornewvehicletype,we

mayseekthedatafromelsewhereandthatmayneedtobethecasewithincreasingly

automatedvehicles.Youalsoaskedhowwillinsurershandleaftermarketautomated

vehicletechnologyandDr.Kornhauserbroughtthatup.Fromanunderwriting

perspective,insurerswouldcarefullyconsiderthesafetyandtheeffectivenessofthat

aftermarkettechnology.Fromaratingperspectiveitmaybedifficulttogetthevolumeof

dataneededtoassesstherightrateformarkettechnologyandalso,thiscouldbeanissue

forusearlyon,totheextentinsurersusetheyear,make,andmodel,andeventheVIN

numbertoidentifywhatsafetyfeaturesexistonthatcar,theymaynotbeabletogetthe

factthatthereisaftermarkettechnologyonthatvehiclebylookingatyear,make,model,

VIN.So,thatmaybeachallengewhenitcomestoaftermarkettechnology.Finally,you

askedwhatcouldtheDepartmentofInsurancedotoaccommodateautomatedvehicles.

AndwewouldsaythatwouldbeimportantforDepartmentstafftobeflexibleasthey

reviewratefilings.Wewon’thavealargeamountofdataasweseektoestablishprices

thatmatchriskforincreasinglyautomatedvehiclesandwealsothinkitwouldbecritical

fortheDepartmenttoallowthecompanyactuariestomakereasonableassumptions

basedonthedatathatisavailable.Wethinkthatthisflexibilitywillbekeytoallowing

37

insurerstosetapricethatmatchestherisk,andwethinkthatthatisimportantbecause

thatmayhelpconsumersseethevalueinpurchasingautomatedvehicles.Ifconsumers

seethevalueinthistechnologyandpartofthatmayhingeonwhethertheyperceivethey

aregettingabetterinsurancepremiumbecauseofit,thiswillthencreatedemandforthe

technology,andinturnleadtotheproductionofitandIthinkthatisagoodthing–

becausethisispotentiallylifesavingtechnology.Thankyou.

INSURANCECOMMISSIONERDAVEJONES:

Thankyouverymuch.Mr.Gilbert.

1:13:06‐MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:Goodmorningandthankyouverymuchforhavingushere.Ijustwantedtosaythat

Nationwideisreallyexcitedabouttechnologiesthatpromisetoreducetrafficrelated

injuries.Wewanttostayasclosetothedevelopmentonthisaspossible,wethinkit

representsjustagreatoutcomeforsocietytohaveaworldwithfeweraccidents.We

wereplanningonbeingabletomeettheinsuranceneedsofvehicleswithautonomous

technologies,whateverthismaybe.It’sreallynotclearaswehavekindofdiscussedand

foundout,it’snotclearhowthetechnologyisgoingtoevolveonceitismadeavailableto

thegeneralpublicorevenhowitisgoingtolookbutwedoknowthatitisrapidly

approachingandweareprobablyveryclosetothatLevel2implementationwithinthe

nextfewyearsIwouldthink.Thequestionswereposedtousandthemainquestionsthat

wereaskedwereifwehadtheabilitytoofferaninsuranceproductandwhatthismay

looklikeintheshortandlongterm.Thethingthatimmediatelypopsintomyheadand

whatmakesitsdifficultfortheinsuranceagency,isthatweareinsomewhatofa

38

reactionarypositionhere.Wearenotdevelopingthetechnology;we’rejustkindofseeing

whereitisgoingandtryingtokeepinline.So,we’veheardalotofdiscussionaboutthe

liabilityquestion,whichisalsomynumberonebulletandisthe64,000‐dollarquestion.

Nationwidewouldsupportthecurrentliabilitysystemaswellaspossiblyshiftingsome

theliabilitytothemanufacturersandthedevelopersofthistechnology,dependingon

whereinthespectrumeachriskislocated.Longterm,itisbecomingverycomplicated

especiallyasmoreandmoreautonomousmilesaredrivenanditisdefinitelyanarea

wherewearelookingofregulatoryclaritytogiveusguidanceonhowtheywillbetreated

underthelawandthedifferentiationbetweenthedifferenttypes.Now,shiftingfrom

liabilitytophysicaldamageratesisadifferentquestion.Fromaratingperspective,Ithink

it’saprettycommonthoughtthatwewillseeasignificantdecreaseinaccidentfrequency,

whileatthesametimewewillseeanincreaseinthecostofrepairortoreplacethose

vehicles.Particularlyasthisnewtechnologyisnewtothepublic,oneofthefirststepsI

seeisbeingabletoidentifyoneofthevehiclesaswellastheautonomouscapabilitiesthat

theyhave.Realistically,Icanseetherecouldbesituationswherewecouldhavevehicles

ateverydifferentlevelontheroadatthesametime.Youaregoingtohavepeopledriving

aLevel2carandsomepeoplemighthaveaLevel4.Traditionally,theVINnumberhas

containedinformationaboutthesafetyfeaturesandmostofthecarrierstodayuseitto

classifylikeriskforthepurposeofrating,similarlyhowKathywasexplaining.Another

complexissueisthesamevehicleintwodifferenthouseholdsmaybeusedvery

differently.Thiscouldbeduetofactorslikedrivingpreference,drivingconditions,

weather,andevengeographytonameafew.Thisdifferenceinusecouldactuallymeana

39

significantdifferenceinexposureatthistime.Ideally,itwouldmakesensetoratebythe

typeofmileagedrivenbutIfullyagreewithHilaryaboutthedifferenttypesofmileage‐

notwomilesarecreatedequal.Youmighthaveonesetofratesforasemi‐autonomous

mileandyouhaveonesetofrateforafullautonomousmile.Ofcoursethiswouldmeana

hugeamountofdatawouldneedtobecollectedforthepurposeofquantifyingthe

exposure,butalsowewouldneedtheabilitytousethisandinformation.Technologyis

alreadyusedbytheinsuranceindustrytotrackdistance,speed,accelerationtrends,

hard‐breakingeventsinrealtime.WhilethisisnotabletobeusedinCalifornia,thisis

showingasareliableandaccuratewaytocollectapredictiveratingfactorandprovide

anotheroptionforinsurance.Thisbringsmetomylastpointofratingcapability.

CurrentlytheCaliforniaCodeofRegulationssetsthemandatoryandoptionalfactorsthat

aretobeusedinratingprivatepassengerautos.Withthecurrentstructure,wherethree

ofthemandatoryfactors‐twoofthethreedriverexperienceanddrivingrecordbecome

lessandlessrelevantasmoreautonomousmilesaredriven.Optionalfactorsthatallow

forratingbasedontypesofvehiclesareavailabletodaybuttheyareweightedlessthan

themandatorythree.Inclosing,ourplanistoevolvetomeettheneedsoftheinsurance

industryfortheprivatepassagetransportation,whateverthatmaylooklike.Withthat

said,wedoneedclarity,underthelawespeciallyaroundliabilityaswellasexploringthe

possibilityofexpandingdifferentinsuranceratingmethodologies.Thankyou.

INSURANCECOMMISSIONERDAVEJONES:

Thankyouverymuch.Thatwasveryhelpful.Mr.Holober.

RICHARDHOLOBER,EXECUTIVEDIRECTOR,CONSUMERFEDERATIONOFCALIFORNIA:

40

Goodmorningandthankyouforholdingtheworkshopandforinvitingme.Idowantto

thanktheCommissionerforyourleadershipandreallyanticipatingawholenewsetof

insurancequestionsbeforeweareinareactivemodesowebelievethatworkshopsinthe

areaarecalledforandlookforwardtoparticipatinginthemandalsoclearlythereisa

needfordatatobecollectedandperhapsrequiredbytheDepartmenttobecollected

frominsurersasmoreexperienceoccursaroundtheLevel2typesofautonomous

vehicles.Asthetechnologiesdevelop,Ithinkmoredatawillhelpusalldefinethemerits

andhowtheyshouldbefactoredinrates.Ithinkautonomousvehiclesareveryexciting,

whenIthinkofthedrudgeryofcommuningandwhenIthinkofplaceswherepublic

transitisnotavailableandnothavingtobestressedoutbehindasteeringwheelsounds

likeawonderfulthing.Ontheflipside,drivingandowningacarissointegraltowhatitis

tobeanAmericanthatIimaginethattherewillbeagradualacceptance,notanovernight

acceptance,ofautonomousvehiclesandyouknowmycommentswillbebasedonthe

Level3typeofautonomousvehiclesthatseemtobeinthemoreimmediatefuture.

ClearlyifLevel3autonomousvehiclesareresultinginfeweraccidentstheyareloss

mitigationtoolsandassuchthebenefitshouldbetotheconsumer,notsimplyawindfall

totheinsurerandinCaliforniaourregulatoryschemewouldrequirethatanysavingsbe

passedalongtotheconsumerwithintheparametersofProp.103.Wedobelievethat

thereisconsiderableroomwithinProp.103toaddressLevel3autonomousvehiclesand

Ijustwanttopointoutacoupleofconsiderations.Aslongasthereisasteeringwheel,

thatadrivercantakeovereitherbychoiceorbynecessityifthereisafailureofthe

autonomoussystem,yoursafetyrecordmattersanddataIimaginewillhelpusbut

41

considerthedriverwhosefirstexperienceisdrivinganautonomousvehicleandthey

havegottheirdriver’slicensetheystartdrivinganautonomousvehicleandhavelittleif

anyexperiencereallydoingthedriving.Iftheyhavetotakeoverinanemergency

becauseofafailureormaybesomeotherdrivernotdoingtherightthingintraffic,isthat

driverasaferorlesssafedriverbecauseofthelackofexperience,thelackofknowing

whentoreactinthoseemergencysituations.So,Idon’tthinkit’sthatsimpleorisaone‐

sidedcalculationtodeterminethesafetyrecordofdriversofautonomousvehicles.Again,

Ithinkweneedtocollectalotofdatabeforewereachthosekindsofconclusions.There

isplentyofroomwithinProp.103,particularlyundertheoptionalratingfactorsinterms

of1,2,and8togiveconsiderableweighttoautonomousvehiclesunderthetypeof

vehiclesperformancecapabilitiesorvehiclecharacteristicsifinsurersarealsowillingto

de‐emphasizeoreliminatetheweighttheygiveotheroptionalratingfactorssuchas

martialstatus,smoking,orzipcode.Becauseifthetheoryisthattheautonomousvehicles

isthesafervehicles,thenwhyshouldmaritalstatus,whyshouldwhereyoulive,or

whetheryousmokecarryanyweight.Prop103hasenoughflexibilitytoplaceemphasis

onthenewtypesofvehiclesifinsurersarewillingtode‐emphasizethingsthatare

becominglessandlessrelevant.Letmestatetheobvious,youcan’tchangeProp.103

withoutavoteoftheCaliforniapeopleorbythelegislationthatadvancesthepurposesof

Prop.103,alotofthequestionsofamending103throughavotewilldependonthe

public’sacceptance,whichwon’thappenovernight,itwillhappengraduallythatpeople

willfeelcomfortablethattheseareinfactoverallsafervehicles.Ithinkifexperienceover

theyearsprovesthat,thentherewillbeanamendmentsputbeforevoters.HoweverI

42

thinkdoingitthroughlegislation,Iwouldcautionthatwillcertainlybeoppositionto

changestodefinitionswithinInsuranceCode,Section660asawayofcircumventingthe

requirementsofProp.103.So,wedonotthinkthatthevehiclesthatareownedby

privatepeoplefortheiruseorfortheirfamily’suseareliveryvehicles.Wealsohave

concernsaboutthewayinwhichaffinitygroupsarebeingused.Weappreciatethatthe

Commissionerheldaconversationwithstakeholdersonthatandhopethatthatwill

continuetobepursued,butIthinkthesemaybebecomegimmickstotrytocircumvent

ratherthandealAVtechnologywithinthecontextofProposition103.Letmeraisea

coupleofotherissuesthatneedtobepartofthediscussion.Therehasbeensometalk

aboutprivacyandwebelieveprivacyisaverykeyissue,sowedoapplaudthe

regulationstheDepartmentadoptedaroundthekindofdatacollectedfromthe

transpondersortheblackboxesthatareinvehicles.Insurancecompaniescancollect

datarelatedtothenumberofmilesdrivenwhichisperfectlyappropriate,it’sconvenient

anditmakessense,butnototherdatainCaliforniathatreallyisnotrelatedtoProp.103

factorsandIthinkweneedtofollowthatmodelinthecollectionofdataonautonomous

vehicles.Certainly,therewillprobablybevaluableneedtocollectaggregate,anonymous

dataabouttheoverallsafetyexperienceofLevel3vehiclesbutwehavetobecarefulto

protectinformationthatreallywouldbemadeprivateaboutindividualdriversand

wheretheydrive,whentheydrive,andsoforth.Andtheotherissuethatoccurredtome

whenreadingthematerialsandconsideringtheconceptthattherewillbethissortof

ongoing,thisdaily,veryfrequent,updatingofyourAVcontrol’ssystemasinformationis

refinedandsoforth.Astechnologyadvances,thereisgongtobesignificantconcernswith

43

hackingandmaliciouskindsofattacksonthesystems.Anysystemthat’screatedisa

targetforhacking,asatargetnotjustmischief,butseriousharm.Idon’tknowwherethat

factorsinbutitseemstomethatthatneedstobepartoftherisk.Therearealotof

wonderfulthingsthattheseautonomousvehicleholdforthefuture,butalongwiththatI

believeisahugeriskthatnotonlyonevehiclecanbetamperedwithbysomeindividual,

butthatthousandsormillionsofvehiclescanbetamperedwithinsomehorrificwayand

that’sapartoftheequationthatIthinkneedstobeaddressedandpossiblypartof

insuranceregulation.Thankyouverymuch.

INSURANCECOMMISSIONERDAVEJONES:

Thankyou.ThatwastremendouslyhelpfulandIreallyappreciateeachandeveryone’sof

yourinsightandperspectiveonthisissue.Onequestionthatimmediatelycomestomind

fortheinsurersonthepanelhastodowiththesemi‐autonomousfeaturethatare

currentlyavailableonanumberofmakesandmodelssuchasadaptivecruisecontrol,

laneassistance,parkingassistance,accidentavoidance,driverfatiguedetection.I’m

watchingcommercialseverynightthatshowsomeofthesetechnologiesandhowthey

canavoidcollisionsoravoidpeoplerunningoverpeoplethathaveselfparkingfeature,

etc.I’mwondering,ifyouknow,ifMs.SchwambergerandMr.Gilbertcansharewithus

howthosefeaturesareincorporatedintoratingcurrentlyinhereCaliforniatotheextent

thattheyare,howdoyouinsurancecompaniescurrentlytakethoseintoaccountand

howarethosehandled.

CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:

I’llgiveitashot.

44

INSURANCECOMMISSIONERDAVEJONES:

Thanks.

CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:

Thosearetakenintoaccountthevehiclecharacteristicsandthosesortsofsemi‐

automatedfeaturesanditgoesbackto,asmanyofushassaid,lookingattheloss

experiencewedon’tsay,thiscarhasthistechnologythereforetherateshouldbe

adjustedinaparticulardirection.IthastobebornoutbyourlossexperienceandI

haven’tseenallthedetailsandMichaelmayknowinanaggregatefashionbutIdon’t

knowiftheyareallprovingtobeeffectivejustbecauseitexists,youknow.The

technologyisimproving;manydifferentautomakershavemanydifferentkindsof

technology.IthinkfromwhatI’veheardandyoumayknowthisbetter,therehavebeen

problemswiththelanekeeping.Itsoundslikeagreatidea,theblindspotdetection,butit

canbetoosensitiveandcausethedriverstoultimatelyignoreit.Thereisalotofhuman

machineinteractionthatplacearoundthistechnologybuttoansweryourfundamental

question,welookatourlawsuitexperience,welookatthedata,andifitsjustified,we

maketheadjustmentsthatwecanmakedependingonthestatelawsinanygivenstate.

INSURANCECOMMISSIONERDAVEJONES:Great.Nationwide.Mr.Gilbert.MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:IwouldechothesamecommentsthatCathyhasmade.Rightnowwewouldbebasing

thisonlossexperienceandhowthoselosses,whentheyoccur,howlongtheyoccur.I

thinkoneoftheissuesisthatthisissonew,thereisnotalotofexperienceoutthereyet,

45

therearealotoffactorswedon’tknowyetthataregoingtoinfluencethat.Mostinsurers

aregoingtheusingsomesortofVINidentifiertoratevehiclesandthetheorywouldbe

thatthosedifferenceswouldbepickedupinexperienceovertime,soiftherewasa

significantdifferenceinmodelAvs.modelBthatyouwouldseethatovertime.Wewould

accuratelybeabletoadjustourratesforthat,whichiswhyoneofmypointsit’svery

importantforustonotonlybeabletoidentifythevehicles,identifythefeaturesthatare

inthembecausethemarketcouldhavevehiclesatalldifferentstagesinthespectrumon

theroadatthesametime.

INSURANCECOMMISSIONERDAVEJONES:

Mr.Stienstra,doyouwanttoaddsomething?

1:31:58‐MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Thanks.So,acouplecommentsonthat.First,VINdoesn’tinclude,especiallywith

optionalfeatures,ifyoulookatBMW,Mercedes,sometheyhavesomeoftheseoptional

automatedbreak‐insystemsandtheVINwillnotincludethatinitsequation.HILDIhas

doneanumberofstudiesonthissemi‐autonomousandwhattheyhavehadtodoisgoto

themanufacturersandgivethemalistofVINSandgetthenwhattechnologyisonthat

vehicle.Thesecondisthat,whenyouareactuallycomingupwiththevehiclesymbol,

whichishowthesearemostlyrated.Whenyouthinkaboutanindividualvehicle,itis

verysmallcredibilitywise.So,howmanyS‐classesaresoldintheUnitedStatesandifthe

2014Sclassesisn’tlikethe2013,thenthatcausesanissue.Typically,insurersusetwo

factors:theyusethebodytypestyle,andthenthepreviousyear’ssymboltostart

estimatingwhatthatvehiclesymbol’srelativityshouldbe.Whenyoustartlookingat

46

automatedvehiclesandthistechnology,oneofthemajorissuesisthattheyarenotthe

same.So,Volvosautonomousbreak‐insystemwillbringyourcartoastopifyouare

travelling,Ithinkit’sunder19milesanhourwitha9milehourdifference,theymightbe

improvingonthat.FromwhatHILDIhasfoundthattheBMWs,atleasttheirolderones,

willnotstopyourcarifthevehicleinfrontofyouhasstopped.Itwillonlybringyourcar

toastopifyou’retravellingandthecarinfrontofyouistravelling.IthinkHondasystem

isnevermeanttostopthevehicle,buttoslowandreducetheseverity.Sounlessinsurers

getbetterdataintermsofwhatthetechnologyactuallyis,howtoidentify,andhowto

priceit,wemightbecomparingthecurrentday’smodelwithlastyear’smodel,whichis

nolongerapplicableortryingtogroupitwithothermodelsthathaveverydifferentgoals

inmind.Evenifyourollinfullyautonomousfeatures,it’sgoingtotakealongtime,even

iftheyareperfect,justbecauseofthewaythecredibilityisandthewayweactually

analyzethedata.Whilewearestillthisseparateentity,tryingtogetdatafrom

manufacturers,tryingtounderstandit,wehavetogothroughHILDEandIHSanddoall

thiscleanuptothedataandontopofthat,themostrecentstudythatHILDEcameup

waslanekeepingaboutayearagoandfoundthatitactuallyincreasedaccidents.I

thoughtthatitmightbesomenoiseinthesystem,buttheyjustdidafollowupandnow

theysay,combinedwithautonomousbraking,itactuallyreduces.Thereisgoingtobea

lotofnoiseinthesesystemstoo,especiallywithearlyseveritywhereIdon’twecanreally

saywhattheimpact’sgoingtobeorhowit’sgoingtoflowthroughtotheratesuntilwe

getbetteranswersontheliability,wegetbetterdataonwhatisactuallygoingonand

47

howitisimpactingchanges,andhowpeopleareactuallyusingit.That’stoanswersome

ofthoseissues.

INSURANCECOMMISSIONERDAVEJONES:

EachofyouIspokeittothecriticalneedformoredatainvariousways–onechallenge

wefaceisthatthedata,whichisgeneratedbythosethataredoingresearchand

developmentonfullyautonomousvehiclesorpartiallyautonomousvehiclesmaynotbe

somethingtheywanttoshareandtheymayhaveavarietyofreasonsfornotwantingto

shareandnotwantingtosharetoosoon.ThereisarequirementinstatelawnowthatI

guesswastestifiedtobytheDeputyDirectoroftheDMVthatthevehicleshavetheability

torecordatleast30secondspriortotheaccidentandthatwouldapparentlybe

reportabletoDMV,butthenanumberofyouhavespokentotheissuewhetherinfactit

wouldbereportabletoothers,likeinsurerssothattheycouldusetheinformationand

thencorrespondinglyinCaliforniawehaveregulationsthatlimittheabilitytocollect

informationfromindividualdriversaswelltoMr.Holobertestifiedtosomeoftheprivacy

reasonsbehindthat.It’sabitofapuzzle.Mr.Stienstra,youalsosaidthattherearesome

intermediatecollectorsofdata,whichIguessgooutandgetdatafromR&Dor

manufacturersaggregatesomewayanditcanbeusedbyinsurers,butthereissomelag

timeassociatedwiththat,thereisalotofnoise,credibilityissuesassociatedwiththat

too,ifIunderstoodyourtestimonycorrectly.

MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Yeah,forthemostpart.LotsofthedatacomesfromStateFarm,Nationwide,actually

supportHILDE,theyaremembersandtheyreportdataandthentheycandotheirown

48

studiesoffofthatbutitisbecausetheinsuranceindustry,somanymembersareof

HILDEandIHS,soitcomesthrough.

INSURANCECOMMISSIONERDAVEJONES:

Theyarecollectingdataaboutparticularvehiclesorinsomecase,particularfeatureson

vehiclesbecauseeachofyouhaveexplainedthecomplexityassociatedwiththefactthat

someofthesefeaturesarenotimmediatelyidentifiablebasedontheVINonthecar.It

causesmetowonderonaregulatorystandpoint,whetherit’smyDepartmentorDMVor

someentityoughttobethinkingaboutisthereawayforustogathermoredataupfront,

tomakethatinsomewayapreconditionofgettingapermit,alicense,andaggregatethat

datainsomeway,soitdoesnothavenecessarilyimpactsonthe,sortof,theproprietary

interestsoftheentitiesthataredoingtheR&Danddoingthemanufacturingthecars,

nonethelessisdatathatisavailableearliertoinsurancecompaniesforpurposesofrating.

I’mjustinterestedinfolk’sreactiontothatasaconcept.I’msurethatthereisaallsortsof

flawswithit,butI’mjustcurious,thatorotherwaystocollectmoredataearliertogive

insurancecompaniesabetterabilitytorate.MaybewecanstartwithMr.Petersonandgo

downtherow.Ifyoudon’thaveacommentonit,that’sfinetoo.

PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,UNIVERSITYOFSANTACLARA:Idon’tknowifthereisanotherwaytogetdata.Iwouldthinkthatinrespecttotheblack

box,those30secondsweshouldn’tbeoverlyconcernedaboutprivacyforexample,

becausetherehasbeenanaccident.Oncetherehasbeenanaccidentyourprivacy

interestgooutthewindow,youcouldbedeposed,youcouldbesenttointerrogatories,if

thereisacriminalinvestigationthatcouldbeseizedwithasearchwarrant,sothatisa

49

wholedifferentmatterformgatheringdatawhileyouaredrivingaroundgenerally.If

thereissomeimpedimenttousingthatlastdriving30secondsnow,Iwouldthinkit

wouldbegoodinyourbailiwick,togetridofit.

INSURANCECOMMISSIONERDAVEJONES:

I’mnottheLegislature.Ms.Rowen.

HILARYROWEN,PARTNER,SEDGWICKLLP:Idon’thavemuchtoaddbutIthinkitis,yourcommentshadtwocomponents,couldwe

getdataearlierandcanwegetcleanerdataandIthink,I’mskepticalabouttheearlier

becausepushcomestoshove,youhavetohavetheaccidents,youhavetohavethe

insuranceclaimsbasicallyinordertohavethedata.CleanerdataIthinkissomethingis

somethingthatIthinkalotofinteractivediscussionsbetweentheDepartmentandthe

DepartmentofMotorVehicles,automanufacturers,andinsurers,andmaybesomething

thatgetspickedupattheNAIClevel,wouldbeusefulbecauseyoureallyaren’tgoingto

beabletopriceinawaythatcapturesthestaplefeatureifinfact,youcan’tidentifywhich

carshavethem,evenifyouhavegottentothepointwheretheactuariesareatleast

willingtodoa,“I’mgoingtolickmyfingerandstickitintheairtoseewhichwaythe

windisblowing”estimateofwhattheratesare.

INSURANCECOMMISSIONERDAVEJONES:

Whattheycallactuarialjudgment.Thanks,Ms.Rowen.Youcanhaveequaltime.

MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Ihavetwocommentsonthedata.Thefirstisthatit’sgoingtotakeawhiletoevenknow

whatdataweneed.Peopletalkaboutaccidents,rightnowautoinsuranceisaveryhigh

50

frequencylineofbusiness,whichiswhyaccidentsiswhatyoulookat.Inthefutureyou

maybelookingatincidents,numbersfortesters,howoftendidtheyhavetotakeover,or

didthecaralmostgetintoanaccidentandwhileinsurersdon’thavegooddatainthe

aggregate,telematicsisleadingtowardsbetterunderstandingofhowdriversactually

driveandwhatisanaverageincidentrateatwhichthedriverhastoavoidortakeevasive

measures.Whateventhebenchmarkshouldbecomparingto,wedon’tknowyet,we

don’tknowhowweshouldbelookingatthedataandit’sgoingtotaketime.Specificto

California,youguyshavegonefurtherintermsofyourDMVregulationsbyrequiringall

incidents.I’mgoingtobetheactuaryandsaythatwhatyouarerequiringisnotenough,

knowingthenumberofincidentsandtypesofincidentsdoesnottellmeanythingabout

therisk.Ineedtoknowabaseline–Ineedtoknowhowmanymilesareyoudriving,

whattypeofmiles,whereareyoudriving,thefactthatonecompanyhas10,000

incidents,andanotheronehas100,doesn’tmeanthatCompanyAisriskierortheir

productisworsethancompanyB.Ineedtoknowmoreaboutittoactuallycomeupwith

acalculation.Thereareprivacyconcerns;therearetheseissues.Myhopewouldbethat

thesecompanieswouldwanttoprotectagainstanunsafecompanyrushingaproductto

market.Andifyoucanfindawayaroundtheprivacyissuesandprotecttheirknowledge

aboutworkingwiththeinsurerstosee,wecan’ttellanythingyet,thisdatalooksokor

doesn’t,it’ssortofaniterativeprocessthatmighthelpalleviate,whilestilldrivinghome

whatactuarieswouldliketoseeintermsofdataacquisition.

INSURANCECOMMISSIONERDAVEJONES:

51

Beforewegoon,Iwanttogiveeveryoneachance,butyoualsosuggestedthatweengage

withmanufacturersandotherstoengageinsometypeofrobusttesting.I’mwondering

youcouldfleshthatoutalittlebitaboutwhatyouhadinmindbeforewemoveontothe

othersabouttheissueofdata.

MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Iguessitwouldbetwofoldagain.One,youhavecompaniescomingoutsayingthatthis

productissaferorit’snotassafe.Thequestioniswhereisthedata.Whatare

manufacturersdoing,whatarethesetests,Ithinkeveryoneworksinsomewhatofasilo,

andtheyunderstandtherisksandtheyknowwhattheyaretestingfor,butthereare

goingtobeahugeamountofmodelrisks,thechancethattheirmodelthattheyareusing,

whileitmightbetrueofhistoricalclaims,isnotgoingtobeaspredictivegoingforward

andasimpleincorrectassumptionoritcouldactuallychangebehaviorlikemortgage

backsecurities,themodelswereextremelysafe,andtheyweredefinitiveanditwasa

beneficialproduct,butappearanceofsafetychangedinthewaypeopleactuallywrotethe

product,thewayitwasappliedandhowitexpandedintowhatiteventuallybecame.In

termsofinsurers,thefolksonpersonalinsurers,whichIthinktheyhavethebestdata,

theyaregoingtohavethebestunderstandingbutitcantakeonesimpleaction–ifone

manufacturerdecidestoremovethesteeringwheel,removethebrake,andtheycan

provethatitissaferandthentheyrollitoutintothecityasaliveryvehicle,thereisno

questionthatitiscommercialinsurance.Theycangoaheadandtakealltheriskandwhat

doesthatmean.Thereisabalancebetweenpersonalandcommercialinsurersbuthaving

workedatboth,neitheroneisgoodatwhattheotheronedoes.Commercialinsurers

52

don’tcompeteverywellagainsttheStateFarms,theNationwides‐thebestpersonalauto

insurers.Andthepersonalautoinsurershaveverysmallmarketoftheoverall

commercialspaceandsoifyouwanttoshiftthebalanceandseewhereitisgoingtofall,

onewouldbenon‐admittedexcessliability.Manufacturerstypicallybuynon‐admitted

excessliability,whichmeanstheirfirstmillion,hundredmilliondollarsisself‐insured.

Thisisn’tgoingtoafirstdollarloss,thisisactuallygoingtothemanufacturerwhois

saying,youknowwhat,I’mnotgoingtosettlethisclaimquicklybecauseI’mnotpaidor

reimbursedtosettleclaimsI’mdowntomanufacturercars,thoughthecostoftherecallif

thatisgreaterthanthenumberofsettlementsandtheaveragesettlements‐it’sa

differenteconomicequationthaninsurerswhoactuallyreimbursedandtheirbusiness

modelisbuilton,settlingclaimsquicklyandfairly.So,thatfirstdollarthatcomesto

liabilityhasverydifferentimpacts,that’swhythereneedstobethisbalancebetween

whatdocommercialinsurersneedtogetcomfortable,whatdopersonalinsurers,and

whatarethemanufacturersdoingwiththeseteststoovercometherisksandapprove

theirsafety.

INSURANCECOMMISSIONERDAVEJONES

Thankyou.Letmegobacktotheearlier,moregeneralquestion:aretherewaysforusto

getdatasoonerandgetdatawithlessnoiseassociatedwithit.

1:44:40‐CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:

IthinkyouroriginalquestionisanideaworthexploringtoseeifthroughtheDMVandin

cooperationwiththemanufacturers,itseemsliketheearliestbest,notperfect,couldbe

thedatathatisgatheredthroughthistestingandcertificationprocessandsoitseemto

53

beworththeconversationwithmanufacturerswhoareparticipatinginthetesting,with

theDMV,maybewithsomeactuarialpeopletoanticipatewhataresomeofthethings

thatshouldbegatheredinthetestingandcertificationprocessthatcouldpavetheway

forinsuringlaterandtoyourpoint–howdowebeproactive,soitdoesseemlikethatis

worththeconversation.AnotherthoughtIhadfromamarketplacestandpoint,itseems

likethedynamicsarethereforeverybodytowanttocooperateonthisbecausetothe

extentthesevehiclesaresafer,Ithinkwearegoingtobeworkingverytoinsurethese

vehiclesoverourcompetitorsandyouwantalloftheminsured,soIthinkthe

Departmentwillbeacollaborativepartnertobeasflexibleaspossiblewithinthe

constraintsofProposition103andallowtheactuariestomakesomereasonable

assumptionsbasedonthedatathatisthere.Soitfeelslikethepartieswouldbeproneto

collaborationbecausetheywanttosellit,wewanttoinsureit,youwanttoseeitinsured

‐thatcoulddrivethecooperation.

INSURANCECOMMISSIONERDAVEJONES:

Thankyou.Mr.Gilbert.

MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:

Yeah,Iagreethatoneofthebiggestconcernsisdataandhavingdataandknowingwhat

todowithit.Withthenotknowingofthefuture,anytimeanassumptionismadeabout

doingthis,willhavethisoutcome,therearealwayssomanydifferentvariablesthatplay

intothatthathowdoyouknowhindsightisalways20/20.Idothinkifweweregoinggo

acollaborativewaywhereweareallpoolingourdatatogetherandbeingabletolookat

other’sexperiences,andworkcloserwiththemanufacturers,Ithinkthatthatwouldat

54

leasthelp.Idounderstandthatisaconcern,whereatechnologydevelopermightnot

wanttoreleaseinformationaboutitssafetyfeaturesforfearofhavingacompetitorkind

ofcuttinginontheirbusinessthere,Idothinkatleastfromtheperspectiveofcollecting

thedata,Ithinkifthereisrelevantpointsofthetechnologydifferences,theycanfilter

intothedataandshouldavailabletobeused.

INSURANCECOMMISSIONERDAVEJONES:

Thankyou.Mr.Holober.

RICHARDHOLOBER,EXECUTIVEDIRECTOR,CONSUMERFEDERATIONOFCALIFORNIA:Iagreewiththelastfewcommentsregardingthevalueofgettingearlydatafrom

developers.Iimaginethattherearewaystosafeguardtradesecretkindsofissueswhen

thatdataisgatheredbutitdoesmakesensetocollaborate.Oncetheseproductsareon

theroad,datacollectioncontinuestobeveryimportantbutIthinkitcanbedoneinways

thatprotectpersonallyidentifiableinformationisaggregatedinmanyareasandcanbe

donehereaswell.

INSURANCECOMMISSIONERDAVEJONES:

LetmeseeifMr.ShultzorMs.Volkmerhaveanyquestions.

CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Thankyou,Commissioner.Idohaveonequestion.SomyiPhonehas20applicationsthat

arewaitingformetoupdatethembutIhaven’tgottenaroundtoityetbecauseIdon’t

haveagoodwificonnection.Whatifadriverfailstoupgradeordownloadthenewest

upgradefromthemanufacturers?Isthereananalogyinthefailuretomaintainthe

55

vehicleinaproperworkingcondition?Iwonder;Mr.Gilbertwouldyoumindtakingiton

andothersiftheyhavethoughts.

MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:

Yeah,IthinkIbroughtthatupasoneoftheunknowns,youdon’tknowwhatpeople’s

patternsaregoingtobe,therecouldbeasituationwhereoneortwovehiclesownersof

thesamevehicle.Oneofthemisgoingtobemuchmorediligentindoingthatandone

mightnotevenknowtheyneedtodoanupdateandmightassumesomething,Inthat

case,Icouldseeasignificantdifferencejustintheperson’s‐howtheownerofthat

vehicleismaintaining.Thenthatcomesalongwiththequestionofwhatismaintaining–

isdownloadinganduploadingmaintainingandautomobile?

CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Anyoneelsehavestrongthoughtsaboutthat?PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,UNIVERSITYOFSANTACLARA:Ithinktherearewaystohandleitwhereyoudon’trelyonthediligenceoftheowner.

Googlecarforexamplewillnotengage,asIunderstandit,inself‐drivingmodeuntilithas

receiveditsdailydownload.Youcandriveitaroundbutitwillsay‐masterIamnot

readytoengageinself‐drivingmode.Ithinkitwouldbeverydangeroustorelyonthe

diligenceofdriverstodownload.Youhaveacomputer,Ihaveacomputer,Inoticeitall

thetime,allthisstuffhastobedownloaded–I’mbusy,Idon’tdoitandIthinkdrivers

willbeexactlythesame.

HILARYROWEN,PARTNER,SEDGWICKLLP:

56

IthinkyouhaveraisedaninterestingquestionthatIhavenotyetseenmuchaddressed

becausewearesofocusedonwhenwilltheyenterthefleet,butthereisalsothequestion

ofwhenwilltheyexitthefleet.Inotherwords,asidefromthedownloadfeatures,thereis

alsothequestionofwhendothesensorshitthepointwhereyoustartgettingsporadic

failurejustbecauseparticularlysaytheyareinsaltyenvironments,winterydriving,

stressfulconditions.Youaregoingtohaveawholesetofissuesthataregoingtoariseas

youhaveafirstandsecondgenerationLevel2andLevel3andLevel2.3carsstartexiting

thefleetorstartreachingthepointwheretheygo–shouldIrepairitorreplaceit–and

youaregoingtohaveaccidentsandequipmentfailurenotthekindwearesortof

thinkingofthroughmostofthishearingtoday,butsortofasoftermalfunction.Gee,you

failedbecauseitstartedtorustout.Thatisfurtherdowntheroadquiteliterally,butis

somethingthatinsurers,DMV,theDepartmentofInsurance,automanufacturers,even

bodyshopsaregoingtohavetodealwithasthisnewgenerationofvehiclesstarttoage

out.

INSURANCECOMMISSIONERDAVEJONES:

Okay,well,youhavegivenusalotoffoodforthoughtandthatreallyisthepurposeof

thisistoreallyunderstandthecomplexityoftheissueswefaceandbeprepared.Weare

goingtohaveachancetohearformthemembersofthepublicbutbeforewedo,I’ll

probablyreiteratethis,wehaveauniqueopportunity,giventhatthedegreetowhich

thesetechnologieshaveenteredthemarketissomewhatlimitedrightnow,totrytodo

thebestwecantogetthepublicpolicyresponserightatthefrontasopposedtotryingto

reactatthebackendtothetechnologybeinginthemarketalreadyanditraisingahostof

57

insurancequestionsandonesthatfranklyhaven’tbeenansweredandtherehavebeen

examplesofothertechnologieswherethathasoccurredandtherehavebeenfatalities

evenandtheinsuranceandliabilityissueshavenotbeenworkedout.Wehavesometime

although,giventheexcellenceoftheengineers,scientists,andentrepreneursinSilicon

Valley,California,wedon’thavealotoftimetofigurethisout,butI’mconfidentthatwith

thepartnershipwiththeR&Dfolksandthemanufacturersandthecompaniesand

entrepreneursinterestedinthis,aswellastheinsuranceindustryitself,consumer

groups,theacademy,andveryablelawyerswecanhopefullyfigurethisout.Ireally

appreciateyoursharingofyourinsightsyou’vegivenmealottothinkabout,Imadevery

copiousnotesandIplantowatchthisseveraltimesbecausetherehavebeenalotof

complexityandnuanceinwhatyouhaveofferedandIhopeyouwillmakeyourself

availabletousifwehaveadditionalquestions–Iandmystaff,theDMV,orother

Californiaagenciesasweworkourwaythroughthis.Thankyouverymuch.Ithinkwe

areexcusingthispanelandallowmembersofthepublictocomeforwardiftheywishto

becenterstageandtestifyforamoment.Thankyouverymuch,weappreciateit.Idon’t

thinkwehaveasignupsheetformembersofthepublicwhowishtotestify,butIthinkif

therearemembersofthepublicwhowouldliketotestifythisisyourmomenttodoso

andperhapsyoucancomeuponebyoneandidentifyyourselfandyouraffiliationifyou

haveone.Intheinterestoftimewecanonlygiveyouaminute,weaskyoulimityourself

tothesubjectofthepublichearing,whichisalwaysagoodreminderatapublichearing.

Itisanopportunityforustohavepeoplewhoweren’tonthepaneltosharetheir

thoughtsorinsightssowewanttogivethosefolksachancedothatatthistimeandthey

58

candothatrighthere,ifyouaresoinclined.Youhaveanynumberofmikestochoose

fromsodon’tbeshy;Iknowthisisn’tashygroup.Yes,hi.

KATHLEENBISSELL,LIBERTYMUTUALINSURANCE:

ThankyouCommissioner,thisisagreathearing.IlearnedalotandIjustwantedto

sharewithyouthatmynameisKathleenBissellandIrepresentLibertyMutual

insurance.WeareaBoston‐basedcompanyandourfolksatthehomeofficearevery

interestedinthesubjectandI’vetakencopiousnotesthatIwillbereportingbackto

them.Myquestionisourteamofpeoplewhoarelookingatthisclosely,whotheycan

contactattheDepartmentforfurtherconversation.WouldthatbeChris?Wouldthatbe

you–whoeveryouassign.

INSURANCECOMMISSIONERDAVEJONES:

IthinkI’mgoingtoofferupChrisandChrisisgoingtoofferupSummer.

KATHLEENBISSELL,LIBERTYMUTUALINSURANCE:

Ijustwanttomakesurewehavethatoutthereforfurtherconversationbecauseweare

veryexcitedaboutthistopicaswell.

1:55:50‐INSURANCECOMMISSIONERDAVEJONES:

WeareveryappreciativethatLibertyMutualisparticipatingandthankyouforbeing

involvedinourpublicpolicyconversationsaswell–appreciateit.Others?Iwon’tcall

anyoneout–IdorecognizeafewfolksfromtheindustryherebutIwon’tcallanyoneout.

Iwanttogivefolksonemoreopportunitytotestifyiftheysowishoridentifythemselves

iftheysowish.Ok,Idon’tseeanyonerushingtothemike.Verygood.WellIwantto

thankourpanelistswhotooktimefromtheirbusyschedulesinSiliconValleyattheTech

59

Museum.IwanttothanktheTechMuseumforaffordingusthisbeautifulspaceand

opportunitytoholdthishearing.Iwanttothank,inparticular,mystaffwhoworkedso

veryhardandablytoputthistogether,inparticularIwouldliketothankKathySnell,

LisaStrange,PatrickStorm,MadisonVoss,ReginaWright,GilBelcher,KevinBrown,

FrankMorra,PraneetMaharaj,NimraSyed,andAlisonCastroandalsoDeputy

CommissionerShultzandMs.VolkmerforalloftheirhardworkandI’msureI’veleft

someoneelseoutfrommyteam,Iapologize.Alotofworkwentintopreparingthe

backgroundmaterials,makingsurewehadpanelsandorganizingthishearing.Iwantto

thankthepanelistsaswellagain,fortakingthetimetoshareyourviewsandinsights.I

thankourpartnersattheDepartmentofMotorVehiclestoo–theDirectorandthe

DeputyDirectorandstafffromDMVwhoareworkinginconcertwithus.I’mleftwith

thoughtsaboutthegreatpotentialofthistechnologyandwhatitbodesintermsof

potentiallyreducingtheincidentsofhumanerrorandtheoperationofvehiclesandthe

potentialtoreduceaccidents,fatalities,andinjuries–IthinkthatisveryexcitingandI

thinkhereinCalifornia,weareattheleadingedgeofthisasweareinsomanythings.We

havecompanies,entrepreneurs,engineers,scientistsworkingthistechnologyaswe

speakhere,perfectingit,hopingtomakeitavailabletoCaliforniaconsumers.Atthesame

time,wehaveveryrobustinsurancemarketsandveryableinsurancecompaniesthat

meettheinsuranceneedsofbothcommercialentitiesaswellasindividualsandfamilies

andasthestate’sinsuranceregulator,it’smyresponsibilityinconcertwithotherstate

agenciestomakesurethatasthistechnologyemergesandasitbecomesmoreavailable

toCaliforniansthatconsumersareprotectedandwehavethat.Iwasdelightedtohear

60

fromtheinsurersthatparticipatedthattheyareexcitedaboutthetechnologytoo,they

supportthetechnology,andareforwardtowaystheycanofferinsuranceproductsto

Californiaconsumersconsistentwiththeentryofautonomousvehiclesintoourmarket,

orpartiallyautonomousvehiclesinourmarketaswell.That’sgoodnews.Wehavealot

ofthingstofigureout,nottheleastofwhichishowmuchsaferdoesthisreallymake

driving?Whoultimatelyisandwillberesponsible?Howwillinsurancebepriced?What

datawillbeavailabletohelpusinidentifyingthatpricingifyouwill?Aswell,what

interpretationsormodificationsofregulationswillbeneededtoaccommodatethisnew

technology?That’sthetaskinfrontofus.Ididn’tsetoutinholdinganyexpectationthat

wewouldanswerallthequestionsbutIthinkthetaskofposingthosequestionshelpus

begintochartapathtobegintoanswerthemandIlookforwardtodoingthatinconcert

withallofyouwhoarestakeholdersinthisprocess.Thankyouverymuchforyour

participationandwelookforwardtoidentifyingtheappropriatepublicpolicyresponse

andsupportingthistechnologyandithopefullymakesCalifornia’sroadssaferandmakes

drivingsaferforCalifornians.Thankyou.Withthatweareadjourned.Thankyouagain.