December 15, 2016

Gary C. Wang, FCAS, MAAAMichael K. Chen, FCAS, MAAA

Autonomous Vehicles and Their Impact on the Insurance Space

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About Presenters

• Gary C. Wang, FCAS, MAAA• Consulting Actuary• Bloomington, Illinois• Pinnacle Actuarial Resources, Inc.

• Michael K. Chen, FCAS, MAAA• Consulting Actuary• Des Moines, Iowa• Pinnacle Actuarial Resources, Inc.

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• Introduction

• Level of Autonomy in Today’s Driving Environment

• Impact of Growing Autonomy

• Legislative Actions

• Consumer Response

Agenda

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Categorization of Autonomy

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Categorization of Autonomy

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• All new cars will include backup cameras by May 2018

– Prevent backover accidents

– Eliminate blind zone

– Parking

Backup Cameras

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• A 2022 deadline to voluntarily make automatic emergency braking (AEB) standard on nearly all new passenger vehicles has automakers vying to get the crash avoidance technology into their models before their competitors.

Automatic Emergency Braking

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Always

Almost Always

Sometimes

Polling Question #1

How often do you use cruise control on the highway/interstate?

Almost Never

Never

A

B

C

D

E

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• Driver comfort and compliance with speed limits

• Based on a series of trials on simulators with a group of 90 drivers of varying ages, researchers found that episodes of drowsiness increased by 25% when participants were using a cruise control, compared to test groups that didn’t use them

• This study also found that reaction time to emergencies was lengthened by one second on average, corresponding to an extra 131 feet when the car was traveling at 80 miles per hour.

Standard Cruise Control

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• Among the lane-drift crashes studied by IIHS, incapacitation reportedly played a role in 34 percent of collisions and 42 percent of crashes resulting in fatal or serious injuries.

– Asleep, suffering a medical emergency, or blacked out due to drug or alcohol use

• Lane-keeping assist systems will need to do more to prevent crashes than simply nudge vehicles back into their lane.

Lane Drift Crashes

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• Prior Highway Loss Data Institute (HLDI) studies have indicated that some collision avoidance systems are reducing insurance claims.

• Initial evaluations of forward collision warning systems estimated reductions in bodily injury liability claim frequencies of 4–9 percent.

• Systems that provided autonomous braking reduced bodily injury liability claim frequency by 14–32 percent.

Forward Collision Warning Systems

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• Uber has launched its first self-driving services in Pittsburgh and San Francisco.

• Experience described as both “thrilling because of the implications for the future of transportation” and “mundane because it was like driving with your overly cautious grandmother”.

• While Uber says the goal is full autonomy, the company admits the technology is not there yet. Occasionally, the safety driver will have to take control.

Uber Autonomous Cars

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• Intel has been moving fast to catch up in the quickly-evolving autonomous driving market by setting aside $250 million to invest in autonomous driving startups.

• Automotive suppliers Delphi and Mobileye announced a partnership that would be taking advantage of Intel silicon chips. Intel plans on announcing a new processing chip made specifically for autonomous driving.

• Other chipmakers like Nvidia and Qualcomm have a multi-year head start on Intel in the autonomous driving market. Tesla announced its Autopilot 2.0 in all its cars would be powered by Nvidia's Drive PX2, a computer that Nvidia says can deliver 24 trillion deep learning operations per second.

Competition in Processing Chip Market

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• The European Platooning Challenge (ended April 6, 2016)– Six starting European locations

• Scania – Södertalje, south of Stockholm (longest route, at over 2,000 km)

• Volvo – Gothenburg

• Daimler – Stuttgart

• MAN- Munich

• IVEOC – Brussels

• DAF – Westerlo, Belgium

– Ending in Rotterdam (APM Terminals, Maasvlakte II in the Port of Rotterdam)

• The platoon formation– Vehicle controlled acceleration and braking

– Driver controlled steering

Commercial Auto – Highlights from the Year

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• Michigan – Military Test (June 23, 2016)

– Lapeer and St. Clair counties

– I-69

• Vehicle-to-vehicle and vehicle-to-infrastructure radio communications

– Conceptually necessary components of networked autonomous driving environment

Commercial Auto – Highlights from the Year

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• Colorado – The Otto-Budweiser Test (October 20, 2016)

– Fort Collins to Colorado Springs, through downtown Denver

• 120 mile stretch on I-25

• 55 miles per hour

– Utilizes cameras, radar and LIDAR sensors

– Automated acceleration, braking and steering

Commercial Auto – Highlights from the Year

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• “All Tesla cars being produced now have full self-driving hardware”

– The Tesla Team, October 19, 2016

• All vehicles will have hardware necessary for full self-driving capability

– Eight surround cameras

• 360 degree visibility

• 250 meter range

– Twelve ultrasonic sensors

– Forward-facing radar with enhanced processing

• Capable of “seeing” in difficult environments

• Plan to run in “shadow” mode for data collection

The Dawning of Full Autonomy?

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Automating Driving – Benefits

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Virginia Tech Transportation Institute Study

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• Increases in Annual Mileage: Exposure to accidents increases as people drive more. The density, or exposure of more vehicles in proximity to one another, also rises.

2,600,000

2,700,000

2,800,000

2,900,000

3,000,000

3,100,000

3,200,000

Travel in Millions of Vehicle MilesAll Roads and Streets

Contributing Factors to Increasing Loss Costs

Source: https://www.fhwa.dot.gov/policyinformation/travel_monitoring/15augtvt/page2.cfm

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• Distracted Driving: Many drivers admit to unsafe driving behaviors. As interactive technology pervades our society, the distraction it brings may lead to increased frequency and severity.

Contributing Factors to Increasing Loss Costs

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• The high cost of repairing modern safety technology

Contributing Factors to Increasing Loss Costs

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• In general, automated vehicles will operate mainly on interstates since these roads pose fewer challenges to automated systems.

• In 2014, about 33 percent of vehicle miles traveled were on interstates, the safest roads per mile driven.

• If all interstate miles were logged by autonomous vehicles and none of them crashed, the maximum overall benefit would be 17 percent fewer crash deaths and 9 percent fewer crash injuries.

Initial Impact of Automation

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• IIHS researchers conducted a recent observational survey observing vehicles brought in to Honda dealerships for service

• All but one of 184 models equipped with the two features had forward collision warning turned on

• Only a third of vehicles had lane departure warning activated

Will New Features be Used?

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Owner

Operator

Passenger

Polling Question #2

Who should be primarily liable for semi-autonomous car accidents?

Manufacturer

Other

A

B

C

D

E

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• Eight states and Washington D.C. have passed legislation related to autonomous vehicles

– California, Florida, Louisiana, Michigan, Nevada, North Dakota, Tennessee, Utah, Washington D.C.

• Since 2012, 34 states plus Washington D.C. have considered legislation related to autonomous vehicles

• Common themes

– Definitions

– Scope of allowance and prohibition

– Directives and authorizations for studies to certain agencies

The State of State Legislation

Source: http://www.ncsl.org/research/transportation/autonomous-vehicles-legislation.aspx

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• NHTSA: Federal Automated Vehicles Policy (September 2016)

• Regarding Insurance:

– States should consider how to allocate liability among HAV owners, operators, passengers, manufacturers and others when a crash occurs…

– …States must determine who (owner, operator, passenger, manufacturer, etc.) must carry motor liability insurance…

– …Determination of who or what is the driver of the HAV in a given circumstance does not necessarily determine liability for crashes involving that HAV.

Federal Regulation

Source: https://www.transportation.gov/AV/federal-automated-vehicles-policy-september-2016

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Protect the driver

Protect the bystanders

Polling Question #3

How should a car respond if it must choose between injuring the driver (no passengers) or three bystanders?

A

B

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• The NHTSA policy outlines the consideration along three objective axes– Mobility

– Safety

– Legality

• The guidance for how the algorithm navigates the potential conflicts is broad, likely by intention– Algorithm should be designed transparently, with input from

• Federal and State regulators

• Drivers

• Passengers

• Vulnerable road users

– Take into consideration the consequence of the Highly Autonomous Vehicle’s action on others

The Ethical Considerations

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• Consumers are torn between the need for safety and the desire for control

49%51%

Consumer Poll on Autonomous Vehicles

I prefer to have a safer roadway for all, even if that means I have less control overmy own vehicle

I prefer to have full control of my vehicle, even if it’s not as safe for other drivers

Consumer Poll on Autonomous Vehicles

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Wait and See

Research

Develop New Rating Variables

Polling Question #4

How do you see your company handling the influx of autonomous vehicles?

Develop New Product (Manufacturer Liability)

A

B

C

D

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Questions

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Join Us for the Next APEX Webinar

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• We’d like your feedback and suggestions

• Please complete our survey

• For copies of this APEX presentation

• Visit the Resource Knowledge Center at Pinnacleactuaries.com

Final Notes

34Commitment Beyond Numbers

Thank You for Your Time and Attention

Gary Wang

gwang@pinnacleactuaries.com

mchen@pinnacleactuaries.com

Michael Chen