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Distracted Driving: What Can You Do?

Posted By Heather Turner, Tuesday, November 12, 2019


PC360 recently spoke with the president of PIA of Puerto Rico and the Caribbean, Carlos Felipe Silén Escudero, about the role insurance professionals play in promoting safe driving behavior.

PC360: Carlos, what are the key risks associated with distracted driving?

Carlos Silén: Safety is clearly at risk. Every day on the road, distracted driving adds to the safety risks drivers have to be aware of and manage.

Let’s look at three 2017 stats from the National Highway Traffic Safety Administration that point out the risks of distracted driving:

  • More than 3,160 deaths in the United States were due to distracted driving behaviors.
  • Nine percent of fatal crashes were reported as distraction-affected crashes.
  • Nearly 600 “non-occupants” (pedestrians, bicyclists and others) were killed in distraction-affected crashes.

What’s causing the most distractions? It’s simple: The phone. You not only see people texting while they drive, but some are watching videos on their phones and using social media. That’s a big issue, especially here in Puerto Rico. It’s why many accidents take place — and not just “fender benders,” but more serious accidents.

It used to just be men shaving or women finishing makeup in the car. Now it’s more than that. People are looking at their screens and not the road.

When drivers text, they take their eyes off the road for an average of 4.6 seconds, sometimes longer. At 55 mph, that means a driver will go about the length of a football field without looking at the road.

And the cars themselves can distract drivers. Maps and navigation systems are distracting, even though the use of a voice navigation system can help.

PC360: Are these risks the same for commercial drivers?

Silén: Distracted commercial drivers present a much, much bigger exposure. Quite simply, the liability is greater because commercial drivers are behind the wheel of bigger vehicles, like trucks and semis. Commercial drivers have a large responsibility.

They also might use handheld phones for navigating delivery routes, increasing their distractions.

Plus, commercial drivers might intertwine work responsibilities and home-life distractions on their phones. Add that to a larger vehicle, and the possibility of having passengers on board, and the risk of injury and liability is much greater.

PC360: How are these risks currently affecting claims for personal auto insurance customers?

Silén: Since there isn’t an exclusion on auto policies for distracted-driving behavior, and drivers are more distracted than ever, we may be seeing higher premiums as a result.

On top of that, in Puerto Rico, we’re seeing a steady increase in auto insurance premiums resulting from the effects of natural disasters.

Furthermore, it’s not easy to reward the responsible driver who is not engaging in distracting behavior. While technology is the largest risk factor in distracted driving, it could also be the remedy [in the form of user-based driver data delivered through mobile devices].

PC360: How are these risks currently affecting claims for commercial auto customers?

Silén: Claims for commercial auto vehicles involving distracted driving can be much bigger. Drivers who are victims of a distracted driver are more likely to file a claim if they are involved in an accident with a commercial vehicle

PC360: What role do independent agents play in combating distracted driving?

Silén: Distracted driving and other risks just make the risk manager’s job that much more important. We can and should help our clients have a better claims experience. The industry needs to find ways to reward customers who are safe on the road, and we as agents can play a key role.

Our responsibility is to help our customers be safe. “Don’t take on risky behaviors” is the message we should give our customers.

We’re in the best position to deliver it. And we might help save a life.

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Encouraging Teens to Develop Safe Driving Habits

Posted By Administration, Wednesday, October 23, 2019


About 3 million teens get their driver’s license each year in the United States, a milestone that comes when young people pass their driving test and are handed their first set of car keys. But that license does not automatically make them a safe or experienced driver. Research shows that the part of the human brain that is responsible for judgment isn’t fully developed until sometime between the ages of 22 and 25, which means that parents should supervise and manage their teen’s driving well beyond their graduation from driver’s ed. 

During National Teen Driver Safety Week, NU PC360 spoke with Joan Woodward, president of the Travelers Institute and executive vice president of public policy at Travelers, about tips that adults can use as their teen begins driving. Woodward is working to reduce distracted driving through the company’s Every Second Matters campaign, which is designed to educate and empower all drivers — including teens — to make better decisions behind the wheel. 

NU PC360: What are some ways to enforce good driving habits among teens? 

Joan Woodward: First, parents should be mindful about their own driving. Teens can pick up a lot of their own driving habits by watching how their parents drive, so it’s important to set a positive example when you’re behind the wheel. Committing to safe driving behavior and using a parent-teen driving contract can help reinforce the importance of safety and make the process more of a team effort. Settings like the iPhone’s “Do Not Disturb While Driving” — something everyone in the family should use — can be a big help to block phone notifications when your vehicle is in motion.

NU PC360: How can parents monitor their teens’ driving habits to encourage learning and improvement? 

JW: Some cars now have smart technology that allows parents and drivers to monitor driving behavior such as speed and hard braking. If the car isn’t equipped with these tools, there are third-party apps that can identify teachable moments and engage teens in the learning process. Some apps even let family members compete to be the safest driver. Regularly checking in with your teen to review the statistics (for both the teen and the parent —remember the parent-teen contract!) and using positive reinforcement can help to encourage good decision-making behind the wheel.

NU PC360: How can teens prepare to handle emergency situations on the road? 

JW: It is an unfortunate reality that half of all teens will be involved in a car crash before graduating from high school, according to the National Safety Council. Before they drive, teens should know what to do in both common situations and unexpected ones. It is important that they always carry their driver’s license. They should know where they can find the car’s registration and insurance card; if and where there is a spare tire; and whom to call in the event of a collision. Keeping an index card in the glovebox with all relevant information along with a pen and paper can help young drivers be prepared and avoid additional anxiety in the event of an incident. 

NU PC360: Are there other ways teens can review the rules of the road to prepare for conditions or situations that might arise when they are behind the wheel?

JW: Not everything can be learned in driver’s education courses, because they probably won’t give students the experience of driving at dusk or at night, or in heavy snow or rain. Practicing real-life situations with a responsible adult will help a teen driver gain confidence and improve their driving skills in poor conditions.

NU PC360: What has Travelers learned since launching the Every Second Matters campaign in 2017? 

JW: A multipronged approach has helped us build awareness, and we’ve learned that we must use many channels to spread the message about the risks of distracted driving. We recently created a video series to convey how a crash can cause someone’s life story to go unfinished. We’ve also hosted local events and conducted surveys to find out how prevalent distracted driving is in each area. Most of our studies indicate that a majority of people use mobile devices while behind the wheel. Many say they need to stay connected to work, family members, or even social media while driving. The truth is, none of those things will matter if a driver gets into a serious crash because they weren’t paying attention. 

Distracted driving is an epidemic that’s mostly avoidable, and the solution to ending it will require a concerted effort to encourage everyone, including teens, to be focused while driving. With guidance and encouragement from parents and caregivers, teens will learn the right driving behaviors from the get-go and be well prepared for their journey ahead.   

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Deaths Due to Red Light Running at 10-Year High

Posted By Victoria Spears, Tuesday, October 8, 2019


The number of people killed as the result of drivers running red lights has spiked sharply in recent years, according to an analysis of crash data by the AAA Foundation for Traffic Safety. And, more often than not (almost 65% of the time), the victim is not the offending driver.

“This disturbing trend impacts everyone on our roadways – drivers, passengers, cyclists, and pedestrians,” said Lori Weaver Hawkins, public and government affairs manager at AAA Blue Grass. “It is critical that all parties understand this increased risk and adjust their behaviors accordingly. While you can’t control the bad behavior of other drivers, you can change your own behavior to minimize risk.”

Statistics indicate that deaths caused by drivers running red lights jumped almost 30% from 2012 to 2017, the most recent year for which crash data is available. According to the AAA, impatient, distracted, and reckless drivers racing through red lights claim at least two lives every day across the United States.

The most recent crash data available shows that in 2017, there were 939 people killed in crashes caused by running red lights — a 10-year high.

“Drivers who decide to run a red light when they could have stopped safely are making a reckless choice that puts other road users in danger,” said Dr. David Yang, the foundation’s executive director. “The data shows that red light running continues to be a traffic safety challenge. All road safety stakeholders must work together to change behavior and identify effective countermeasures.”

According to the AAA Foundation:

  • 28% of crash deaths that occur at signalized intersections are the result of a driver running through a red light.
  • Per capita, Arizona has the highest rate of red light running fatalities, while New Hampshire has the lowest rate.
  • Nearly half (46%) of those killed in crashes caused by running red lights were passengers or people in other vehicles, and more than 5% were pedestrians or cyclists. Just over 35% of those killed were the drivers who ran the red light.
  • Eighty-five percent of drivers said that they view red light running as very dangerous, yet nearly one in three said that they blew through a red light within the past 30 days when they could have stopped safely, according to the AAA Foundation’s latest traffic safety culture index.

The Insurance Institute for Highway Safety (IIHS) found that when properly implemented, red light cameras reduced the fatal red light running crash rate of large cities by 21% and the rate of all types of fatal crashes at signalized intersections by 14%.

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How Often Do YOU Touch Your Phone?

Posted By Kyle Stock, Tuesday, May 7, 2019

Insurers Know!


The distracted driving report by Zendrive, a traffic-data startup, makes it clearer and clearer each year that millions of Americans can’t stop themselves from talking, texting and livestreaming — yes, even using FaceTime — while driving. The results have been increasingly unsettling, showing that drivers in the U.S. are becoming more likely to use their smartphones more often.

The company took the usage data from the tens of millions of cellphones it monitors and combined it with a self-assessment to the same drivers: Are you good at focusing on the road? The worrying verdict: American drivers have no idea how often they use their phones. The most distracted drivers in Zendrive’s sample gave themselves high marks for paying attention, with roughly one-third of the worst multi-taskers considering themselves “extremely safe.”

“It’s just terrifying,” said Zendrive CEO Jonathan Matus. “We’ve built these highly addictive experiences and people can’t help themselves.” Matus should know — he helped design Facebook’s mobile app before launching Zendrive, a service intended to help insurance companies and fleet managers identify bad drivers. Basically, he’s now trying to short-circuit all of the work he did in his previous job to hook us to our phones.

Fully autonomous vehicles that will safely subtract humans, leaving us free to focus on our screens, remain a long way out. The laws that prohibit drivers from touching smartphones are patchy and difficult to enforce. In the meantime, safety regulators, insurance companies and technologists have turned to an incremental fix for distraction: monitoring the driver, not the vehicle. The hope is that awareness may just succeed where policies and penalties haven’t.

The data paints a clearer picture

Zendrive now has its monitoring technology on 60 million phones, roughly one of every four U.S. drivers. TrueMotion, a rival, is tracking distraction and other driving metrics for eight of the top 20 U.S. auto insurers. A third provider, Cambridge Mobile Telematics, monitors distracted driving for 35 insurers, including State Farm.

The reason for all this data is that at least one in five U.S. auto insurance policies now offers a potential discount if the customer consents to a vehicle monitor. Taken together, there’s a very complete picture of the dangerous driving that has led to the 15% surge in annual U.S. traffic fatalities from 2014 to 2016.

Distracted driving is more predictive of an eventual loss claim than virtually any other behavior, including speeding and braking. Those who tend to use cellphones at the wheel have 20% more insurance claims than others in the risk-pool, according to TrueMotion.

Can awareness be enough?

Early indicators suggest simple awareness may be an effective antidote. Cambridge Mobile said distraction levels drop by 35% among participants who check their data regularly. Early trials among those using the ConnectedTravel app show a 40% reduction in phone use; four out of five participants check their driving metrics daily.

The early results point to a market triumph over bad behavior that lawmakers, police and advocacy groups have struggled to deter. Underwriters who are best able to identify distracted-driving tendencies are better able to price the accompanying risk. Most insurance companies still only offer discounts for good cell-phone behavior, but a growing number are using the findings to raise rates on serial tap-and-swipers.

While the proliferation of robot chaperones is encouraging, the data they are collecting is grim. Distraction has increased in every part of the country, despite a rash of new laws intended to curb cellphone use at the wheel. Zendrive said distracted driving levels increased by 10% in the past year. Today, the company considers one in 12 drivers a phone addict — on their phones at least one-third of the time at the wheel — and that measure is climbing fast. At the current rate, one in five will fall into that category within three years.

Tags:  auto insurance  distracted driving 

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Personalizing the Future of Auto Insurance

Posted By Katherine Wellman, Thursday, March 28, 2019


The days of the “one size fits all” model in the auto insurance industry are dwindling as demand for a more personalized experience grows. When shopping for auto insurance, more and more people want to be treated as individuals with unique driving behaviors that vary by contextual situation — not as a statistic. Smartphone telematics, big data and artificial intelligence are making personalized auto insurance more possible today.

Recently, industry newcomer Root Insurance — a start-up that offers customers a personalized auto insurance experience through a model similar to usage-based insurance (UBI) and behavior-based insurance (BBI) — will work towards accelerating this transition with its latest round of funding and a $1 billion valuation. This is one of the largest investments in UBI and BBI, but it won’t be the last. Using innovative technologies, legacy companies with the reach to truly disrupt the industry can offer the same kind of personalized experience as the innovative, younger companies, but with the power to shape the industry’s new direction.

A personalized experience with smartphone telematics

Over the last decade, companies have become smarter. Consumers expect the brands they shop with to know enough about them and their behaviors to offer a personalized, tailored experience. That expectation has now entered the auto insurance industry, and it’s only the beginning.

Customers don’t want to be grouped and rated based on characteristics that have little to do with driving performance such as age, location and gender, and they certainly don’t want to be paying more than necessary when they have a history of safe driving. In fact, 73% of drivers said that they would prefer insurance rates be based on their driving behaviors. Smartphone telematics enables companies to easily receive data that provides insight on the driver’s individual performance — including speeding, hard braking and phone distraction habits — and provides regular feedback to consumers. This allows for rate assessment based on personal behaviors and individuals’ efforts to improve them.

Out of the top 10 largest U.S. insurance providers, nine of them are currently using or testing some form of smartphone-based telematics program. The various use cases include building better risk and pricing models, offering behavior-based discounts and/or rewards, and providing feedback and gamification to motivate customers to become better drivers. The personalization does not end with rates and rewards, however: telematics data enables additional insurance services to enhance the customer experience.

The next step in personalization

When insurers use technology to understand and offer a personalized experience to their consumers, they are better equipped to engage with drivers in their moment of need. Using telematics data, insurers can assess not only driving performance, but also vehicle crashes — one of the major reasons for communication between an insurer and driver today. When an accident occurs, it takes time and energy to compile and review all of the incident details, assess damage and provide cost estimates. In a time when consumers expect exceptional customer service and attention, streamlining the claims process gives insurers the opportunity to quickly respond and support their customers in a typically bleak circumstance.

Automated impact alerts ensure that the insurer is aware the moment an accident occurs, so they can provide immediate assistance to the driver as needed. After the accident, telematics data and photos of damaged vehicles can be analyzed using artificial intelligence to help reconstruct elements of a crash and send that information to the insurer. When drivers call their insurance companies after an accident, the companies will already have the relevant details: time of day, location, speed of impact, delta-v, number of impacts, etc. Plus, building a complete picture of the driver can help companies communicate more regularly and effectively with consumers, offer fair and tailored rates, and when the worst occurs — like a car crash — provide quick and personal support.

Who will lead the transformation?

Several start-ups are basing their entire model on offering a personalized experience to consumers, and it’s paying off. But, it will take more than the young companies to truly lead the shift to next-generation auto insurance. The industry’s legacy players will have to step up, adapt and flourish.

The shift will require overcoming a few barriers, like incorporating telematics data into actuarial scoring models and integrating the technology with current claims processes. But the overarching benefits vastly outnumber the initial discomfort of implementing a new practice in legacy processes, particularly as many telematics offerings no longer require a separate device. The time is now for the auto insurance industry to get personalized. As a result, roads will be safer, drivers will be better, and insurers will retain their customers.

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10 Ways Cellphones Dangerously Distract Drivers

Posted By Denny Jacob, Thursday, March 28, 2019


Despite public campaigns and advances in vehicle technology, distracted driving continues to plague roads and highways in the U.S.

Preliminary numbers from the National Safety Council estimate that roughly 40,000 people lost their lives to car crashes in 2018. Distracted driving likely contributed to that figure.

To understand how cellphones distract drivers, The Risk Institute at The Ohio State University Fisher College of Business conducted an online pilot survey. The 386 respondents reported driving at least three times a week and owning a smartphone. Among its findings, distracted driving was predicted by gender, overconfidence and positive attitudes toward cellphones, among other factors.

Distracted Driving Awareness Month begins in April. In the above slideshow, respondents were asked “How likely are you use to your phone while driving…” on a scale of 0-100%. With this in mind, here are some of the key takeaways from The Risk Institute’s latest findings.


Parking Lots
Men: 40.8%, Women: 46.1%, Overall: 43.5%

During the Day
Men: 27.6%, Women: 29.1%, Overall: 28.4%

On Empty Streets
Men: 26.5%, Women:27.0%, Overall: 26.7%

While Bored
Men: 24.5%, Women:19.7%, Overall: 22.1%

In Traffic
Men: 21.7%, Women:17.8%, Overall: 19.7%

On Residential Streets
Men: 20.1%, Women:18.5%, Overall: 19.3%

At Night
Men: 20.7%, Women:16.1%, Overall: 18.4%

On the Highway
Men: 15.5%, Women:10.7%, Overall: 13.1%

In Rain
Men: 14.2%, Women:10.3%, Overall: 12.2%

In Snow
Men: 9.4%, Women:5.7%, Overall: 7.5%

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Daydreaming and Driving: A Deadly Combination

Posted By Administration, Thursday, March 28, 2019


Daydreaming while driving can be deadly—especially on a Saturday in September or May, according to a review of police data by Erie Insurance. At the other end of the spectrum, Tuesdays and Wednesdays in February were found to be the least likely days for fatal daydreaming.

In a previous analysis last March, Erie found that being “lost in thought” (daydreaming) was the No. 1 distraction associated with fatal crashes—responsible for 61 percent of crashes caused by distracted drivers compared to only 14 percent for cellphone use (talking, listening, texting or dialing).

The data is from the Fatality Analysis Reporting System (FARS), which includes information from police reports on the causes of fatal car crashes. The data is based largely on police officers’ judgment at the time of a crash and interviews with those involved. Erie Insurance consulted with the Insurance Institute for Highway Safety to analyze the data.

Erie’s review of the FARS data resulted in a ranked list of more than 84 combinations (with some ties) of days and months associated with daydreaming while driving. Below are the top and bottom five during 2013-2017:

Top 5 Days/Months

  1. Saturdays in September
  2. Saturdays in May
  3. Fridays in October
  4. Saturdays in August
  5. Fridays in July

Bottom 5 Days/Months

  • Sundays in December
  • Thursdays in February
  • Mondays in January
  • Wednesdays in February
  • Tuesdays in February

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How Technology is Reshaping Auto Claims

Posted By Jared Kalfus, Thursday, March 28, 2019


The auto insurance market is facing a variety of near-term and long-term pressures that could eat into profits. Conversely, new data technologies and innovations are providing the data to combat these threats, helping insurers maximize their potential for a healthy bottom line.
In the near term, the industry remains on solid ground. According to Deloitte, in the P&C sector, U.S. premiums written grew 4.6% in 2017, the highest percentage in the past decade, before jumping by 12.7% in the first half of 2018.

However, more longer-term outlooks are less clear, mostly because of all the talk of autonomous vehicles. Autonomous vehicle technology, a rise in on-demand transportation and a shifting of liability to manufacturers will shrink the auto insurance sector by more than 70%, or $137 billion by 2050, according to research by KPMG.

Several technologies and innovations are reshaping the way auto insurers conduct business. For example, everything from artificial intelligence, machine learning, Internet of Things, big data analytics, automation, chatbots and telematics are all impacting insurers and their business models. More specifically, a handful of these technologies are having a direct impact on how claims are processed for customers and their vehicles.

Case in point, the last two years have seen deadly hurricanes hit various locations in the U.S., and these storms provided damage to property, homes and vehicles well into the billions of dollars.

When insurance companies need to calculate payouts, the most critical aspect of the entire process is having access to the most timely and accurate valuation on each vehicle in the portfolio. However, not all valuation services are created equal, and leveraging the wrong value, multiplied over several thousand vehicles with payouts, can be financially devastating to an insurer.

Today’s advanced valuations include data analytics to provide more precise valuations. These VIN-specific data resources take into account each individual vehicle’s unique history footprint, helping insurance professionals determine the impact a vehicle’s history has on its value, both current and future. Even with the use of vehicle history reports, insurance professionals are still reliant on automotive values based on an unscientific, subjective, educated guess as to the impact a vehicle’s history has on its value, which often leads to mistakes and inconsistencies in the valuation and payout process during claims processing

Vehicle values that take into account a VIN-specific history can be as much as 31% more precise when compared to the auction transaction price than valuations without a history adjustment included. This is possible since today’s analytics process leverages data that can help professionals quickly pinpoint a more precise valuation on two individual vehicles of the same year, make and model, based on data inputs that take specific vehicle history events into account. Making an inaccurate estimation of appraisal values can decrease margins for a dealer, as well as increase losses for insurance companies and auto lenders.

History-adjusted vehicle valuations analyze multiple factors and events in a vehicle’s history such as number of owners, vehicle usage, accident and accident severity, title issues, flood/hail/fire damage, CPO history, and other variables that are not obvious when physically inspecting a vehicle.

Insurers have long relied on vehicle valuation data in order to help determine the right payout for each vehicle damaged or destroyed in an accident or natural disaster such as a hurricane. Over the last few years, these natural disasters have been a large reason why large numbers of vehicles have been destroyed, and there is a good chance this pattern will continue in the years to come. With the right tools and resources, such as data- and analytics-driven valuation insight that takes into account each vehicle’s unique identifiable history, insurers can be even more precise in determining the exact vehicle payout to keep clients happy and preserve the right margin in each vehicle portfolio.

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Why We Should Train Drivers on Autonomous Features

Posted By Administration, Thursday, March 28, 2019


Should drivers using vehicles with autonomous features be trained on those features before they get behind the wheel?

A new paper, “What Do We Tell the Drivers? Toward Minimum Driver Training Standards for Partially Automated Cars,” recently published by the Journal of Cognitive Engineering and Decision Making, explores that question and suggests looking to the experience of pilots for an answer.

Despite autonomous car systems being designed to respond to conflicts, crashes could still occur if there is not proper human training, according to authors Stephen M. Casner of NASA and Edwin L. Hutchins of the University of California San Diego.

Casner says this issue is increasingly relevant as more and more vehicles are being equipped with autonomous features such as lane keeping and automatic braking. By providing no standard training for drivers on these machines, automakers are handing average drivers complex pieces of equipment and hoping for the best, the authors say.

Currently, there has been little coordinated attempt to train drivers of vehicles with autonomous features about how the systems work or how they affect driver behavior. “The current strategy seems to be to place additional pages in the operator’s manual and hope drivers will pull it out of the glovebox and carefully read it,” Casner said.

Casner and Hutchins argue that, while autonomous-feature vehicles will reduce common crash scenarios, the lack of educated drivers could lead to a slew of other types of accidents.

To demonstrate their point, they cite the advent of autopilot in airplanes. Decades ago when automation was first deployed in airplane cockpits, there was little front end training for pilots on how these systems worked. This led to new kinds of crashes, and ultimately pushed the industry to increase the training offered for these systems.

“That early research yielded a number of unexpected findings,” the article states. “We found that pilots were sometimes surprised by the behavior of the automation, unable to predict what a complex system would do next. Ironically, being able to predict what the automation would do next seemed to require more knowledge about how the automation works than we originally anticipated.”

They say people need training not just on how the technology works, but also on how humans respond to it and the general concept of a human-automation team.

The paper explores how what was learned nearly 50 years ago in planes could foreshadow what will happen if society doesn’t start educating autonomous-feature vehicle drivers how their machines work.

The authors point to studies showing that drivers often let their attention drift and don’t understand how the automation works.

While they applaud that car makers, insurance firms, government agencies and others are discussing some of these issues, they conclude there appear to be few actual plans to provide drivers with the training they need.

The authors offer a first attempt at a set of minimum standards for what drivers should know before they operate a partially automated car.

The paper, which will appear in print in the Journal of Cognitive Engineering and Decision Making in June, is available online now.

The Human Factors and Ergonomics Society is a professional organization for human factors/ergonomics professionals with an interest in designing systems, tools, consumer products, and equipment to be safe and effective.

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Commercial Auto Insurers Map Out Path to Profitability

Posted By Joyce Anne Grabel, Thursday, March 28, 2019


In a short but memorable scene from 2017’s “Logan,” the title character happens upon a crash involving a horse trailer and a fully autonomous truck. The movie is set in the near future — 2029 — and its dystopian vision shows both the solutions (no driver shortages) and the problems (crashes!) facing the commercial auto insurance sector as autonomous vehicle (AV) technology evolves.

The high cost of climate change

The increasing frequency and severity of weather events due to climate change has led to a significant increase in damage risks and costs — with increasingly severe weather forecast every year. And the results of climate change aren’t limited to the obvious, such as crashes directly linked to snowstorms or losses from flooding. The causes can be more subtle. For example, a new study by Massachusetts Institute of Technology scientists found that roadway fatalities increase as temperatures rise.

“Hurricanes, floods and hail storms are leading to higher auto physical damage loss ratios, especially for those insureds with high-value concentrations of vehicles,” says Jonathan Charak, assistant vice president & actuary, Technical Underwriting — Pricing at Zurich North America.

Driven by such increased losses, commercial auto rates have continued to rise over the past few years, and industry professionals expect them to continue to increase for some time. “The loss results in commercial auto have been running high during this time, which has caused steady rate increases,” says Steve Shepard, underwriting manager, Transportation, at Burns & Wilcox.

Physical damage will continue to be a challenging exposure, with loss severity increasing for the foreseeable future, predicts Charak. He notes that auto physical damage deductibles have not kept up with repair costs and loss trends. He expects that insurers will look to right-size these deductibles on commercial fleets as part of the overall strategy to improve results.

Chris Moulder, vice president at Worldwide Facilities, says that the market continues to face pricing pressure from adverse results driven by distracted driving, medical cost inflation and “seismic” jury awards.

To reduce distracted-driving events, more companies are implementing technology solutions. “Cost continues to be a factor that weighs heavily in the decision to adopt the technology,” says Shepard. “The larger fleets tend to have more funds to be able to invest in advanced technology at this point.” He predicts, however, that with continued development and acceptability of the technology, the industry will start to see cost reductions.

“While advanced driver-assistance systems should bring about positive safety changes, they are becoming more common and complex. This will lead to increased repair costs in a way similar to what we have seen in recent years with widespread back-up camera usage” says Charak.

Pairing technology and underwriting

The commercial auto insurance industry is closely following the development of autonomous vehicle technology, which is expected to expand the opportunities significantly. Shepard believes that AV will have a positive impact on the industry, helping to drive its evolution. He predicts that AV technology will become more acceptable, readily available and cost-effective.

Autonomous vehicles will necessitate a fresh underwriting perspective, says Charak. “Overall loss frequency is expected to decrease — and, potentially, loss severity in the future.” He expects the causes of loss will also change. Instead of being worried about 2017 Market Share Report a speeding vehicle on an icy morning, future risks are likely to include handover from AV to human driver, or a failure of an autonomous system.

As legislation develops along with AVs, there may be shifts in liability. “Recent industry studies expect there to be a diminishing demand for auto liability and an increase in products liability, cybersecurity and infrastructure,” Charak says. He explains that a highly automated vehicle will rely on radar, light detection and ranging (lidar), cameras, graphics processing units, and central processing units to analyze the imagery. New risks arise from potential systems failures due to a faulty part, improper installation or inaccurate calibration.

According to Moulder, coverage enhancements particular to the AV industry are not commonplace yet but are being worked on by several carriers. “We are seeing autonomous risks across a wide range of applications.” He notes that warehousing and logistics applications involving yard trucks are becoming popular, along with such low-speed electric vehicle technology applications as local-radius parcel, grocery or food delivery within a mapped environment.

Within the commercial segment, over-the-road AV deployments are still in the future; however, it won’t be unusual to see product developers testing their technology on public roadways — on their own or in partnership with fleet owners, Moulder predicts. “Agents and brokers should be prepared to face these issues during 2019 as more and more companies begin to test their products on public roadways, and as more jurisdictions pass legislation allowing for that testing,” he says.

It’s important to keep in mind that AVs will not be the panacea everyone is hoping for, says Rick J. Lindsey, CEO of Prime Insurance Company. “Everyone is hoping autonomous vehicles are going to reduce accidents and improve claims results, and I think that’s naive. We will just have different arguments and claims. We’ve insured autonomous vehicles and have been watching, and we haven’t seen claims go down yet.”

Filling empty driver seats

One enormous challenge facing commercial vehicle fleets is the attrition of experienced commercial drivers as baby boomers reach retirement age, coupled with a lack of job candidates who have the skills and expertise needed to drive safely. According to research by the American Trucking Associations, the trucking industry is currently understaffed by more than 50,000 drivers, and this could increase more than threefold within eight years if current trends continue.

According to Shepard, it’s been difficult for insureds to recruit and retain talented and experienced drivers. “This is a major issue,” he says, “considering roughly 75% to 80% of the goods on store shelves have been transported by a truck at some point.”

To help mitigate the risks associated with newer, inexperienced drivers, Shepard advises insureds to consider implementing pre-employment screening in addition to telematic safety tools. He notes that using pre-employment screening during the hiring process helps determine a driver’s inspection and accident history. “Often, this includes information that is not provided in their motor vehicle report,” he says.

Many commercial fleet operators are either partnering with accredited commercial driver’s license training schools that provide in-depth driver training courses or developing their own comprehensive driver training programs in-house. Moulder observes that while more truck fleet operators are building internal driver training programs to recruit young drivers to the industry, most truck insurers prefer certain minimum age and driving experience requirements, which may not be met by some trucking companies.

“For large fleets with sophisticated risk management programs, insurers may be willing to waive certain minimum age and experience requirements,” he says. “For small and midsize fleets, they may need to trade their desire to hire inexperienced drivers for higher insurance rates or surcharges.”

If you work at it, you can find people. “They’re good-paying jobs,” says Lindsey, who notes that some fleet managers are reaching out to former military members. “A lot of companies won’t underwrite drivers with less than three years’ experience, but we’re willing to underwrite new operations with younger drivers if we feel they have the proper skills and training.”

High losses, physical damage, developing and unproven technologies, and operator shortages are the primary challenges facing the commercial auto insurance industry in 2019 and further down the road. But they don’t have to become roadblocks if insurance professionals know what to watch out for.

Untapped telematics potential

As driver distraction continues to play a key role in loss frequency, growing numbers of fleet managers are continuing to evaluate camera- and telematics-based systems to give them better insights into driver behavior. “The availability of camera systems has become more widespread and affordable for fleet owners over the past decade,” says Chris Moulder, vice president at Worldwide Facilities.

According to Jonathan Charak, assistant vice president & actuary, Technical Underwriting — Pricing at Zurich North America, risk managers and fleet managers alike have embraced the technology as a powerful way to improve safety and driver behaviors while gaining operational efficiencies. “But there continues to be reluctance on the part of some insureds to share their telematics data with insurance providers,” he says. “This has created a lot of untapped potential in the value that insurance providers can bring to telematics users in the form of safety training, behavioral insights, data analysis, predictive modeling and premium consideration.”

Steve Shepard, underwriting manager, Transportation, at Burns & Wilcox points out that insurers offer credit or cost saving to insureds that invest in telematics and other technologies designed to improve vehicle safety. “I have seen an increase in the use of telematics, drive-cam and distracted driving technology, such as lane departure and anti-rollover. Insurance companies have indeed looked favorably on this type of investment by the insureds. The natural question is, ‘What is the cost of the tech, and will that cost be offset with insurance savings?’”

Some insurers are offering free or subsidized camera systems in exchange for the ability to review data associated with those systems. “I believe we will see a rapidly advancing trend where insurers favor certain telematics systems and partner with new telematics providers. This will enable these insurers to aggregate data and then derive information that will allow them to better evaluate and price coverage into the future,” Moulder predicts.

In his experience, Rick J. Lindsey, CEO of Prime Insurance Company, has found that a lot of companies are afraid of telematics because they’re concerned about data not being in their favor. “We don’t tell companies they have to put cameras in their vehicles, but it helps us save money on claims by knowing the truth,” he says. “We don’t want to ignore the facts. We want to settle as soon and as cheaply as possible. Increasing litigation is driving up rates. If insureds go to lawyers, it will increase costs.”

Lindsey says that he wants insureds to make the right decisions for their businesses. “They’ll pay lower premiums if they make good decisions,” he says.

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