There are fewer bodily injury liability claims. The systems are functioning as intended. These systems are designed to stop the severity of front-to-rear crashes.
More benefits were shown in systems that added autonomous braking systems. Thus autonomous braking reduced bodily injury liability claim frequency by 14-32 percent.
Sensing technologies are evolving. The price of the systems have dropped. As a consequence, some non-luxury vehicles are now available with these technologies.
For example, the 2013 Honda Accord was offered with a camera-based front crash prevention system as well as lane departure system. The bodily injury liability reduction was a significant 40 percent. The Honda Accord is one of the best-selling cars in the United States.
The Honda Accord has high sales volumes. Gross insurance losses will be reduced as a result of the front crash prevention system.
Technologies take three decades to spread through the fleet. The current analysis focuses on collision avoidance features. The feature either comes as standard equipment or is offered as an option.
Ninety five percent of all registered vehicles could have rear park assist by 2037. Rear park assist was rolled out in the United States in 1995. The crash avoidance technology will therefore not be available in 95 percent of registered vehicles until 2048. Federal mandates would accelerate the fitment of these features.
Federal and local government encourages the use of three currently available technologies (telematics, collision avoidance and automated traffic law enforcement. These technologies will reduce traffic accidents and insured automobile losses. Consequently Property/Casualty insurers see a major reduction in their auto insurance premium revenues.
“In the near term, an auto insurer should be asking itself three questions,” says Donald Light, Senior Analyst with Celent’s Insurance group.
“ How is it monitoring technology-driven changes in insured losses, (i.e. the progress of the scenario)? Second, do scenario technologies provide new kinds of data? And third, what should it do differently this year and next?”
How will collision avoidance technologies affect premiums? Karlyn Carnahan, principal of insurance at Novarica says:
“Theoretically, they should help to bring premiums down. As accident frequency drops, smaller claims are eliminated. But this has to be coupled with inflationary trends and the fact that medical costs are rising. We can hope that technology will help costs remain stable.”
Greg Horn, vice president of industry relations at Mitchell, agrees that there will be a reduction in frequency of accidents. However, the cost of replacing some of these technology pieces, such as an adaptive radar sensor mounted in the grille of a car, will be expensive. “So the question is: Will the reduction in frequency outweigh the additional repair costs when these vehicles are in accidents”?
Over time, there will be a significant impact on insurance premiums. This will be augmented by telematics and automated traffic law enforcement. Examples are red light and speeding cameras and, in 10-15 years, driverless cars.
Are these technologies sufficiently reliable and thoroughly tested. Are we headed for an increase in claims related to the technologies themselves.
“All technologies fail at some rate”, says Light. Yes, there will be greater exposure for auto manufacturers and manufacturers of the various collision avoidance technologies, but it is unlikely that those new sources of premiums (commercial) would come close to replacing reduced premiums, from personal auto insurance.”
While tested and ready for public consumption, there are several issues with some of the first-generation technologies. For example, blind spot cameras are prone to false alarms in heavy fog or rain. Autonomous braking systems can fail or be delayed if the sensor in the grille gets caked in mud.
Overall, however, Light believes accident avoidance technologies will become “increasingly important in terms of increasing auto safety. Auto insurance losses will decrease. Premium costs will be reduced.”
Carnahan also sees growth in these devices. Manufacturers will therefore strive to make their vehicles smarter. They will improve telematics. The latter will be enabled by better broadband technologies.
“Vehicles (in accidents) should diagnose themselves. They should also automate claims notifications. This helps settle claims quickly, thus reducing expenses.”
Premiums in the 14 largest car markets in the world are therefore expected to drop by $20 billion by 2020.