the latest in predictive modeling part 1

How Growing Data Availability is Enhancing Actuarial Opportunity

Growing data availability is enhancing actuarial opportunity for property-casualty insurance — especially for actuaries eager to experiment with various predictive models.

My Actuarial Review article, The Quest for Big Data, explains how data is presenting greaterthe latest in predictive modeling part 1 potential and challenges for actuaries. To find data gold, they must shift through available data — whether is buried in text or from the growing number of external sources catering to the insurance industry.

Actuaries have a seemingly insatiable appetite for data. While more data is available than ever in some areas, information voids remain.

This article is part 1 of a series I am writing on the latest in predictive modeling for Actuarial Review.

To explain how growing data availability is enhancing actuarial opportunity, the article discusses:

  • innovative ways insurers are using internal data;
  • data sources for developing potential proxies;
  • why all insurers will soon be able to collect telematics data;
  • differences in data needs for personal compared to commercial lines;
  • tips on selecting data vendors;
  • growing data potential, including digital breadcrumbs and the Internet of Things.

Part II of the series will cover innovations in models. Part III will explore barriers to  predictive modeling innovation, the upcoming disruption in the insurance company business model and more!

Do you agree that growing data availability is enhancing actuarial opportunity in property-casualty insurance? Please share your comments below. Thanks!

Q & A: Insurance Information Institute’s Robert P. Hartwig

Robert Hartwig

Robert Hartwig

Robert P. Hartwig, president and CEO of the Insurance Information Institute (III), has been one of my most valued sources for facts and opinions about this often misunderstood industry.

Hartwig is leaving in August to become a faculty member and co-director of the University of South Carolina’s Moore School of Risk and Uncertainty Management Center. Hartwig, who has a Ph.D. in economics, also has a Chartered Property Casualty Underwriter designation.

Hailing from Oxford, Mass., which he describes as a one-traffic-light town during his youth, Hartwig has an impressive resume that includes key positions at Swiss Re, the National Council on Compensation Insurance (NCCI) and the U.S. Consumer Product Safety Commission. Hartwig joined III as its chief economist in 1998 and became president in 2007.

As a reporter, I first interviewed Bob while he was working at the NCCI 20 years ago. My first truly Hartwig experience, however, took place when he sent me a 75-page “Drink From My Firehose” presentation as a basis for interview questions. As I was drowning from the waterfall of information, Bob helped me work through the pertinent material for an article. 

True to his ever-helpful and insightful nature, Bob shared a few moments to talk about his views on the insurance industry, why he is joining the ranks of academia and more . . . .

Question: In the midst of traveling 150,000 miles annually, offering presentations and answering media calls, what do you do in your personal life?

Answer: I am an avid traveler and love seeing new places and experiencing different cultures. My job at the III has allowed me to travel all around the world, but I usually don’t have a chance to soak up any of the local experience. On a recent business trip to Germany, for example, I was on the ground for a total of seven hours. On a trip to Beijing, I was there for a total of 14 hours. In my next career I hope to be able stay awhile! 

After I arrive in South Carolina, I intend to get back into piloting airplanes. Ironically, because I was traveling so much for the III, there was no longer any time to fly on my own.

Question: What do you miss the most about flying airplanes?

Answer:  Flying airplanes is not only exhilarating but it commands 100 percent of your attention. You think about nothing else other than flying the aircraft. It gives me an adrenaline rush and at the same time allows me to forget about everything else!

Question: Why did you go into insurance?

Answer: I’ve always been a numbers person and have had a lifelong fascination with statistics. I had a great opportunity back in 1993 after finishing my Ph.D. to work in the actuarial group at NCCI.  It was the total immersion method of learning insurance but I wound up loving it. 

Question: What has been your most fulfilling role so far in your career? 

Answer: I love defending the industry against its critics — be it the media or on Capitol Hill.  I enjoy the challenge. The insurance industry has a noble and necessary mission, but one that too often misunderstood or deliberately mischaracterized. 

I’ve also love being a part of the industry in the aftermath of major disasters. With my office being in lower Manhattan, I had a real-time front row seat to the devastation and horror of the 9/11 attacks and was very proud of how this industry helped New York City and the country overall recover from those attacks. The industry truly fulfills its role as the nation’s “economic first responder.” The same is true after numerous other devastating events, including Hurricane Katrina and Superstorm Sandy.

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The insurance industry has a noble and necessary mission,
but one that too often misunderstood or deliberately mischaracterized.
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Question: As you think about the insurance industry during your career, what is going well? 

Answer: Despite opinions to the contrary, I think the industry has adjusted fairly well to rapidly changing nature of risks in the global economy. 

My nearly 25 years in the industry began shortly after Hurricane Andrew in 1992, which became the most costly natural global at that time. The industry has adapted well to not only more frequently and costly natural catastrophes, but also the new risks of the 21st century.  

Insurers are also rapidly ascending very steep learning curves for new risks such as cyber, supply chain, intellectual property, the “sharing economy” and the “internet of things.”  It’s a brave new world, but all signs point to industry seizing opportunities and providing the risk management solutions that businesses and people need for the decades ahead.

Question: Where does the industry still need improvement and where do you have concerns? 

Answer: While the industry is moving in the right direction in terms of offering underwriting and risk management solutions for the 21st century, advances in technology and data analytics potentially threaten to disintermediate the industry from its life’s blood—the flow of information from customers and producers to the insurer.  

Any interruption of this flow would also threaten insurers’ role as the analytics engine that supports the pricing and underwriting of risk. Insurers have the edge, but need to beware of potential usurpers seeking to upend the insurance industry’s value chain.

Question: Thanks for being such a reliable source for insurance information. I hope you will still accept media calls.

Answer: I’m looking forward to working with media in my new role in addition to continued interaction with the many stakeholders of this vital industry. 

(Note: Starting Aug. 8, III’s new top leader will be Sean Kevelighan. To learn more, click here. )

 

 

Personal Auto Pricing Different Since Great Recession

AR_July-Aug_2016-coverMany changes have taken place since the Great Recession, forever altering the personal auto pricing cycle. My latest Actuarial Review article, which is already attracting positive feedback, takes an in-depth look into what has affected personal auto insurance premiums since 2008.

The article, called, “The New Cycle of Pricing Personal Auto” covers several pertinent factors including:

  • The relationship between frequency and employment.
  • The curious sudden accident uptick in frequency by miles driven in the 4th quarter of 2014.
  • The gradual increase in costs per claim (severity).
  • A marked increase in driver distractions not just from cell phones but infotainment systems.
  • A growth of driving while under the influence of marijuana and accident increase in states where use is legal.
  • Auto manufacturers’ safety features reducing the frequency and severity of accidents.
  • Big data and predictive modeling transitioning from a unique pricing strategy to a common insurance business practice.
  • Low interest rates.

I am unaware of any other article that comprehensively looks into the auto insurance pricing cycle since the Great Recession. I would also like to thank James Lynch from the Insurance Information Institute for his assistance. I hope you enjoy it!

What do you think has most affected the auto insurance pricing cycle?

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Like what you see?
Then follow me by clicking the button
on the bottom right hand side of this post.
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Facing the Insurance Quality Content Dilemma – Part 2

CC0 Public Domai

Last week, I wrote about the choice insurance marketing and communications executives often face when looking for public relations and marketing services. They can either rely on insurance subject matter experts who are not effective communicators or public relations and marketing firms that do not understand insurance.

Then the question becomes, how can insurance industry companies deal with the Hobbesian choice?

The answer is hiring the rare find: a communications firm that understands insurance. Too often, however, insurance industry public relations and marketing executives either cannot find this rare breed or do not have the resources to acquire such talent.

As a result, insurance company marketing and communications personnel, along with vendors that offer industry services, end up exploiting and frustrating internal subject matter experts or hiring public relations and marketing companies that provide assistance on the cheap.

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The best Search Engine Optimization approaches
in the world cannot overcome fluffy content
that lacks substance.
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The first approach can become a human resources problem. The second approach could risk your company’s online reputation by publishing materials that will actually turn potential customers away from your business.

This is happening more than the penny-wise and pound-foolish financial professionals want to believe. They don’t understand that potential clients have become more sophisticated and expect more from content, such as insight and problem-solving strategies. I used to write such content full-time as a journalist, but few publications can support expert reporters.

Once potential customers decide to ignore your company’s marketing emails and social media posts, reversing this rejection becomes very difficult. Reputation damage is much more expensive and difficult to overcome than establishing a credible presence in the first place.

Budget Restraints

But Annmarie, you say, true insurance experts who are also schooled in public relations or journalism can be expensive. Sure, they cost more, but you will not be paying for them to become educated about insurance. Further, the expertise of a quality professional should be reflected in the content and marketing strategies.

With a minimal budget, focus on quality over quantity. I have long told my clients that it is better to publish less often and offer higher quality than to publish a lot of junk. What you want is to see your company’s name associated with must-read content.

This means re-evaluating all the marketing and communications channels and even cutting back in some areas.

Begin by maximizing the company website. There is no point in investing in social media and other digital marketing approaches if the content bread crumbs will just lead to a unappealing website. The best Search Engine Optimization approaches in the world cannot overcome fluffy content that lacks substance. Then there are the ever-changing Google algorithms that strive to reward the best content available and punish those offering content garbage.

Think about it. You get frustrated by wasting your time on shallow content produced by novices. What makes you think your potential customers are any different?

Evaluate the website and ensure that everything adheres to what I call The Credibility Factor. That means:

  • getting rid of all the fluff and telling your potential customers what they need to know to ease the buying process. Simple websites are more effective than fancy and complicated ones.
  • considering the structure and how often a viewer has to click to find what they really want to know.
  • looking beyond the latest and greatest in design and stick with what works.

Once the website is scrubbed of hype, begin planning magnetic content. That means:

  • creating an editorial calendar.
  • approaching internal subject matter experts and freelance writers with the topics and schedule.
  • producing several evergreen pieces first — just in case the schedule falls through – and it will.

Now that your company’s website is top notch, your content rocks and your blogging schedule is consistent, return to social media one venue at a time. As you offer online content breadcrumbs, you want them to lead to your company’s website and ultimately its call to action piece.

For commercial lines customers, you’ll get better results from LinkedIn and Twitter than Facebook. Make sure you have maximized both before moving forward to Facebook. As a tip, I am amazed at how many visitors I get from Google Plus. Be creative on how to use other social media sites. Personal auto and homeowners’ insurers can benefit from Pinterest and Snap Chat with the right approach.
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Get rid of all the fluff
and tell your potential customers
what they need to know to ease the buying process.
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Once you have established substantive content, you can repurpose it as the core of what must be a fascinating and engaging video.

Personally, I am not a fan of videos. Since younger audiences like to watch videos, I am including them.

Here’s why I give them a lower priority. First, I can read faster and would rather not spend two-to-three minutes on a video. Second, videos tend to be very superficial. Video production is not cheap and it requires another set of expertise to be effective.

And finally, please do not produce another boring “teaching” video that mimics a typical classroom experience. The video must personify your company’s brand and insurance is already considered boring enough.

Do you agree with my blog or would you care to share one of your own best practices? Please let me know by responding in the comments section or contact me directly at annmarie@lipoldcommunications.com.

 

 

 

 

 

 

 

 

 

 

 

 

Facing the Insurance Quality Content Dilemma (Part 1)

CC0 Public Domain

CC0 Public Domain

Insurance marketing and communications executives face a Hobbesian choice when looking for public relations and marketing services. They can either rely on agency counterparts who do not deeply understand the intricacies of insurance or internal subject matter experts who know insurance but are not professional communicators.

The dilemma is the direct result of two primary factors. First, there are few professionals who offer insurance expertise and possess audience-focused communications training and experience.

Second, effective marketing heavily relies on producing magnetic and substantive content. Amidst intensifying online competition, the C-Suite asks their internal marketing and communications departments to become publishers of brand journalism without the additional resources to support the effort.

Often, the C-Suite commonly does not want to accept that publishing is expensive. But it is, which is why so many newspapers and magazines, even those offered online, no longer exist. In a world of free content as a marketing approach, there is no option to sell advertising to underwrite the expense of professional communicators.
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Without understanding the audience,
inbound marketing will fail.
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Those who appreciate and understand insurance tend to be professionals whose aspirations didn’t include becoming writers. Experts in claims management, underwriting, risk management, actuarial, statistics and other disciplines often despise writing. They began their careers not knowing that branding and digital marketing would introduce the publish-or-perish mentality that academics have struggled with for decades.

Such professionals are being asked to work beyond their skill sets while trying to maintain their core competencies through endless hours of continuing education. So it is not surprising that producing content by writing white papers or blogs becomes a hassle amidst their already busy days.

These experts find the writing process to be quite frustrating. After staring at a blank screen for seemingly hours their material is often unorganized or too complicated, making it difficult to read and understand. As a result, the marketing and communications department must invest in heavy editing and re-writing. It’s a time consuming and difficult process that can breed resentment on both sides.

Further, this approach is likely more expensive. Asking highly-paid professionals to write diverts their time and focus away from meeting client needs or rainmaking. Unfortunately, the C-Suite often does not take all these factors into consideration.

Lacking Insurance Expertise

The other option is to hire public relations, marketing and other communications firms. Usually, these well-intentioned companies lack deep and thorough insurance expertise.

The reality is that it takes years to understand the nuances of insurance. The industry not only has several disciplines, but several functions and a multitude of insurance lines.

Workers’ compensation, for example, involves understanding different subjects including health care, the claims process, return-to-work and disability coverage. Additionally, each state has its own regulations and expectations. Personal auto, the largest property/casualty insurance line, focuses on consumers so the approach is different compared to commercial lines such as general liability or business interruption coverage.

Further, the traditional insurance paradigm is evolving to a data and analytics model. Insurance executives, who tend to be conservative in nature, are still learning to maximize predictive modeling so it extends beyond underwriting and pricing to addresses claims management practices and marketing techniques. Forward-moving insurers are focusing on obtaining business intelligence through predictive modeling, which is quite difficult to understand without insurance expertise.

Other disruptors, including artificial intelligence, changing regulations and policy sales via Internet are also having a great impact on insurance companies and the vendors that serve them. Vendors that want to expand into the insurance industry also struggle with understanding what insurers really need, industry nomenclature or the right point person to contact.

Meanwhile, each insurance line faces its own struggles. Auto insurers are excited about telematics when a great deal of consumers want to maintain privacy. Then there are “preoccupiers” such as Uber and Lyft and driverless cars.

_______________
…the C-Suite commonly does not want to accept
that publishing is expensive.
_______________

Then there is the problem of truly understanding the needs of each customer type. Insurers are vying for a greater piece of the growing demand for cyber coverage, for example, when policies are inconsistent and buyers – and even their agents – are struggling to know what should be included in their coverage. The market potential for cyber insurance is enormous, but developing the right policy per each specific customer profile remains a challenge.

For business insurance, a smaller company that lacks a risk manager or a really awesome agent or broker will purchase based on price. Larger companies see the value of services and are sophisticated enough to know that price is just one part of the equation. They want to know how an insurer’s services will support risk management, claims processing and other areas. They also need to be sold on the technology designed to better serve them.

Another limitation is that marketing companies often approach digital marketing from a business school rather than a journalism school approach. They lack professionals who understand how to effectively produce materials because they are not trained in first rule of journalism, which is to understand the audience. I often encounter companies that do not want to invest in determining customer needs and pain points. Without understanding the audience, inbound marketing will fail.

So what is the solution? I’ll address this in my next blog. You can follow it by pressing the follow button on the left hand side.

In the meantime, please offer your comments below.

 

 

Don’t Underestimate Dodd-Frank’s P/C Insurance Impact

Actuarial Review March April 2016 CoverThe Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 introduced the most far-reaching federal regulation the property/casualty insurance industry has ever seen.

While the regulatory focus of Dodd-Frank has been on a relatively few insurers that either have subsidiary banks or are considered systemically important financial institutions (SIFIs), the act is poised to affect the entire property/casualty industry, according to my recently published Actuarial Review article, Demystifying the Regulatory Web: Dodd-Frank and Its Complex Impact.

My article takes a rare, comprehensive and journalistic look into the ramifications of Dodd-Frank and the resulting regulatory web. During my research, I could not find one article that updates the multiplicity of Dodd-Frank’s impact on insurers.

As I wrote the piece, I became convinced that Dodd-Frank’s impact is greatly underestimated. (Life insurers are also affected.)

And after spending countless hours on the article, I could not put my finger on anything that substantially makes the insurance industry and its customers better off. If anything, federal regulation is onerous and hardly transparent. States, which have been regulating insurance for 150 years, have much more transparent processes as does the National Association of Insurance Commissioners (NAIC).

Dodd-Frank requires its brainchild, the Federal Insurance Office (FIO) and the Federal Reserve System (Fed) to work with the NAIC at the International Association of Insurance Supervisors’ (IAIS). Since then, transparency has dimmed. Formerly open meetings have been closed. In one instance, a presidential appointee told a congressional subcommittee he was barred from attending an IAIS working group meeting.
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“…I could not put my finger on anything
that substantially makes the insurance industry
and its customers better off.
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To further complicate matters on the international stage, the Fed, FIO and the NAIC, known as “Team USA,” have different missions that sometimes conflict with one another.

The federal rule making process also lacks the kind of transparency states offer. Information access to reporters is also very limited. Federal agencies provided me with plenty of documents to wade through, but subject matter experts were not available for questioning. This disturbs me greatly.

I also wondered how the activity of one large U.S. insurer’s London-based banking subsidiary could justify Dodd-Frank’s introduction of federal insurance regulation and monitoring.

Ironically, both federal agencies depend greatly on the NAIC even as their activities seem to overlap the organization’s historic role. In some cases, the Fed and the NAIC are on separate regulatory tracks to address the same concerns.

Meanwhile, Dodd-Frank directs the FIO to look into coverage discrimination issues, which is old hat for state regulators. For example, the agency choose to evaluate auto insurance discrimination when state regulators and research organizations have been considering the claims of consumer groups for decades.

All parties say they are committed to working together, but communication has been challenging.

The FIO has the primary role of monitoring the industry and one direct regulatory role to develop international cover agreements. Through its monitoring efforts, the FIO identified new regulatory opportunities for insurers.

Meanwhile, it’s been seven years since the enactment of Dodd-Frank and the Fed still has a lot of rule making to do. Besides going through that arduous process, the Fed is also working to appreciate the deep magic of insurance. This includes the role of actuarial opinion, which is part of the special sauce that makes individual companies competitive.

State vs. Federal Regulation

Federal intervention has reintroduced the time-honored question of whether states or the federal government should regulate insurers. Labor groups have long advocated for federal regulation for workers’ compensation. There are pros and cons to both approaches. If the federal government regulates insurance, one benefit would be regulatory consistency across state lines.

Certainly the international community, including Europe, prefers the approach of central governance for the United States. This difference in regulatory approach between central authority and state authority is not merely an academic discussion. The Jeffersonian notion of states rights to prevent the oppression of centralized authority was a direct reaction to the European central authority model that goes back to at least the Roman Empire.

Based on other topics I have covered, the United States needs to be very careful with taking euro-style approaches when the downsides most likely outweigh the benefits. There are fewer insurance companies operating in Europe partly due to regulatory burden.
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“The federal rule making process also lacks
the kind of transparency states offer.”
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It can be argued that state-based regulation is a key reason why the United States has the largest insurance industry in the world. While imperfect, the state regulatory model allows for greater innovation and flexibility. Under a truly federal regulatory model, for example, could Texas to continue to allow employers to opt out of workers’ compensation?

By digging deeply into the details of Dodd-Frank’s implications for property/casualty insurers, my hope is the article will be informative and thought provoking.

I am grateful to the Casualty Actuarial Society for giving me the opportunity to provide a comprehensive look at Dodd-Frank. The Fed’s media staff provided very useful congressional testimony and the NAIC, the Property Casualty Insurance Association of America and the American Academy of Actuaries all provided the necessary support to complete my article.

How do you think Dodd-Frank is affecting insurers?

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Legionnaires Disease Deserves More Attention

Often, a new disease breaks out that has doctors and pubic health professionals

Legionella Under the Microscope. U.S. Centers for Disease Control (CDC).Public Domain.

Legionella Under the Microscope. U.S. Centers for Disease Control (CDC).Public Domain.

puzzled and worried. In 2014, it was Ebola. This year, it is the Zika Virus.

There are also potentially fatal illnesses that are preventable and yet, the Centers for Disease Control and Prevention is seeing cases on the rise. One such example is Legionnaires Disease.

My article, Insurance Implications of Legionnaires Disease, published by the AmWins Group’s The Edge, provides an update on illnesses related to legionella bacteria, along with prevention tips, symptoms and the liability concerns. I hope you find it helpful.

 

For Actuaries and Underwriters, Times Are a-Changin’

AR_Jan-Feb_2016 CoverThe days of actuaries and underwriters applying their crafts through separate roles and responsibilities are on the way out, as my recent Actuarial Review article, Pricing Adjustment, explains.

To be successful in the future, actuaries need to spend more time learning to appreciate the demands underwriters face. Underwriters also need to embrace predictive modeling to appreciate its potential for pricing and marketing, experts say. Surveys show too that insurers are frustrated when their actuaries and underwriters hold to their traditional roles and work against each other.

Embracing a new approach is always easier said than done. It’s only human nature to resist change. Companies like Liberty Mutual, however, are learning that having actuaries and underwriters work more closely together boosts return on investment

Liberty’s national insurance specialty section integrates underwriters and actuaries into functional teams. The results so far have been positive, placing the insurer in a better position to address underwriting challenges while encouraging communication and understanding.

Underwriting is not the only area where actuaries should become more familiar. Past articles I have written also explain how actuaries and statisticians can complement each other and why actuaries and information technology professionals need each other.

The bottom line is the actuarial role is a-changin’. Successful actuaries will embrace new ways to work with other professions to deliver better results.

Happy reading!

Before You Cut and Paste, Obey Copyright Laws

Digital media experts offer lots of advice on howLeader's Edge logo to successfully market online, but rarely do they emphasize the importance of avoiding copyright infringement.

That’s a shame because website owners who are caught re-using blogs from other sites or publishing photos without appropriate permission and attribution can suffer legal and financial consequences. And thanks to special software that finds reproduced images, it’s also easier to get caught.

As I cover in my Leader’s Edge article, Making a Lasting Impression, the Council of Insurance Agents and Brokers (CIAB), which publishes the magazine, was reminded of this the hard way.

Stressed for time, an employee published a photo without getting permission, which goes against the CIAB’s policy. As a result, the photographer’s lawyer contacted the organization and offered a settlement fee much higher than the original cost of purchasing permission. CIAB enlisted an attorney to reduce the fee and settle the matter.

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Imitation (or duplication) may be the sincerest form of flattery, but if it is not done legally, the compliment can be costly.
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Kudos to CIAB President and CEO Ken Crerar, who wanted the story told to prevent the same thing from happening to others. I wrote the article to be helpful to readers, so it also offers tips on how to secure permission with or without licensing fees.

The important point to remember is that posting a photo online is a form of publishing and the same laws apply as with print publishing.

Anyone publishing online needs to take care that they do not copy someone else’s work without obtaining permission. Since there are creators who make the effort to find copyright infringers and sue them, it’s worth combing through all publications and web publishing to avoid copyright infringement.

Imitation (or duplication) may be the sincerest form of flattery, but if it is not done legally, the compliment can be costly.

 

Driverless Cars: Beyond the Hype

Not long after I submitted my Actuarial Review article about driverless cars, “60 Minutes” presented a segment, “Hands off the Wheel” on the same subject.AR_Nov-Dec_2015 Cover

Since I had intensely researched the topic, I could not wait to hear what the reporter would tell the general public. Instead of investigative journalism, the segment gave the driverless car industry a boost with little mention of the many unresolved issues and potential unintended consequences.

At its beginning, the reporter said “almost all” car accidents are caused by driver error, noting the safety potential of driverless cars. The truth is, nobody really knows how safe driverless cars will be.

The often-quoted statistic by driverless car advocates is that 93 percent of car accidents are caused by human error. The logic is that by reducing the opportunities for driver mistakes, automated vehicles will be safer.

The statistic and its assumptions, which were also presented as testimony before the U.S. Congress, are very important because they guide the assumptions and expectations of driverless cars. Google also boasts that all of the accidents involving its cars were due to human error.

But when the rubber hits the road, it’s the insurance industry’s opinion that counts. Its actuaries not only have the most experience looking at the factors that lead to accidents, but the industry will be responsible for covering them.

My article, Destination Driverless: Will Vehicles – Not Drivers – Become the Center of Risk?, sets the record straight about the all-important 93 percent statistic thanks to actuarial analysis provided by the Casualty Actuarial Society’s Automated Vehicles Task Force.

The task force concluded that automated technology could only address 78, not 93 percent of accidents if it cannot overcome factors such as weather, vehicle errors and inoperable traffic control devices. Using the 93 percent statistic, the task force also asserts, is problematic for other reasons.

Stemming from a National Highway Transportation Safety Administration (NHTSA) study, the statistic had nothing to do with driverless cars. And, due to its age, the study could not anticipate the latest safety improvements to conventional vehicles.

So what do actuaries need to have a better idea of the potential costs of insuring driverless vehicles? Access to proprietary data that developers and manufacturers naturally are not quick to share.

My article also details other factors that should be considered – especially when human drivers must take the wheel of automatic vehicles. It also covers the challenges that developers must overcome to make them viable in the real world.

What does this mean to the average consumer? Driverless car excitement abounds, but nobody sees significant population of driverless cars for another 20 years.

In the meantime, drivers can expect automated vehicles to gradually join the traffic jam. That transition, in and of itself, could also lead to unintended consequences.