Shifting Gears

Driverless car regulations are on the way that will bring about big changes in the insurance industry.
By: | July 31, 2017 • 4 min read

The U.S. Congress is expected this Fall to approve groundbreaking regulations on the production and use of driverless cars. Once the regulations are passed, they will likely bring about significant changes to the insurance industry.

A bill authorizing the expansion of driverless cars was approved on July 19 by the House Subcommittee on Digital Commerce and Consumer Protection and should reach the full House of Representatives in September. Having received support from both Republicans and Democrats in the subcommittee, the odds are that the House will give it the green light.


Among other provisions, the bill authorizes the deployment of 100,000 driverless cars on American roads without the need to meet all safety regulations that apply to ordinary vehicles. It also prevents states from imposing their own driverless cars rules.

The progress of the bill follows requests by the likes of Ford, Tesla and Volvo for the implementation of rules that will enable carmakers to accelerate the introduction of driverless cars in the market. The main argument is that they will be so safe that the number of road accidents should fall dramatically once intelligent vehicles predominate.

“Nearly 40,000 lives are lost in road crashes every year and nearly 94 percent of those crashes are caused by human error,” said David Strickland, the general counselor of the Self-Driving Coalition for Safer Streets, a lobby group, in a statement released after the bill was approved by the House subcommittee.

“By removing humans from behind the wheel, self-driving vehicles offer the opportunity to save lives and enhance mobility.”

What will also become scarce are auto insurance policies for drivers, one of the main sources of revenues for the global insurance industry.

This will bring about a fundamental shift in the way that auto insurance operates, as liabilities for accidents will shift from drivers to producers of cars.

“There is an opportunity for insurers between now and the next ten to fifteen years.” – Anand S. Rao, Innovation Lead, PwC’s Analytics Group

Product liability should become the main coverage for vehicles circulating on the road, with carmakers purchasing their programs from a reduced number of insurers, said Anand S. Rao, the Innovation Lead at PwC’s Analytics Group.

According to Rao, there will always be some need for individual insurance to protect vehicles from natural events and other losses not linked to road accidents. But the implementation of technologies such as forward collision warning, drowsy driver detection, lane departure sensing and others is likely to remove most of the human risks that constitute the bread-and-butter of today’s auto insurance business.

“Auto insurance will change from a personal line to a business line insurance,” Rao said.

“B2B insurers will end up making deals with car makers. And, in some cases, as we are already seeing in Europe, car manufacturers may opt to keep the liabilities, and transfer them to the reinsurance market.”

In other words, there will be room for a much smaller number of players in the auto insurance market. The good news is that the industry should have some time to prepare itself for this new reality.

Anand Rao, Innovation Lead at PwC’s Analytics Group.

“It may take a few decades before all the changes can happen,” Rao said.

The transition from human controlled cars to completely automated cars should take place gradually, enabling the insurance sector to adapt itself to it. The U.S. National Highway Traffic Safety Administration, or NHTSA, has in fact established a five-level route for the process, where Level 0 means no automation at all and Level 4 implies full self-driving automation.

“There is an opportunity for insurers between now and the next ten to fifteen years,” Rao said. In the short and middle runs, he said, insurers can employ the transition phase to collect data and adapt their prices and products and make a few extra bucks with the emerging technologies.

For example, before driverless cars completely dominate the market, the car industry is likely to offer dual-mode vehicles, where drivers will be able to decide whether they will keep control of the car or let automated systems take over.


“It will be easy to monitor how long drivers are keeping their hands on the steering wheel, and how long they are shifting to self-drive, and then slice the risk,” he added. A driver’s liability could apply to the periods where drivers keep their hands on the steering wheel, while product liability would take over on self-driving stretches.

“By doing this, they [insurers] can adapt rates and offer specially designed products that could attract more and more drivers who own dual mode vehicles,” Rao added.

Underwriters who prefer to focus on the future B2B opportunities should look for opportunities to collaborate with car makers and understand the emerging technologies, he pointed out.

But not all auto underwriters will be able to arrive unharmed to the end of the journey, as Rao believes that only a few leading players should survive in the auto insurance market once it takes its new shape.

Rodrigo Amaral is a freelance writer specializing in Latin American and European risk management and insurance markets. He can be reached at [email protected]

More from Risk & Insurance

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Risk Management

The Profession

Wawa’s Director of Risk Management knows that harnessing data and analytics will be key to surviving the rapid pace of change that heralds new risk exposures.
By: | July 27, 2017 • 5 min read

R&I: What was your first job?

My first job was at the age of 15 as a cashier at a bakery. My first professional job was at Amtrak in the finance department. I worked there while I was in college.

R&I: How did you come to work in risk management?

A position opened up in risk management at Wawa and I saw it as an opportunity to broaden my skills and have the ability to work across many departments at Wawa to better learn about the business.

R&I: What is the risk management community doing right?


The advancements in analytics are a success for the industry and offer opportunities for the future. I also find value in the industry focus on emerging and specialty risks. There is more alignment with experts in different industries related to emerging and specialty risks to provide support and services to the insurance industry. As a result, the insurance industry can now look at risk mitigation more holistically and not just related to traditional risk transfer.

R&I: What could the risk management community be doing a better job of?

Developing the talent to grow with the industry in specialization and analytics, but to also carry on the personal connections and relationship building that is a large part of this industry.

Nancy Wilson, director, quality assurance, risk management and safety, Wawa Inc.

R&I: What was the best location and year for the RIMS conference and why?

I have had successes at all of the RIMS events I have attended. It is a great opportunity to spend time with our broker, carriers and other colleagues.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I think the biggest challenge facing most companies today is related to brand or reputational risk. With the ever-changing landscape of technology, globalization and social media, the risk exposure to an organization’s brand or reputation continues to grow.

R&I: What emerging commercial risk most concerns you?


The changing consumer demands and new entrants into an industry are concerning. This is not necessarily something new but the frequency and speed to which it happens today does seem to be different. I think that is only going to continue. Companies need to be prepared to evolve with the times, and for me that means new risk exposures that we need to be prepared to mitigate.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I try to be optimistic about most things. I think the economy ebbs and flows for many reasons and it is important to always keep an eye out for signs of change.

R&I: What have you accomplished that you are proudest of?

I am fortunate to have opportunities professionally that make me proud, but I have to answer this one personally. I have two children ages 12 and 9 and I am so proud of the people that they are today. They both are hardworking, fun and kind. Nothing gives me a better feeling than seeing them be successful. I look forward to more of that.

R&I: What is your favorite book or movie?

This is really hard as there are too many favorites. I do prefer books to movies, especially if there is a movie based on a book. I find the movie is never as good. I have multiple books going at once and usually bounce back and forth between fiction and non-fiction.

R&I: What’s the best restaurant you’ve ever eaten at?


I have eaten at a lot of different restaurants in many major cities but I would have to pick Horn O’ Plenty in Bedford, PA. It is a farm to table restaurant in the middle of the state. The food is always fresh and tastes amazing and they make me feel like I am at home when I am there. My family and I eat there often during our trips out that way.

R&I: What is your favorite drink?

I do love a good cup of coffee (working at Wawa helps that). I also enjoy a good glass of wine (red preferably) on occasion.

R&I: What is the most unusual/interesting place you have ever visited?

Vacations aside, I do get an opportunity to travel for work and visit our food suppliers. The opportunities I have had to visit back to the farm level have been a very interesting learning experience. If it wasn’t for my role, I would have never been able to experience that.

R&I: What is the riskiest activity you ever engaged in?

My husband, kids and I recently did a boot-camp-type obstacle course up in the trees 24 feet in the air. Although I had a harness and helmet on, I really put my fear of heights to the test. At the end of the two hours, I did get the hang of it but am not sure I would do it again.

R&I: If the world has a modern hero, who is it and why?

The first people that come to mind are those who are serving our country and willing to sacrifice their own lives for our freedom.

R&I: What about this work do you find the most fulfilling or rewarding?

Every day is different and I have the opportunity to be involved in a lot of different work across the company.

R&I: What do your friends and family think you do?

My husband and children have a pretty good sense of what I do, but the rest of my family has no idea. They just know I work for Wawa and sometimes travel.

Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]