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

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.


That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.


Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]