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Car Crash: Driverless Tech will Drive Auto Insurers Out of Business

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Burney Simpson

Auto insurers are in serious trouble.

That’s the word anyway from a number of large business consultants who apparently see an opportunity selling their services to the insurers.

Several of the consultants released reports recently suggesting auto insurers better get it together before autonomous vehicles put them out of business.

The international business advisory firm KPMG reports that the advanced safety and accident avoidance systems in autonomous vehicles could lead to decline in accidents-per-vehicle by as much as 80 percent. That in turn will cause a decline in the current auto insurance industry, which could shrink to 40 percent of its current size by 2040, KPMG believes.

Meanwhile, auto insurance executives don’t see the threat of the technology, at least in the near term, KPMG writes in its study “Automobile insurance in the era of autonomous vehicles.”

As part of its report KPMG conducted a survey of top insurance executives. More than 95 percent say autonomous vehicle technology will have no impact on their industry by 2020. Their attitude bends somewhat when discussing six to 10 years out, with 41 percent of the executives saying the technology will impact their industry somewhat or very significantly by 2025.

DRASTIC CHANGES

Meanwhile, Deutsche Bank this month predicted the drastic changes to industry will happen on a faster timeline than that foreseen by KPMG.

In an analysts report on Progressive Insurance, Deutsche said that self-driving cars and ride sharing programs will completely alter auto insurance. There could be a large number of accident-free cars on the roads in 10 years, and it’s not clear there will an auto insurance industry in 20 years, according to Deutsche.

And then there’s David Powell, a manager with Lloyd’s Market Association, who tells trade pub Insurance Age that autonomous cars will drive down the number of accidents, leading to consolidation among auto insurers. Accident liability could move from the vehicle owner to the manufacturer, further fracturing the insurance industry.

INSURANCE TELEMATICS USA

These types of changes to the insurance industry will be a major topic of discussion at the Insurance Telematics USA 2015 conference and exhibition in Chicago on September 2-3.

Show organizers say there will be 800 senior level executives attending, with 57 percent from top North American insurance firms. Others are from auto OEMs, industry suppliers, tech houses, and consulting firms.

The agenda offers five tracks – Business Models and Tech Innovations, the Connected Car Disruptor, Claims & Telematics, the Consumer at the Heart of UBI, and Data Decisions & UBI.

Photo: Leona Drive (Toronto, ON) by JasonParis 2009.

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Truck Driver = Logistics Manager in Autonomous Future: Daimler

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Burney Simpson

In the next decade the driver of an autonomous truck will be a system manager who monitors the efficient handling of the vehicle, according to a Daimler North America executive at a panel on driverless technology last week in Washington, D.C.

The panel was convened May 8 by the Brookings Institution and the U.S. Department of State to discuss “Bringing Driverless Cars from Research to International Markets.”

For the most part the panel covered big picture topics like legal liability and data privacy, and the experts called on governments to begin addressing these issues on a global basis.

Adding a touch of the immediate was Jessica Altschul, a Daimler manager of outreach and innovation policy. She noted that Daimler last week launched in Nevada two fully-autonomous 18-wheel Freightliner Inspiration trucks.

By 2025 heavy-duty freight trucks will operate in platoons using adaptive cruise control, and the driver/logistics manager will be monitoring several vehicles, checking for system glitches, reviewing emissions, and closely watching fuel economy, said Altschul.

“The trucks will stay at the same speed and at the same length from each other. Fuel economy will be especially important,” for shipping goods, said Altschul.

SAVING LIVES

Panelist Levi Tillemann welcomed driverless vehicles as a possible godsend that can drastically reduce auto accidents and death.

“My father and grandfather both died in auto accidents, one due to human error, one due to mechanical malfunction,” said Tillemann, a former Energy Department official and author of “The Great Race: The Global Quest for the Car of the Future,” a book on the development of electric vehicles.

“If we can reduce the 30,000 people a year that die in accidents, nearly 90 percent due to human error, that’s a good thing,” said Tillemann. “Let’s not hem and haw over this.”

Driverless vehicles can also bring mobility to the disabled community, said Sonya Smith, associate professor of mechanical engineering at Howard University.

DOUBLE THE FUNDING

The Obama administration is seeking to double the funding for driverless technology research in its 2016 budget for the Department of Transportation, said Jonathan Margolis, the State Department’s acting deputy assistant secretary of state for science, space and health.

Obama is asking Congress for $935 million over the next six years for intelligent transportation systems and automation research, according to the DOT’s pdf FY 2016 Budget Highlights.

Other panelist included Benjamin Wittes, senior fellow at the Brookings Institution, and Karl-Josef Kuhn, head of reliable automation and control with Siemens AG.

Photos courtesy Daimler AG.

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Driverless Cabs Could Be Cheaper Than the Subway

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Burney Simpson

A driverless ‘robo-taxi’ could cost 35 percent less than a conventional taxi, and may even be cheap enough to compete with mass transit, according to the new report ‘Robo-Taxis and the New Mobility‘ by Boston Consulting Group (BCG).

Commuters would probably be charged the cheapest robo-taxi rate because they would regularly schedule the vehicle in advance, travel from fixed start and end points, and share the ride with at least one other passenger, BCG reports. These taxis would offer a private compartment for each rider.

In its cost comparison, BCG uses an occupancy rate of 1.2 passengers per ride, the average rate for New York City cabs (See BCG chart above). A driverless robo-taxi carrying 1.2 passengers would cost $1.80 per passenger mile, compared with the $2.80 cost of a cab with driver, the research firm reports.

BCG found that a robo-taxi with two passengers would cost $1.10 per passenger mile, highly competitive with the $1 a mile cost for a subway ride. Theoretically, robo-taxis carrying commuters would be cheaper still if their operators received any of the local, state and federal funds that public transit receives.

Robo-taxi firms will be operated by ‘mobility providers’ – a mix of taxi companies, ride-sharing services, tech firms, and OEMs – that would rent their service either by the length of the ride or by the amount of time the vehicle is used.

BCG contends that robo-taxis would make ride-sharing services commonplace, reduce car ownership and congestion in urban areas, and even lower emissions.

For more on BCG’s research, see Driverless Transportation’s “Consumer Demand Will Bring Partial-Autonomous Driving Tech This Year: Study” on the firm’s ‘Revolution in the Drivers’ Seat: The Road to Autonomous Vehicles.’

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Consumer Demand Will Bring Partial-Autonomous Driving Tech This Year: Study

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Burney Simpson

The coming of driverless vehicles is down to ‘when’ not ‘if’ as auto OEMs rollout vehicles offering a variety of autonomous features in the next 12 months, according to Revolution in the Driver’s Seat: The Road to Autonomous Vehicles, a new report from the Boston Consulting Group (BCG).

This includes such technologies as single-lane autopilot, highway autopilot with lane changing, traffic jam autopilot, autonomous valet parking, and urban autopilot, reports BCG, which has been releasing portions of its research the last few months (See “Self-Driving Features May be Worth $42 Billion by 2025“).

The implementation of this partially-autonomous technology will initially be seen in high-end vehicles due to the cost of developing, testing, building and installing the features.

Many consumers are willing to pay extra for these features that offer greater safety and convenience, according to a BCG survey last September of more than 1,500 U.S. consumers that had recently purchased or planned to soon purchase a car.

Fifty-five percent of U.S. consumers would buy a partially autonomous vehicle, and 44 percent said they would buy a fully-autonomous vehicle. The three top reasons cited for buying a partially-autonomous car are lower insurance premiums, increased safety, and that the vehicle will switch to self-driving mode on the highway, BCG found.

The cost of an autonomous vehicle to the consumer will come down as “component costs are scaled, R&D investments amortized, and assembly costs reduced due to volume increases,” BCG predicts. By 2025, the technology developed for partially-autonomous vehicles will have declined enough that it will be economically feasible to market fully-autonomous vehicles to a majority of consumers.

SENSOR TECHNOLOGY

A number of technology challenges remain before there is widespread development of fully-autonomous vehicles. The major issue now is lowering the costs of and improving the quality of sensor technology, BCG writes.

Sensors assess and react to a vehicle’s environment, receiving and interpreting information from cameras, radar, ultrasound, GPS systems, light detection equipment, and LIDAR. While much of this technology is available from auto-parts suppliers and technology firms, the auto OEMs will hesitate to install it on a mass scale until they see costs come down, especially for LIDAR and GPS, BCG contends.

After partially-autonomous vehicles become more widespread, regulators will seek to quantify their value to determine whether to require fully-autonomous technology from the auto industry, BCG predicts.

Regulators will focus on productivity gains from reduced traffic congestion and savings arising from fewer accidents. BCG believes it will take five years of proven improvements in these areas before governments decide on mandating autonomous technology in vehicles.

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Connected Vehicle Systems Revenues to Top $36 Billion Annually by 2025: Study

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A new study from Navigant Research is projecting that connected vehicle systems will see annual global revenues exceeding $36 billion by 2025.

This figure derives from sales of OEM and aftermarket dedicated short-range communications (DSRC)-based Vehicle-to-external (V2X) communications systems.

The study is a 77-page overview of the market with write ups on key players, market barriers, technology issues, and suppliers. It offers 40 charts, graphs, and figures, according to a promotional release.

The release for the study notes that DSRC provides a foundation for connected-vehicle capability because it can provide real-time data to vehicles, drivers and pedestrians through vehicle to external communications (V2X).

Navigant says its report addresses these questions:

  • How big is the potential OEM market for vehicle-to-external (V2X) communications globally and regionally?
  • How will aftermarket V2X systems, including built-in and smartphone-based solutions, help drive the development of vehicle connectivity?
  • What are the key forces driving the deployment of V2X-connected vehicles globally?
  • What are the possible roadblocks to reaching the full potential of V2X communications?
  • What are the pros and cons of various technology solutions for connected vehicles?
  • Which companies will play a critical role in the deployment of V2X communications?

The 77-page study is targeted to OEMs, fleet operators, tier one and aftermarket automotive electronics and software suppliers, aftermarket automotive electronics retailers and installers, telecomm providers, intelligent transportation system suppliers, government regulators, and the investor community.

The report’s full name is Connected Vehicles, Vehicle-to-X Communications and Supporting Technologies: Global Market Analysis and Forecasts.

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Planners — Be Wary of Autonomous Vehicle Cheerleaders

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Burney Simpson

City planners should take care when reading or viewing the latest breathless report about the fast-moving transition to fully autonomous vehicles, according to a new study that two transportation experts conducted for a high-powered group preparing a long-term transportation plan for Seattle and the Puget Sound area in Washington State.

It’s true that autonomous driving technology is moving fast, but its implementation will “occur more gradually than is often presented in the popular media,” according to the ‘Transportation Futures: Influence of Technical Advances on Transportation Behavior’ report this month from Mark Hallenbeck and Martin Wachs. (The link will download a 23-page PDF).

POPULAR PERCEPTION

Predicting if and when full vehicle autonomy will happen is difficult, they write, but “(i)t is likely that partial automation, especially for long distance freeway portions of longer trips, will be available earlier than the full automation that is the popular public perception.”

The higher levels of automation may occur in “select, more controlled environments, such as college campuses and industrial complexes.”

Hallenbeck is director of the Washington State Transportation Center at the University of Washington. Wachs is a former director of the University of California Transportation Center, and of the transportation, space and technology program at Rand Corp. He is a member of the California Road User Charges program Technical Advisory Committee.

The report covers information technology, vehicle technology, and transportation finance and traffic management, as it reviews ways that planners can best use technology to prepare, and possibly fund, an evolving transportation system that best serves the region.

PAYING FOR IT

The authors suggest that transportation project funding could shift from motor fuel taxes to charges for actual road use as tracked by GPS- or smartphone-based systems, along with tolls and fees for parking and specific uses like a bridge crossing. Opponents say the road use fee concept invades personal privacy.

The study was conducted for the Transportation Futures Task Force, a group of civic leaders in the Puget Sound area seeking to develop a comprehensive 30-year transportation and transit system for the region. The task force began its year-long study in February.

Photo in 2012 of a Google car by Steve Jurvetson.

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Give Up Your Car? 40% of US Drivers Say Yes

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Burney Simpson

Nearly 40 percent of U.S. vehicle owners are interested in autonomous vehicles, and would consider giving up ownership if they had access to a vigorous, reliable, on-demand autonomous vehicle program, according to a survey of 1,086 adults by research consultant Gartner Inc.

The survey is part of the Gartner study “Crashing Industries and Our Societal Beliefs – The Real Implications of the Autonomous Vehicle” by Vice President and Analyst Thilo Koslowski.

However, American consumers are wary of autonomous technology. More than one-third of U.S. vehicle owners have concerns about trusting the technology, 20 percent have second thoughts about possible costs for a vehicle that offers at least some autonomous capabilities, and 17 percent fear losing control of their vehicle to a computer.

COST DISPARITY

There is a wide disparity in what American consumers say they would pay for autonomous technology and what it costs today, at least in the prototypes that auto OEMs and others are building and testing, according to Gartner.

On average, vehicle owners say they would spend an additional $1,404 for self-driving features.

But the hardware in an autonomous vehicle prototype can cost about $200,000, and the cost for “just the Lidar sensor used in most prototypes today to measure distance by illuminating a target with a laser and analyzing the reflected light represents an $85,000 investment,” Gartner reports.

Still Koslowski believes that self-driving vehicles will evolve in the next 15 years in three stages — from automated, to autonomous, to driverless. By 2030, “autonomous-driving-capable vehicles will represent approximately 25 percent of the passenger vehicle population in use in mature markets,” he concludes.

Photo by Kamyar Adl.

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Maryland a Step Closer to Driverless Roads

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Burney Simpson

Maryland could become the fifth state to allow the use or testing of self-driving vehicles though there’s still probably a long road ahead before it changes any laws.

The Maryland House of Delegates today passed a proposal that would fund a two-year task force that will determine best practices for self-driving vehicles after reviewing how other states are addressing the topic and calling on the U.S. Department of Transportation for guidance.

The legislation calls for spending as much as $200,000 to hire a driverless vehicle expert to advise the task force which must report its findings by the end of 2016.

The proposal also calls for a review of current state law to consider possible changes needed to accommodate driverless vehicles. The task force must also make recommendations on driver training and education, and on liability issues for crashes involving driverless vehicles.

FOUR STATES & DC

If Maryland decides to allow the use or testing of self-driving vehicles, it will join Nevada, California, Florida, Michigan, and the District of Columbia. Nevada authorized the use of self-driving vehicles in 2011, and issued a license to Google in 2013.

The chief sponsor of the Maryland proposal is Del. Pamela Beidle, a Democrat from Anne Arundel County, who has said that support for driverless transportation is growing rapidly.

The House passed her proposal 130 to seven, and requests to be on the task force have come from the State House, the Attorney General’s office, the state highway department and DOT, several police organizations, AAA, insurers, and OEM associations, according to press reports.

NEXT STEPS

The next step in the legislative process is for the Maryland state senate to pass similar legislation to that of the House bill, and send it to the governor for his signature. A sister bill – SB0778 – is scheduled to be heard March 24 by the Maryland Senate Judicial Proceedings Committee.

It has the bi-partisan sponsorship of Sen. Andrew Serafini, a Republican from Washington County, and Sen. Bill Ferguson, a Democrat from Baltimore City.

The National Conference of State Legislatures (NCSL) reported that 11 states, including Maryland, considered self-driving vehicle legislation in 2013, but none of those proposals were successful.

The NCSL found that the major issues that states consider in these proposals have been liability, insurance, cyber-security, and the possible application of distracted driver laws to the person charged with responsibility for the vehicle.