Helping to drive
The perfect storm
Compared to older classes of insurance, such as Marine, Motor is a relative newcomer; the first car insurance policy was issued in the UK in 1896, some 200 years after Edward Lloyd opened his coffee house. The risks have changed in that time as vehicles developed, became commonplace and now dominate the transport networks around the world but the fundamental remains the same - a human gets into the car and drives it.
The pace of change and technological advancement is quicker today than it has been in our history and the automotive sector is no different. Many commentators predict that we are going to see a revolution over the next 20 years the likes of which we haven’t seen since cars replaced horses and it is already well underway.
We talk a lot in the industry about Advanced Driver Assistance Systems (ADAS) and, in particular, the effectiveness of the sensor suite such as radar, lidar and cameras. The effectiveness of these sensors is crucial in the development of Autonomous Vehicles (AVs) as they will replace the human driver’s eyes and ears. But that is only one part of the puzzle. The other things that humans have is a brain; a sensor does not. All of these sensors, no matter how sophisticated, will simply provide inputs to an artificial ‘brain’ that will then determine what action to take; whether to steer left, right, brake, speed up or stop.
The human brain has evolved over millennia. Artificial Intelligence (AI) developers are attempting to create software that can replace the human brain behind the wheel and this presents a real challenge to the insurance industry. Human behaviour is surprisingly predictable which is why historical claims data is a very good predictor of future claims. But what happens when the past is no longer relevant? When the AI ‘brain’ can be updated (for better or worse) in a single update? How will we know what the future looks like then?
Our traditional risk models, that have served us well for decades and have been largely based on past human behaviour, will become obsolete. We will need to develop new techniques to assess the risk that AVs will pose. Access to driving data, both real world outputs and software simulation testing will be crucial in developing these new techniques, as will the ability to interrogate and interpret those outputs and understand the impacts on the likelihood and magnitude of crashes happening in the future.
Simply put, the insurance industry needs to think differently and develop new skills and capabilities and we need to do that quickly. Data analytics, for example, will be critical. This is precisely why Direct Line Group is involved in a number of R&D projects, in particular Move UK and Streetwise, both part funded by the Government through Innovate UK. We are also developing partnerships to work collaboratively with car manufacturers, such as Tesla, and their supply chains, not just to understand risk but also to create innovative products and service solutions that will meet the demands of changing customer behaviour. We are already seeing the emergence of new mobility solutions, such as ride-hailing and car sharing which we expect to reduce traditional car ownership over time. We also want to help our customers navigate their way through the technology.
The Government expects to see driverless cars on Britain’s roads by 2021 and is making a number of regulatory reforms to help make this happen. The Autonomous and Electric Vehicles Bill currently going through Parliament is just the first step in amending such laws and regulations that currently prevent cars being driven without any human operator inside or outside the car.
The fundamentals of our industry are changing, the naysayers may view this as a perfect storm and batten down the hatches in the hope that it passes. We choose to run towards this future, embrace the changes and help drive the revolution.