The power of 35.
The Insurance Institute for Highway Safety (IIHS) estimates that automatic emergency braking and forward-collision warning features could curtail injury claims by as much as 35%. The California Department of Motor Vehicles estimates that in 35% of crashes the brakes were not applied. It is striking that these two numbers match.
These savings are not surprising. Automatic braking will avoid some accidents altogether. When an accident nevertheless occurs, automatic braking may greatly reduce the speed on impact. As a matter of simple physics, a reduction in speed results in an exponential reduction in the kinetic energy that must be absorbed in a collision. The formula, for those interested, is Kinetic Energy = 1/2mv2, where "m" is the mass of the vehicle and "v" is the vehicle's velocity. Thus, a vehicle that collides at 30 mph has only one-fourth the kinetic energy of a vehicle that collides at 60 mph.
While automatic emergency braking and forward-collision warning are standard in some luxury cars and are available as options in many others, 10 automakers have agreed with the National Highway Traffic Administration and the IIHS to establish a time frame for making assisted driving features standard in all cars.
These are significant developments for insurers and for public policy makers.
For insurers, a 35% decrease in injury claims will result in a significant reduction in premium. This may be offset, at least in part, by an increase in the cost of repair for more sophisticated vehicles and the continuing increase in healthcare costs.
Public policy makers should contemplate the potential benefits of a 35% reduction in injuries and deaths because of assisted driving. At present, highway deaths in the U.S. account for 33,000 to 35,000 deaths per year (depending on how one correlates deaths to auto accidents). Over 10 years this is the equivalent to the population of some major cities-St. Louis, Minneapolis, Des Moines or the city of your choice. A 35% reduction would reduce deaths from 33,000 to 21,450. Every year, 11,550 more people would continue to go about their lives. Add a similar reduction in the more than 2.5 million injuries per year, and the public benefit is overwhelming.
These benefits only accrue as assisted driving features find their way into the fleet. This can be a slow process. It is estimated that electronic stability control, which has been available as an option for many years and has been mandatory since 2012, will not reach 95% penetration until 2029. This is because the average age of automobiles is a bit more than 11 years. Thus, anything that can hasten the adoption of these safety features (and others that are to come) benefits everyone.
Encouraging adoption directly implicates insurance. Auto insurance is one of the more expensive costs of owning a car. The cost of these safety features, either as an option or as a standard feature, is also an expense of owning a car. It is critical that savings from the lower frequency and severity of accidents be rapidly passed on to car owners in lower insurance rates, which will help offset the added cost and promote more rapid adoption.
Even when assisted driving features become standard, which will be some years in the future, the majority of the existing fleet may still be on the road for another 11 years or so. Passing substantial insurance savings to potential purchasers will make retiring the old heap more palatable.
Policy makers and regulators can play an important part in facilitating adoption of these safer cars. Laws and regulations that may impede the rapid distribution of insurance savings to insureds should be streamlined. Likewise, some driver-centric rating systems that may distort rates by artificially depressing the weight given to the safety of the vehicle should be reviewed.
Self-driving vehicles of the future have captured the attention of the public and the insurance industry. While many have been looking toward that day, enormous improvements in safety-critical technology are taking place right now. In a sense, the future is already here. Cars are taking over many safety-critical functions from their more fallible drivers. Insurers and policy makers must adjust.
Those interested in a lengthier treatment of this topic can read this article by Thomas Gage and Richard Bishop. And here is a Bloomberg article on a Boston Consulting Group study of the issue.
