How smart tech could lower car insurance premiums

Vehicles equipped with Advanced Driver Assistance Systems (ADAS) come with features such as lane departure warning, active park distance control and sensors to slow or stop vehicles in order to avoid a collision. 

This technology has the potential to reduce motor accident frequencies up to 25% and cut car insurance premiums by USD 20 billion by 2020, according to research by Swiss Re and HERE.

However, insurers must collaborate with motor manufacturers if they want to access this data and accurately assess ADAS technologies as part of their risk pricing models.

To help insurers with this task, Swiss Re is working with BMW to develop an ADAS risk score algorithm, which will be available from 2019.

This partnership points to a future where car manufacturers and insurers share information and collaborate to improve road safety and create tailored motor insurance products.

In depth

Sometimes your eyes can play tricks on you.

Failing to see what is on the road is the biggest cause of road accidents. UK statistics show that in more than 40% of crashes, a driver failing to look properly was a major contributory factor.

Technology may not be able to fix lapses in our concentration, but it can intervene to reduce the chances of crashing.

Around a quarter of new cars today come with Autonomous Emergency Braking (AEB) systems that will alert the driver to a potential collision, then apply the brakes if the driver fails to act. Still more are fitted with forward collision warning systems that provide the warning without automatically braking.

This technology is just one of a range of intelligent driving aids and safety measures that are collectively known as Advanced Driving Assistance Systems (ADAS).

By 2020 the research predicts that every vehicle will be fitted with some form of ADAS technology, with an average of 1.7 systems installed per car.

Research of the BMW Group and Swiss Re show that Emergency Brake Assist alone has the potential to reduce rear end accident frequencies by more than 30%.

Cutting premiums

Mass adoption of ADAS technology is likely to be good news for both road safety and car insurance premiums.

Basic ADAS technology such as forward collision or lane departure warnings could reduce accidents by 16.3% on motorways, and 11.6% on other roads. More sophisticated ADAS technology like AEB and lane-keeping assistance could have an even greater impact, reducing accidents by 25.7% on motorways and 27.5% on other roads.

Fewer accidents means fewer insurance claims, which can in turn help push down the cost of motor insurance policies for consumers.

Research by Swiss Re and HERE has found that the increased road safety resulting from widespread ADAS adoption could help cut USD 20 billion from annual   premiums by 2020.

However, the tools that insurers are currently using when factoring ADAS technology into their risk calculations lack the appropriate level of detail to properly reflect the safety benefits, according to Swiss Re’s Head Strategy, Products & Technology Sebastiaan Bongers.

“Most insurers do not yet take a risk management approach of systematically looking at ADAS and pricing this into a motor policy,” Bongers says.

Instead, explains Bongers, insurers typically take a broad view where they assess the frequency and severity of claims for vehicles with these technologies versus those without ADAS.

“What insurers can’t do is perform more granular analyses as they do not know which ADAS features are installed, how much safer these systems are, and to what extend drivers use these systems,” he says.

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