Insurance Helpline | It’s time to speak up about driverless cars
QUESTION: Have you been thinking about the insurance implications of thousands of driverless cars on Jamaican roads? What effects would they have on motor insurance? Would a contraction of the industry take place as a result? Would premiums go down? I would be most interested to learn your views.
INSURANCE HELPLINE: These questions were posed to me by a close relative. He is a regular reader of this column. I was unsure whether his questions were posed for me to answer in this column or if they were topics for the hour-long discussions we have on the telephone.
At first, I was reluctant to share my thoughts in public. Many local companies, including insurance companies, do not invest in research and development or conduct studies of how developments overseas can rapidly affect their local operations.
This is still happening in spite of the disruption that cellular phones wrought on the former monopoly, telephone provider Cable & Wireless (now FLOW).
The mission of this column is to offer free information and advice to consumers about personal insurance products. It is not in the business of conducting research and or offering free information and advice to insurance companies.
Four things caused me to change my mind and reply to the four questions.
My relative is a consumer of personal insurance products. I offer him advice from time to time. He has a very curious mind and a long-standing interest in science, generally, and in the use and application of technology. PNP Chairman and former government minister Robert Pickersgill would call him a member of the 'articulate minority'.
The third reason is that discussions about driverless or self-driving cars have already begun locally. Between August 2015 and January 2016, there were three references to them in this newspaper.
Finally, I enjoy a challenge. Writing about this subject without giving too much away, particularly to those in the local insurance industry who may be too busy to be aware of the developing trends, is something that I find very difficult resist.
The local insurance industry is a by-product of our colonial past. Those links remain to this day. For example, the suppliers of reinsurance insurance protection that insurers buy of the majority of local insurers are found in London.
Many of our laws are based on English law. For example, our Road Traffic Act, which is finally about to be repealed, and the Motor Vehicles Insurance (Third-Party Risks) Act were patterned off similarly named laws in England. The practice of insurance locally is founded on UK traditions. Since the local insurance infrastructure is not as developed as the UK's, examining what is happening there can give us insights of what could happen locally in relation to insurance and driverless cars.
"Insurers face driverless cars challenge," said a Financial Times (FT) headline on January 19, 2016. FT is one of the most influential business newspapers in the United Kingdom. Quoting rating agency Standard & Poor's, it said: "The development of driverless and automated cars could shrink the size of the ... market" and that trend "would reduce the frequency and severity of claims, pushing down premiums." However, it will be some time before those features become common.
Meanwhile, what some locally call high-end vehicles (which are already on the island) come equipped with autonomous emergency braking systems (AEBS). These vehicles are designed with special sensors. Those devices detect when another object is likely to hit the vehicle and automatically apply the brakes without the driver's intervention.
The UK insurance industry's Thatcham Research says that this technology has led to "a reduction in accident frequency and a 40 per cent reduction in personal injury claims". According to the article, "almost three-quarters of cars launched last year had AEBS as standard or optional extras".
The director of insurance policy at the Association of British Insurers had this to say: "The presence of driverless cars on UK roads would be life-changing in many ways, and one of the business sectors likely to be most affected is insurance. Contrary to what some people might expect, insurers are not standing in the way of this development, but actively looking to support progress and innovation.
"The developments we've seen towards increasingly autonomous vehicles are already reaping rewards with autonomous emergency braking reducing collisions and injuries and helping to bring down insurance premiums. Truly, driverless cars have the potential to dramatically reduce deaths and injuries on the roads and could revolutionise what we think of as public transport. The role of motor insurance in such a future will be very different to what it is today, but insurance will be part of the picture."
This column is issuing an invitation to the executive director of the Insurance Association of Jamaica. Has the association articulated a policy in relation to driverless motor vehicles generally and, more specifically, vehicles that are fitted with AEBS and other types of automatic collision-avoidance devices?
n Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: email@example.com.