Gear shift – how the power of data can help insurers reflect the true risk of a car

A drive in Henry Ford’s famous Model T was a risky business. Back in 1913, when the iconic car was all the rage, road deaths were climbing rapidly – about 33 people were killed for every 10,000 vehicles on the road in the US.

A century and several factors of additional horsepower on, and these numbers have plummeted to around 1 person per 10,000 cars. Cars are a lot safer than they used to be.

Advanced driver-assistance systems (ADAS) like automated emergency braking (AEB) and lane keeping assistance (LKA), which are increasingly fitted to modern cars, are making them safer still.

But these safety improvements and falling risks are not always being captured in insurance premiums. Traditional pricing is still rooted in who is driving the vehicle rather than what they drive. Adjusting pricing based on the safety features fitted in the vehicle, or its make and model, is onerous and time-consuming.

At Swiss Re, we have come up with a solution − our ADAS risk score. It harnesses the power of data to help insurers better reflect the true risk of each car. And it means that incremental safety improvements in each model and make of car can be captured, allowing insurers to set premiums accordingly.

The road to greater resilience

Traffic accidents remain a significant cause of mortality – around 1.35 million people are killed on the roads each year according to the World Health Organization. The majority of these deaths occur in low- and middle-income countries, with less stringent safety regulations and fewer of the most modern cars on the road.

As we progress towards fully automated vehicles, the safety features fitted to cars rolling off the production line are becoming increasingly advanced. Research by Swiss Re and digital mapping company HERE suggests that even basic ADAS technology like forward collision or lane departure warnings could reduce accidents on motorways by 16.3%. More sophisticated technology like AEB and LKA could have an even greater impact – helping reduce motorway accidents by more than a quarter.

If we can capture the true impact of this safety technology, and reflect it in risk calculations, then insurance becomes a key tool in migrating drivers’ choices towards the safest vehicles. With more affordable premiums we can drive up road safety and ultimately improve resilience.

The problem is, only the car manufacturer knows which ADAS is in a specific vehicle – features vary from car to car and brand to brand. Our research has shown that there can be significant differences in performance between different generations of the same technology, let alone the different ways it can be installed.

Better defining risk

In 2018, Swiss Re and the BMW Group built the Swiss Re ADAS risk score. It matches technology already fitted in cars with vast amounts of claims data to give a clear picture of the impact of these safety systems.

For brand new cars, where there is not enough claims data, we combine this backward-looking information with live vehicle track testing. This means testing the systems across a range of potential real-life insurance situations to clarify their true performance. Doing this ensures that we have up-to-date information about each make and model when it comes to preventing or mitigating collisions.

On top of this, we add in data drawn from simulations. This provides additional information on high-speed manoeuvres in traffic, or poor weather conditions for example. It allows us to look at situations like, what happens if a pedestrian runs out in front of a car? And how do things change if that pedestrian is standing still?

Being able to test out these scenarios virtually before new features enter the market means that there is no latency in the score.

Scoring individual vehicles

Pooling together all this data, each vehicle is assigned a score – the higher the score, the safer the vehicle. These scores are made available through the Swiss Re Automotive platform and can be accessed by insurers. They can use this information to supplement existing models and more accurately reflect risk in their underwriting and tariffs.

We have recently broadened the scope of the ADAS Risk Score even more by forming partnerships with additional Original Equipment Manufacturers (OEMs). In 2020, Toyota Insurance Services also joined the ADAS Risk Score platform, another example of how expanding collaborations can continually improve the accuracy of our Risk Score.

Currently we sit between two places. We are not yet at the point of fully autonomous vehicles, where the skill or otherwise of the driver is irrelevant. But the static proxies for risk that were put in place years back – things like ‘Who is the driver?’, ‘Where do they live?’ – can’t sufficiently capture the evolution towards safer cars with self-driving features.

Understanding the impact of these step changes in safety and coupling them with existing risk profiling gives insurers a clearer picture. It enables them to offer lower premiums where suitable, ultimately accelerating the uptake of safer car models and improving resilience.

Making our roads safer for all means putting data and technology in the driving seat.

Find out more about our Advanced Drivers Assistance Systems (ADAS).

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