The AXA.COM team editor

Insuring the driver, the car and the algorithm

Whether in terms of risks related to cyberattacks, the evolution of automobile insurance models or the legal and ethical framework surrounding the Internet of Things, the connected car raises a number of questions. Future of insurance
Jan 20, 2016

Analysis

What is the future for driver insurance in an automated world?

Car insurance premiums are currently calculated according to driver and vehicle characteristics. In tomorrow's world, people will probably be travelling in driverless vehicles... so what is the future of car insurance?

This is the question being asked by Warren Buffett, CEO of Berkshire Hathaway and owner of several insurance groups. And with good reason, as autonomous cars could lead to a 93% reduction in accidents by 2040, with the price of insurance contracts possibly falling accordingly (source: KPMG). David Zuby, Vice-President of the Insurance Institute for Highway Safety is already reporting that "vehicles with collision-avoidance systems have an accident rate which is 7-15% lower than that of other vehicles".

And with good reason, as autonomous cars could lead to a 93% reduction in accidents by 2040, with the price of insurance contracts possibly falling accordingly.

Accident frequency by vehicle could fall dramatically in the near future.
KPMG LLP actuarial analysis

In addition, car-sharing platforms like Uber, BlaBlaCar and Autolib, could support the move towards autonomous cars by reducing the need for individuals to buy their own vehicle. Uber boss Travis Kalanick has already set out a clear strategy for 2014: "Today, you not only pay for the car, but also for its driver. If this is no longer the case (note: with driverless cars), using Uber will become cheaper than owning a vehicle". Uber recently opened a research centre in robotics and mapping at Carnegie Mellon University, Pittsburgh, USA, to build its own autonomous vehicles.

Even if this irreversible and definitive vision is not adopted, at the very least the car itself will go through a period of considerable transformation, one AXA has anticipated with studies dedicated to this type of forward-looking subject.

Data, the new black gold

In an initial phase, of course, cars will not be totally autonomous. In fact, manufacturers are already increasingly automating controls by default: obstacle detection with automatic braking, automatic speed on motorways, parking assistance, etc. This transition period is fostering the development of new insurance models based on the exchange of data between the vehicle, infrastructure and embedded services (such as onboard GPS), with analysis of this information helping to individualize risk.

This transition period is fostering the development of new insurance models based on the exchange of data between vehicle, infrastructure and embedded services (such as onboard GPS).

Bruno Aidan
AXA Data Innovation Lab

Ever more accurate analysis of driving (acceleration, anticipation) and environmental (road, event) data is leading to reduced behavioral risks as well as a more limited impact of circumstantial risks. This ultimately benefits the individual insured person by reducing their costs and enabling new practices, such as vehicle sharing.

In addition, when accidents do happen, the collection of various types of data allow us to better understand causes and so detect and correct anomalies or vulnerabilities, making vehicles ever safer.

New practice-oriented insurance services

Helen Chauveau
Head of emerging risks at AXA

When 2040 comes along and 70% of new vehicles taking to the roads no longer have a driver (source: BNP Paribas Workshop), it will be necessary to find a way "to ensure coexistence for a long transitional period of conventional vehicles, motorbikes and pedestrians, etc., with robotized cars, leading to settlement of lengthy and complicated insurance claims.

As car insurance is already an area targeted by automakers, it is likely they will eventually have it covered in full. Having become mere passengers, individuals would then take out personal insurance, guaranteeing their right to compensation for injuries resulting from an accident or, less seriously, in the event of a delay or cancellation that is the transporter's fault. It is also true that many insurers are pushing for the establishment of a system known as "no-fault liability".

Hélène
Chauveau

Put simply, in this system the victim is compensated and the insurers of the various parties then agree on assigning liability.

Comprehensive insurance

The correlation of data from vehicles and from connected objects, be they in the home (smoke or intrusion detectors, etc.) or on a person (connected watch or wristband), could allow insurance firms to propose all-encompassing offerings (transport, housing, health), constantly updated based on calculated risks.

Bruno Aïdan
AXA Data Innovation Lab

From taking out insurance through to compensation, data will gradually occupy a predominant place in the insurance business. This will lead to the emergence of and competition between the data platforms of players in the value chain. For these players, a twin-track race is under way towards access to data but also towards transparency and client consent.

From taking out insurance through to compensation, data will gradually occupy a predominant place in the insurance business.

Insurers and society as a whole ultimately have an interest in encouraging the use of these connected technologies, whether in the car, at home or while out jogging, as it will generally reduce the risks we take and those we cause others to take.

More than insurance...

The information insurers will have on insured persons will give them the opportunity to go beyond traditional activities to offer new value-added services such as avoidance of traffic jams, networking opportunities (traveling with people with common affinities), personalized tourist recommendations (according to taste, location, weather), etc.

To protect individuals and demonstrate the kind of complete transparency required by operating in this new model of society, AXA is putting data privacy at the heart of its review of insurance trends so insured persons will find it worth their while, such as preferring to utilize geolocation on their mobile phones for services such as routing, weather, localization in case of theft, etc.

Therefore, insurance could become a virtual companion, faithfully watching over us, ready to anticipate problems and intervene should they arise.

AXA is putting data privacy at the heart of its review of insurance trends.

The cars of tomorrow will be without drivers but not without hackers...

The law requires us to keep control of our vehicle at all times or thereabouts, but what will happen when we are no longer in control?

The autonomous vehicle is set to revolutionize roads in 25 years, when 75% of vehicles will no longer have drivers (source: IEEE). To be autonomous, cars must be ultra-connected (via GPS, via connections between cars and with road infrastructure) and these connections bring an attendant risk of hacking...

However, 21st-century highway hackers will not look like the madmen (and women) of Mad Max, dangling at the end of a pole to grab the steering wheel, all the while wielding spiked clubs. They will be more discreet, intervening at a distance, hidden behind a screen.

What risks lie ahead on the roads of the future? Did you know that...


1/ The car could one day become a nest for viruses?

The auto industry has gradually phased out any mechanical link between command and action in cars, making them nothing short of computers on wheels. For example, when pressing the brake pedal we are no longer physically stopping the car, but are instead asking the onboard computer system to activate the braking function. Computerization of the car might bring on a lot more familiar modern-day IT-related hassles such as bugs, security updates and viruses!

2/ Hackers or intrusive geolocation systems could eventually track our driving?

In the autonomous car, GPS systems would always be active, continuously exchanging location information with various systems. GPS is already part of everyday life in places like France. In fact, nearly nine out of ten people use their onboard GPS or that of an application installed on their phone, such as Google Maps or Waze, when driving (OpinionWay, 2015). Security failings have already been identified. For example, in 2010, according to UnderNews, Manar Youssef, a Moroccan computer expert, identified a system vulnerability in British app Simplytrak, a vehicle fleet tracking solution. Essentially, any novice hacker could easily access and view the location data of all 7,238 users. GPS will probably be the target of numerous hacker attacks in the future, while also providing police and other agencies, as well as businesses, with a legal source of invaluable information on individuals.

Today, GPS is already part of everyday life in places like France. In fact, nearly nine out of ten people use their onboard GPS or that of an application installed on their phone, such as Google Maps or Waze, while driving.

3/ Vehicles could be stolen with just one click?

The ability to remotely unlock a car is extremely handy for car-sharing services... and very convenient for the new generation of car thieves, who are more like hackers than lock breakers.

BMW discovered this, much to its own chagrin, a few months ago, when members of ADAC, a powerful German motorist association, highlighted a security failing in their Connected Drivesystem, which manages the opening of a vehicle remotely via smartphone. It transpired that the connection between the car and the mobile phone was not secure, and that the configuration file could be modified remotely. The German company had to urgently come up with a patch and update 2.2 million vehicles worldwide.

4/ Road accidents could be caused remotely?

The connection capabilities (via Bluetooth, Wifi and GSM) of the connected car represent potential security breaches that make it possible to take control of driving commands remotely, which can cause serious injury or even create powerful weapons in the hands of criminals, according to an FBI report.

In a remarkable July 2015 case, two American security experts, Charlie Miller and Chris Valasek, hacked into a Jeep Cherokee and initiated actions such as turning the engine on and off in the middle of the highway. Chrysler had to send more than one million of its customers a USB key with a security update.

Several security researchers have demonstrated they can get into a vehicle's computer and take control: i.e. turn the engine on or off, activate or release the brakes, accelerate, turn the steering wheel, turn on the wipers, etc. A report by Senator Ed Markey even concluded that "nearly 100 percent of vehicles on the market include wireless technologies that could pose vulnerabilities to hacking or privacy intrusions". The transition to the autonomous vehicle will therefore require serious improvements in this area.

5/ The car could become one of the entry points for the hackable city?

Autonomous cars will not be the only things to be computerized and interconnected; all infrastructure will gradually be as well, including signs and traffic lights, electricity, cameras, sensors, etc. As smart cities develop, connecting different functions to each other, cities will turn into veritable playgrounds for hackers: a bit like being able to play SimCity or Watchdog, only this time in real life!

Insurers faced with new highway issues

Some experts, such as KPMG, believe car insurance premiums will drop, as autonomous cars contribute to drastically reducing the number of road accidents. Nevertheless, the uncertainty of risks and consequences of hacking, and the costs of the embedded technology in these cars (cameras, sensors, etc.) may initially encourage insurers to maintain or increase premiums. Basil Enan, Director of Coverhound, a US startup that compares different autonomous cars, has predicted that "car insurance will become very close to home insurance, where claims are rare, but very expensive"

Basil Enan
Director of Coverhound

Car insurance will become very close to home insurance, where claims are rare, but very expensive

In the future, car insurance could even be covered by the manufacturer or car-sharing platforms, such as Autolib or Uber, rather than individuals, who will in that case become mere consumers.

So if insurers cannot save us from hackers and their actions' consequences, they will nevertheless require manufacturers and car hire firms to adopt sufficiently high safety standards, like crash tests, so vehicles benefit from maximum protection from the risk of attacks by highway hackers.

Three questions for Bruno Marzloff


"The connected car will not change our ethics"

Seventeen years ago, sociologist Bruno Marzloff founded Chronos, a think tank specializing in innovative mobility. This research firm brings together players from the fields of transport, media and urban planning. He has penned numerous books including Le cinquième écran, les médias urbains dans la ville 2.0 and Pour une mobilité plus libre et plus durable in collaboration with Daniel Kaplan.

AXA: With the autonomous car, control passes from the driver to the robot. Are we willing to let the car make decisions for us?

B. MARZLOFF: Manual driving is still what we are most familiar with. The move to automation, when "the machine takes over", is naturally a source of confusion for our Cartesian minds. It is probably for this reason that manufacturers are striving to "anthropomorphize" the machine, with reassuring human voices. But let's not overstate it. The autonomous car has not come out of nowhere to brutally evict the driver. Firstly, there are other automated modes of transport (the metro, for example). Secondly, even in our cars, we have already adopted various tools which make decisions for us. GPS, for instance, decides the route to take; while speed regulators determine how fast we should drive. Ultimately, the autonomous vehicle is just the next step in the process, the logical extension of this semi-automatic driving which is already in place.

"Ultimately, the autonomous vehicle is just the next step in the process, the logical extension of this semi-automatic driving which is already in place."

Furthermore, the autonomous car must not be seen as an end in itself: it will not solve all the problems (traffic jams, sharing solutions, pollution, etc.) through the magic of technology. Admittedly, it is part of the answer to critical questions, but even automated, it remains a car. The real challenges are elsewhere, in the practice models which the authorities, operators and individuals will choose to adopt or leave to one side.

AXA: The autonomous vehicle will still make decisions, sometimes in complex situations (when there is a risk of an accident, for example). Doesn't this raise an ethical problem?

B. MARZLOFF: Clearly, the connected car will not change our ethics. We often speak of accident situations, choices which the autonomous car must make. But this dramatization skews the debate and evades the real question which is much broader than the simple case of the car. Today, decision-making based on algorithms and without human input touches on countless areas like the Internet of objects, or smart cities which are increasingly dependent on algorithms. The process of reflection is therefore broader, societal and political. And decisions on these fundamental issues will then condition the use of the autonomous car. Not the other way around.

"Today, decision-making based on algorithms and without human input touches on countless areas... The process of reflection is therefore broader, societal and political."

AXA: How can insurers support the emergence of these practices?

B. MARZLOFF: To be more involved and more innovative, insurers have to get away from the "autonomous vehicle" object and take account of the more deep-seated transformation of the automotive ecosystem. When they undertake joint projects with startups on the car-sharing sector, this is a very interesting avenue to go down. Other sources of innovation, the Pay As You Drive or Pay How You Drive proposals, take into account the use of the car or driver behavior. These solutions demonstrate a genuine understanding of the changes underway. In the course of the twentieth century, the car gradually imposed itself as a necessity. It now accounts for 80% of long-distance journeys, which is proof of its popularity. It is therefore not about "surfing" on the wave of automation simply by offering new types of contracts but rather understanding how to provide new forms of mobility in terms which are acceptable to society, the city and the daily life of individuals, etc.