How insurance providers are starting to use ADAS data to price cover

Published On : 02/15/2021

By Carla Hopkins, senior vertical market manager, LexisNexis Risk Solutions UK & I

The motor insurance sector is facing significant change as vehicle autonomy increases. By 2035, 40% of new UK car sales could have self-driving capabilities[i] according to the Department of Transport with connected and automated vehicles (CAVs) predicted to help prevent thousands of serious accidents and save lives[ii]. The UK Government has already signposted its intentions to allow the use of Assisted Lane Keeping Systems on UK motorways and is currently reviewing feedback following a consultation that launched in August 2020[iii].

Motor insurance activates when an accident or collision occurs. As levels of autonomy increase in vehicles, insurance providers will need to understand the direct impact these developments will have on claims frequency and severity to help price insurance and evolve their offerings. Data direct from the connected car will be key to this and the foundations are already in place to bring car manufacturers and insurance providers together to serve their common customer through a connected car data exchange.

However, car buyers are already investing in car safety features as the first level of vehicle autonomy is now common amongst new vehicles. If you drive a car that was manufactured within the last few years it will almost certainly have some sort of Advanced Driver Assistance System (ADAS) fitted, designed to make your journeys safer. The problem is that the link between the presence of ADAS and the likelihood of an insurance claim has been a blind spot for the insurance market.

The most recent data from the Society of Motor Manufacturers[iv] confirms that 80% of new cars on sale in the UK are offered with a self-activating safety system. Of these vehicles, 70.7% have Autonomous Emergency Braking technology. Some features come as standard, others can be added as optional extras but it won’t be too long before all new cars will be ‘born’ with ADAS features as car manufacturers continue to invest in this technology as part of their zero fatalities objectives.

Carla Hopkins

For some car buyers ADAS is a major factor in their purchase, for others it’s a nice to have – either way, when they come to insure their car, the fact they have invested in ADAS is unlikely to be fully factored into the price they pay. This is because insurance providers have had no way of understanding what features are present on individual vehicles and how they combine to reduce collision frequency and severity.

This is largely because car makers tend to describe ADAS in a myriad of ways making it almost impossible to understand the purpose and performance of different features. For example, there are over 40 different names for automatic emergency braking and over 20 different names for adaptive cruise control. That’s 24,000 possible combinations, for just two safety features[v].

Also, some ADAS features are chosen as additional options when the car is purchased from new, so working on the basis that ADAS will be standard for a particular model won’t work.

It has taken the creation of a common classification of ADAS to start to solve this problem for the benefit of consumers, insurers and motor manufacturers. Ultimately, this will mean that the safety features of a car, along with how they behave (for example if a feature will provide an alert or warning to the vehicle’s driver when a potential danger or hazard is detected), will soon be accessible to insurers – at a Vehicle Identification Number level. It will also allow insurance providers to understand the purpose of the safety features.

Testing of the data is already underway by motor insurance providers in the UK to understand how these vehicle centric insights correlate to claims.

With greater insight into the presence and performance of ADAS, it not only becomes possible to price more accurately but it opens the door to creating new products and services for consumers who have invested in car safety technology.

An important additional benefit of this solution is that car manufacturers will be able to benchmark their ADAS against the rest of the automotive market. This insight will be valuable in conveying the merits of specific ADAS to their customers, based on their performance in the real world.

At the root of these developments is the need to fill a big gap in knowledge for consumers, insurance providers and car manufacturers about how specific safety features on vehicles directly impact insurance claims. Building this understanding in tandem with the continuing advances in car safety technology could help support greater investment in ADAS by consumers and in turn improve road safety standards. It’s a virtuous circle with vehicle build data at its heart.

[i] https://www.gov.uk/government/news/uk-on-the-cusp-of-a-transport-revolution-as-self-driving-vehicles-set-to-be-worth-nearly-42-billion-by-2035?utm_medium=email&utm_campaign=govuk-

notifications&utm_source=3a1e0085-eddf-4832-a7e8-9baf5dc0c5ca&utm_content=daily https://www.gov.uk/government/publications/connected-and-automated-vehicles-market-forecast-2020

[ii] Source: SMMT and Frost & Sullivan report, 2019: Connected and Autonomous Vehicles: The Global Race to Market

[iii] https://www.gov.uk/government/consultations/safe-use-of-automated-lane-keeping-system-on-gb-motorways-call-for-evidence

[iv] Society of Motor Manufacturers and Traders: https://www.smmt.co.uk/wp-content/uploads/sites/2/SMMT-Motor-Industry-Facts-JUNE-2020-FINAL.pdf

[v] LexisNexis Risk Solutions analysis

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.