Impact of Car Sharing, Automated Driver Assistance, Autonomous Cars on Insurance

Impact of Car Sharing,
Automated Driver
Assistance, Autonomous
Cars on Insurance
Dr. Anand S. Rao
Innovation Lead – PwC Analytics
Mehrad Ahari
Insurance Consulting
PwC
Table of Contents
1. Disruptors to Auto Insurance
2. Impact on Auto Insurance
3. Case for Action – Short-term. Medium-term and Long-term
4. Questions & Answers
PwC | page 2
Ridesharing, Automated Driver Assistance Systems, Autonomous Vehicles and
Electric Vehicles are disrupting the auto industry ecosystem
PwC
3
Car sharing & Ride sharing
Younger, urban dwellers are increasingly shifting towards sharing as
opposed to owning assets – including cars
30%
Annual growth of car and
ride sharing globally
PwC | page 4
$5.2 Billion 1 Million
Revenue from car sharing
globally by 2020
Number of Uber drivers
worldwide in June 2015
300
Number of cities with Uber
as of June 2015
Car & Ride
Sharing
Efficiency
Sharing makes life
more affordable
Ownership
Less expensive to
share than own
Provider
Demographic
Urbanization, rising
cost of ownership,
technology, and
convenience of use,
are fueling the rise of
car and ride sharing
PwC | page 5
Providers aged
18 to 44 years
86%
81%
62%
83%
44% of US
adults are familiar
with the “sharing
economy” and
Sharing makes life more
convenient and efficient
43%
40%
19% have
Car Sharing
Participation
Participated
in Car Sharing
Car Sharing
Preference
Like auto sharing because of
better pricing
8%
Sources: PwC Analysis, Roland Berger (2014)
participated in it
56%
28%
Owning feels like
a burden
1%
Providers have
household income
of $25K to $75K
Participated as Car
Sharing providers
Like auto sharing because of
more convenient access
Car & Ride
Sharing
Congestion and higher car
ownership costs are
exposing potential owners to
viable alternatives to car
ownership
Rising fuel prices,
insurance, and parking
fees in congested urban
centers are making car
ownership impractical for
most urban dwellers
Urbanization
Ownership Costs
Car Sharing
Attractiveness
A significant
proportion of urban
millennials are likely
to be sharing cars vs
owning them
PwC | page 6
Technology
Penetration of mobile
devices and mobile
coverage, and improved
sensor adoption and
security have created a
foundation for reliable and
convenient sharing
Convenience
City congestion, traffic,
limited parking, and
minimal vehicle use make
car ownership less
convenient than public
transit and other
alternatives
Owning a Car vs Ride Share vs Taxi
Sources: newsroom.aaa.com
PwC | page 7
Automated Driver Assistance Systems (ADAS)
Variety of sensors, automotive technologies, artificial intelligence and
machine learning techniques are driving growth of ADAS
$230 bn/yr
Cost to society from
distracted driving
PwC | page 8
31%
% of Premium car customers
who will definitely or
probably purchase
emergency stop assist for
$800
23%
$60 Billion
Compound Annual Growth
Rate of ADAS Globally from
2014-2020
Size of ADAS market by
2020 globally
ADAS
Sensors, Radar,
LIDAR, Cameras,
and other
technologies coupled
with Analytics is
driving the era of
Automated Driver
Assistance
PwC | page 9
Frequency
Severity
Forward Collision
-3.2%
-1.1%
Adaptive Headlights
-2.3%
-5.5%
Lane Departure
-0.4%
0.0%
Blind Spot
Detection
-6.1%
-20.0%
Park Assist
-1.8%
-1.1%
ADAS
ADAS technologies
will reduce both
frequency and
severity of accidents
paving the way for
increased safety and
reduced claims
PwC | page 10
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and
initial results of collision avoidance features, 2011 - 2012
Autonomous Vehicles or Self-driving Cars
Falling costs of radar technology and advances in machine learning are
already resulting in autonomous, self-driving vehicles
1,268,108
$9,200
$400 bn
Number of autonomous
miles driven by Google Car
as of October 2015
Cost to operate driverless
Uber cars annually instead
of current $43,500 per year
Accident related savings
with self-driving cars in US
alone
PwC | page 11
2017-2020
Fully autonomous cars will
be released (Audi – 2017;
Tesla – 2018, Toyota –
2020)
Level 4
Full SelfDriving
Automation
Level 3
Autonomous
Vehicles
Limited SelfDriving
Automation
Level 2
Autonomy of driving
is defined by NHTSA
across five levels
with Level 4
signifying
autonomous driving
under all conditions
with no human
involvement
PwC | page 12
Combined
Function
Automation
Level 1
Functionspecific
Automation
Level 0
No
Automation
Source: National Highway Traffic Safety Administration – Preliminary statement of policy concerning automated vehicles
A First Drive – Google Self-Driving Car Project
Autonomous
Vehicles
Google Cars are
already approaching
Level 3 and Level 4
capability under
normal road
conditions
https://www.youtube.com/watch?v=CqSDWoAhvLU
PwC | page 13
Tesla’s Autopilot System is Creepy and Wonderful
Autonomous
Vehicles
Tesla announced a
software upgrade
that allows
autonomous
highway driving
https://www.youtube.com/watch?v=3yCAZWdqX_Y
PwC | page 14
Mercedes-Benz Future Truck 2025 – Autonomous Driving
Autonomous
Vehicles
Autonomous buses,
trucks, pods and
convoys are also
being built and
piloted across the
world
https://www.youtube.com/watch?v=5u5WXd-kaSs
PwC | page 15
CitiMobil2 – Cities
demonstrating
automated road
passenger transport
(European Union)
Autonomous
Vehicles
Autonomous buses,
trucks, pods and
convoys are also
being built and
piloted across the
world
PwC | page 16
Milton Keynes –
Autonomous Pods
unveiled in Sep 2015
Table of Contents
1. Disruptors to Auto Insurance
2. Impact on Auto Insurance
3. Case for Action – Short-term. Medium-term and Long-term
4. Questions & Answers
PwC | page 17
Reduction in losses from ADAS alone is ~11% by 2025
Total Projected Losses, 2025*
ADAS will reduce
severity and
frequency of
accidents thereby
reducing overall
losses as ADAS
adoption increases
$30.0
-11%
Total Projected Losses (Billions)
Impact on
Insurance ADAS
$25.0
$20.0
$15.0
$27.6
$24.6
$10.0
$5.0
$Baseline Without ADAS Technology
PwC | page 18
Baseline With ADAS Technology
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and initial results of collision
avoidance features, 2011 - 2012
Reduction from ADAS alone ~35% by 2035
Total Projected Losses, 2035*
As penetration of
ADAS increases the
projected losses will
decrease by 35% by
2035
$40.0
$35.0
Total Projected Losses (Billions)
Impact on
Insurance ADAS
-35%
$30.0
$25.0
$20.0
$15.0
$34.1
$22.2
$10.0
$5.0
$Baseline Without ADAS Technology
PwC | page 19
Baseline With ADAS Technology
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and initial results of collision
avoidance features, 2011 - 2012
Reduction in losses from ADAS &AV is ~31 % by 2025
Total Projected Losses, 2025*
Car Sharing & AV
will reduce car parc
and combined with
ADAS could result in
a reduction in
projected losses by
31% by 2025
$30.0
Total Projected Losses (Billions)
Impact on
Insurance –
ADAS & AV
-31%
$25.0
$20.0
$15.0
$27.6
$10.0
$19.0
$5.0
$Baseline Without ADAS Technology
PwC | page 20
Baseline With ADAS & AV Technology
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and initial results of collision
avoidance features, 2011 - 2012
Reduction in losses from ADAS &AV is ~52 % by 2035
Total Projected Losses, 2035*
As penetration of
AVs increase over
time the reduction in
losses could be as
much as 52% by 2035
$40.0
$35.0
Total Projected Losses (Billions)
Impact on
Insurance –
ADAS &AV
$30.0
-52%
$25.0
$20.0
$15.0
$34.1
$10.0
$16.4
$5.0
$Baseline Without ADAS Technology
PwC | page 21
Baseline With ADAS & AV Technology
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and initial results of collision
avoidance features, 2011 - 2012
1
Impact on
Insurance
Our conservative
estimates are based
on historical
adoption and
penetration rates of
new technologies
and no regulatory
interventions
PwC | page 22
Estimate availability and
penetration curves of each
technology based on prior
technology take-up rates
Historical data demonstrates a ~15 year span
between initial introduction and 95% new
vehicle availability. The total car population
takes ~30 years to reach 95% penetration
2
Use industry data to estimate
impact on frequency and
severity across loss categories
Loss categories include Bodily Injury, Liability
and Collision
3
Project total impact on
frequency, severity, and total
loss
We calculate a linear baseline projection using
2003 – 2014 claims data. Based on expected
penetration and impact of each technology, we
estimate the total effect by 2025
Source: PwC Analysis based on Highway Loss Data Institute reports on predicted availability of safety features and initial results of collision
avoidance features, 2011 - 2012
“Premier Kathleen Wynne has made
autonomous vehicles one of the provincial
transport minister's priorities”
(The Star, Oct 2015)
Legislative
Moves
When it comes to
autonomous cars in
Canada, Ontario is
the center of activity
PwC | page 23
“Ontario moves to permit testing of self
driving vehicles…testing of autonomous
or self-driving vehicles can begin as
early as Jan. 1”
(The Globe and Mail, Oct 2015)
•
Ontario Ministry of Transportation (MTO) has recently put
forward a proposal to safety test autonomous vehicles on
Ontario roads for a period of 5 years.
•
More than 100 companies in Ontario are involved in
products and services for self-driving vehicles:
In 2014…
Impact of
Ontario
44% of auto
premiums in Canada
were written in
Ontario
PwC | page 24
•
44%
of all auto premiums
written in Canada were
written in Ontario
57%
of all private auto
premiums written in
Canada were written in
Ontario
Even in the highly unlikely case that other provinces do not
follow Ontario, the weight of the province alone is enough to
disrupt Canadian auto insurance market.
Table of Contents
1. Disruptors to Auto Insurance
2. Impact on Auto Insurance
3. Case for Action – Short-term. Medium-term and Long-term
4. Questions & Answers
PwC | page 25
Case for
Action
The impact on
insurance will be
small at first, but
would accelerate once
AV adoption reaches a
tipping point
substantially reducing
consumer auto
insurance market
PwC | page 26
Only 4 states have passed
legislation to address
autonomous vehicles; 16 are
considering, and 9 have
failed to pass measures1
Convenience and
Safety
Regulation
Transportation and
service Efficiencies
Autonomous technology is
projected to add $10,0002 to
the cost of the car; this is
expected to decline to
$3,000 by 2035
46% of consumers feel that
autonomous cars will not be
safe and 28% believe that
they will never own one3
Autonomous cars will
remove variability and
improve driving
conditions
Investment Costs
Reduced
Transportation
Costs
Public Trust and
Perception
Commute times will
drop due to decreasing
congestion; public transit
and car sharing will cover
larger areas, increasing
availability and reducing
wait times
Autonomous adoption can
reduce transportation
costs of car ownership
through alternative
transportation solutions
Case for
Action
Bundled
Insurance
Shrinking
Premium
Four possible
scenarios over the
next two decades
ranging from small
impact to potentially
a massive
consolidation
PwC | page 27
Slow
Adoption
A
(Loss
reduction
offset by
premium
growth)
B
(Moderate
adoption
fuelled by
regulators)
C
(Insurance
included with
Cars – self
insured)
D
Death
of Auto
Insurance
(Elimination
of losses with
fully selfdriving
cars)
Case for
Action
R
I
S
01
02
03
04
K
Insurers need to be
prepared to innovate
with their offering
and be able to target
new business
customers and
eventually seek
alternative growth
areas
PwC | page 28
Risk
Reduction
Risk
Slicing
Risk
Shifting
Risk
Elimination
Short-term (3-7 yrs)
Case for
Action
Insurers who want
to survive and thrive
in the long-term
should start acting
now to innovate and
better understand
the changing
ecosystem
PwC | page 29
• Embrace alternative
forms of insurance
(e.g., MetroMile)
• Partner with auto
manufacturers to
collect data on ADAS
and AV technologies
• Build capabilities on
usage-based
underwriting and risk
slicing
• Tighten UW guidelines
for individual
consumers
Medium-term (8-15 yrs)
• Shift primary focus
towards automanufacturers and
personal mobility as a
service providers for
marketing, distribution
and product
development
• Consolidate
underwriting capacity as
premiums start
shrinking
• Develop innovative
products – bundled
insurance, ‘self-drive’
mode insurance
Long-term (15+ yrs)
• Consolidate personal
and commercial auto
• Explore alternative
revenue streams
including commercial auto
logistics, becoming a
personal mobility as a
service provider etc.
Questions?
PwC | page 30
For additional information contact
Dr. Anand S Rao
Email: [email protected]
Twitter: AnandSRao
Mehrad Ahari
Email: [email protected]
Authors
Dr. Anand S Rao
[email protected]
Dr. Mark Paich
[email protected]
Lyle Wallis
[email protected]
Joseph D Voyles
[email protected]
Ilana Golbin
[email protected]
Aparajita Bijapurkar
[email protected]
Scott Fullman
[email protected]
Spencer Allee
[email protected]
Balaji Jayakumar
jaya.thirumala.balaji.jayakumar@
pwc.com
Draft
Thank You
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* Data sources via similarweb
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