will people even own vehicles that need
insuring? Can the vehicles be hacked
and then directed to go to a particular
location or cause accidents at rush hour?
There are many advantages, but also a
number of concerns that have not been
sorted out yet.
Many manufacturers are working
on the technology, so this is not an “if”
question, but more of a “when” question.
While it is expected to be several years
after autonomous vehicles are available
before the fleet of cars on the road is predominately autonomous, that day is expected to happen.
Monitoring driver behavior
Telematics is usage-based insurance; it is
the development of premium rates in part
by monitoring the vehicle and a number of
characteristics. These characteristics are:
A monitoring device is put into the
car that measures and records the de-
sired variables. The monitored variables
are then combined with traditional rat-
ing factors such as claim history, driv-
ing record, vehicle make, model and
demographics. Rates are set based on
the combination of variables. Recording
can be for a limited time or continuous.
monitored for six months, then the de-
vice returned to the carrier. Continuous
monitoring is when the device stays with
the vehicle and monitors continuously.
Privacy issues are a major concern; some
people object to being monitored every
time they drive.
Some equipment uses GPS to monitor
location; this raises even more privacy
issues, although it does provide better
information for rating. With GPS the
insured’s locations are tracked. GPS can
identify the types of roads the driver is
on, posted speed limit, types of turns and
other significant information.
Whether the vehicle spent 10 minutes
going 30 miles on the highway or 30
minutes going 10 miles in heavy traffic is
identified. Territory can tell a lot, but only
if GPS is monitored.
Advantages to telematics are that it is
fair and predictive, and customers understand how it relates to rates. It is intuitive, while credit scoring is not to many
insureds. It allows customers to improve
their driving for their own benefit; their
rates are more tied to them specifically
instead of a large demographic of similar individuals. Disadvantages include
privacy issues, hacking concerns, cost to
the carrier of providing the device if it is
provided for free, and storage of the data
Ride-sharing is the practice of
using your personal automobile
to pick up someone and give
them a ride to a specific destination for a fee. The potential
driver signs up with a Transportation Network Company
generally check the individual’s
background, driving record and
inspect the vehicle. Once the
person is approved as a driver,
that person is then allowed to
sign into the app as a driver and
can begin to pick up riders.
While at first this sounds like a great
idea and a way to make extra money,
there are many issues involved. Taxis and
limousines are highly regulated services
and believe that these regulations should
also apply to the TNCs. States have concerns about consumers and drivers not
being aware of the insurance issues involved and finding themselves not covered by insurance if an accident occurs.
Many of the concerns with ride-shar-
ing center around the driver’s lack of cov-
erage on his personal auto policy when
signed in to the app to look for a pas-
senger. This makes the vehicle “for hire,”
which is excluded in most personal auto
gent coverage during stage one; the con-
tingency is that the personal auto policy
denies coverage. While Uber’s coverage is
above state minimum limits, it still only
covers up to $50,000 for bodily injury for
an individual, up to $100,000 for bodily
injury for everyone in the vehicle, and up
to $25,000 for property damages, or as
seen in the policy, simply 50/100/25.
Workers’ Compensation becomes an
issue as well; are the drivers independent
contractors or employees of the TNC? This
is still open to debate; TNCs often state that
drivers are independent contractors using their own equipment and setting their
hours, while drivers claim that the TNCs
are providing work for the driver and are
themselves providing a driver for hire.
There are various suits by drivers claiming
that they should be considered employees
and not independent contractors.
This is an overview of some emerging
risks destined to or already having an impact on the industry. All of these issues
deserve watching, as changes are occurring rapidly and can have significant impacts on the industry as a whole.
Christine G. Barlow, CPCU, is managing
editor with FC&S®, the premier resource
for insurance coverage analysis. She has
an extensive background in insurance
underwriting. She may be reached at
firstname.lastname@example.org. Additional information
about FC&S Online is available at