Future Connected Cars 2016

There are times when a speaker for a large corporation clearly breaks from the cold corporate talking points and suggests something that you just know his managers will consider cringe-worthy. Haden Kirkpatrick, described on the event agenda of the Future Connected Car event in Santa Clara as “director of strategy and marketing” for Esurance, had one of those moments yesterday.

Haden said that what might emerge from the confluence of usage-based insurance and automated driving is a scenario where drivers will only pay for insurance when their hands are on the steering wheel. This simple yet mind-blowing comment almost slid by without notice – but I noticed and pressed him a bit and he confirmed that that was indeed what he was suggesting.

Upon further review I come to discover that Haden had forgotten his business cards. (I obtained his email address and found him on LinkedIn.) On LinkedIn Haden describes himself as an “innovator, futurist, technologist, strategist, mobile guru, entrepreneur, martial artist, guru.” Somehow I suspect he is also a sensei. There were no details regarding his role at Esurance, which left the impression that he may be an internal consultant – but let’s assume he has the corporate position described on the event agenda.

The concept he described is several leaps ahead of anything currently proposed or available in a commercial solution. I mentioned what he had described to another industry colleague attending the event who had not seen the presentation and he claimed that the proposition was precisely what Hakan Samuelsson, Volvo Cars president and chief executive officer, had proposed last year – that Volvo would assume full responsibility for the safety of drivers of its self-driving cars when that technology becomes available.

Samuelsson may have made that commitment – one which has so far gone unmatched by any other car maker – but he never suggested the customer will only pay for insurance when their hands were on the steering wheel. This powerful concept introduces the prospect of an incentive for the driver to take his hands off the wheel at every opportunity and keep them off the wheel. This will represent a huge boost to the trust necessary to convince drivers to let go.

I can’t help but think that the executives in the audience from Allstate, Esurance’s parent company, were shaking or burying their heads in their hands at Haden’s words while the State Farm attendees chuckled to themselves. No insurer will be racing to deliver such a value proposition – though car makers may.

But Haden highlighted a critical issue and question for insurance companies underwriting cars with autopilot capabilities, such as Tesla’s Model S. When such cars are in autopilot the software has become the driver of the car and, therefore, the “driver” should no longer have to pay insurance at those times. It makes perfect sense, but the technology in the market has not caught up to this value proposition.
It also raises the question as to whether insurance companies even want to insure cars with self-driving technology. Currently, as noted by Haden, all underwriting is based on historical data. Cars with autopilot have no history, so there is no basis for underwriting the risk – and no reason not to offer coverage.

One could argue, as Tesla Motors CEO Elon Musk has, that cars with autopilot are safer than those without. Judging from multiple Youtube videos (drivers in the back seat!) insurers might conclude otherwise. But no driver with a car with self-driving technology has yet reported an increase in their insurance rates.

So the question is – do insurers like Esurance have an interest in or an obligation to foster the adoption and use of autopilot? Should customers be rewarded for surrendering driving to the car computer? It’s starting to look that way.

Thus far, insurance companies have been more or less silent on the issue, and insurance discounts for advanced safety features remain difficult to come by. Maybe it’s time for the industry to listen to an Esurance futurist, guru, and think more deeply about how self-driving technology is altering the insurance landscape. Insurers may well hold the key to the broader adoption of these systems and the reduction of the 100-fatalities-a-day carnage on U.S. highways. Yes, I know, it’s time to turn in the direction of the skid.

Roger C. Lanctot is Associate Director in the Global Automotive Practice at Strategy Analytics. More details about Strategy Analytics can be found here: https://www.strategyanalytics.com/access-services/automotive#.VuGdXfkrKUk