The National Highway Safety Administration (NHTSA) has mandated the inclusion of electronic stability control (ESC) on all vehicles less than 10,000 lbs. gross vehicle weight sold in the U.S. by the 2012 model year. This new regulation is supported by the NHTSA's study that analyzed 40,000 crashes over a six-year period, which found that ESC could reduce fatalities in single-vehicle crashes by 30 percent for passenger cars and 63 percent for SUVs. In addition to safety benefits, the study also found that ESC could help avoid a staggering $35 billion dollars in economic losses. While these are extremely substantial and compelling numbers, it is important to understand what's behind the math.

What Is ESC?

Believe it or not, the origin of ESC began over 20 years ago in 1987. Daimler Benz worked with Bosch Electronics to co-develop the system it called “Elektronisches Stabilit?tsprogramm” (German for “electronic stability program”), which it patented in 1992 under the acronym ESP. From then until 1999, Mercedes studied the impact of this safety feature and found that vehicles equipped with the patented ESP technology reduced accidents of all types by 15 percent. This statistic led Mercedes to make ESP standard on all of its vehicles.

ESC is a technology that improves the safety of a vehicle's handling by detecting and preventing skids and loss of steering control as well as reducing the likelihood of a rollover. When the ESC system detects a loss of steering control, it automatically applies individual brakes to help steer the vehicle where the driver wants to go.

There are several basic steering conditions that ESC works to control: under steer, over steer, and rollover. The condition of under steer — common in icy driving conditions — can best be described as a situation where the vehicle does not turn as sharply as the driver intends. For example, under steer can occur when a driver turns the steering wheel to the left and the car plows forward.

Over steer is just the opposite. It's a condition when the turn is actually much sharper than intended and the rear end of the car swings around. When the system detects a loss of control, braking is automatically applied to individual wheels, such as the outer front wheel to counter over steer or the inner rear wheel to counter under steer.

The third condition that ESC helps prevent is a vehicle rollover. Rollover stability control uses additional sensors to detect an impending rollover. When detected, a rollover is prevented through the activation of an anti-skid system. Rollover stability control systems work on flat pavement and cannot prevent rollovers caused by hitting a curb or sliding into a ditch.

What ESC Means for Insurers

The obvious benefit to mandating ESC by the 2012 model year is an overall reduction in accidents, particularly in single-vehicle rollover accidents, which are the most fatal accident type. Insurers should see a reduction in both collision and bodily injury claims resulting from the mandate, but it may take some time to see the full benefit.

Carmakers face a similar situation in terms of seeing the full benefits of mandatory ESC. Automotive industry experts predict that carmakers will only sell about 11 million vehicles in the U.S. in 2009, and that sales will not recover fully in 2011. But when the market stabilizes and sales return to a more normal rate of 16 million vehicles per year, roughly six percent of the 259 million vehicles on America's roads will be 2012 models with mandatory ESC. Adding the existing vehicles that had ESC as optional equipment still only brings the total amount of ESC-equipped vehicles to about 13 percent of the vehicles on the road. It could take over nine years of normal sales volume before ESC is found on the majority of vehicles driven in the U.S.

While technology normally produces positive progress, it does come at a price — and ESC is no exception. Because of the wheel-speed and steering-angle sensors mounted on vulnerable suspension components, the replacement cost of these items is expensive when damaged in collisions. For example, the cost of some wheel sensors that would likely be damaged if a McPherson strut (a widely used type of car suspension system that uses the axis of a telescopic damper as the upper steering pivot) or wheel hub is damaged can exceed $400. Those increased costs could lead to more vehicles being declared total losses.

In the end, will ESC be a benefit? Absolutely. As with any technology, it will take a quite a few years to matriculate into the full vehicle population. When it does become commonplace, it will reduce accident frequency and save lives. The trade off for the insurance industry is that it may affect physical damage claims by heightening repair costs and increasing total losses. No matter what the cost, in the end, it just may be the most important vehicle safety feature since the advent of the air bag.

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