Overall Cost Savings

Driver error is considered to be the main reason behind 90% of all crashes. The annual cost of crashes in the United States is said to be around $300 billion. Even considering the 16% uninsured autos, given the annual cost of auto insurance $300 billion appears overstated by more than double. Nonetheless, consider the main causes of accidents: alcohol, distracted driving, failure to stay in lanes, failure to yield right-of-way, erratic vehicle operation, over-correcting, drugs, and fatigue. It is obvious that an autonomous car might represent a reasonable alternative.

Even when factors such as mechanical failure, roadway, and the environment are causal it's extremely probable that speeding, distraction, and outright inattention could make an accident much more severe and more frequent. Estimates for insurance savings are as high as 50%.

Savings for the Trucking Industry

Just this last week, Peterbilt demonstrated its autonomous driving technologies. Bill Kahn of Peterbilt said, “The autonomous truck of the future is an extension of existing, individual systems already available for today's commercial vehicles.” Peterbilt is a Texas manufacturer of medium and heavy-duty trucks.

In July, Daimler had a similar demonstration of their autonomous truck on German highways. They also showed a video of a man sitting passively in a truck while the vehicle easily managed to steer itself.

That video was fifty years old! Naysayers who attack the driverless vehicles as “happening too quickly” need to think about the amount of time that has already been put into this transition.

The trucking industry is salivating over the $168 billion Morgan Stanley has projected they can save annually. Part of this reduction in expense is due to projected savings on insurance premiums.

The trucking industry seems to think a large amount of savings will be realized simply by keeping trucks in service 24/7 instead of allowing them to sit idle while waiting for drivers who are restricted by hour regulations.

The Change to Autonomous Vehicles Will Happen Quickly

There are savings to be had, but can it happen in five years?

Also last week, in addition to the announcement in the trucking industry, GM stated it would have hands-free driving and vehicle-to-vehicle communication by 2016 in their Super Cruise Cadillac system. The system is designed to allow the car to take over in congested stop-and-go traffic.

Organizations such as Central North America Trade Corridor Association (CNATCA.com) are determined to move quickly. They believe that our current east/west shipping lanes need supplements. They've proposed an autonomous corridor on U.S. Highway 83 from Mexico extending to Alaska, which splits the nation north and south through the plains states.

Because of the impact of fracking in the Bakken oil field of western North Dakota, such a corridor is desperately needed. Oil transportion is disrupting the area's coal and grain shipments. Even a proposed new, electrified, double train track will not provide the freight volume needed.

“We believe the legislators in at least North and South Dakota will be receptive in this upcoming session to a proposal for testing semi-autonomous trucking along the corridor,” said Marlo Anderson, spokesman for CNATCA. “Companies like Integrated Roadway are already building roads with sensors, with ice and snow melting equipment built in.”

“Semi-autonomous trucking” involves convoys that are electronically tethered with a driver in the lead vehicle. Convoys would be formed outside congested areas. Before joining the convoy, and after the trucks arrive at destination ports, they could be either driven through congested areas to final destinations by remote control or by onboard drivers.

Insurance Underwriting Advantages

It is hard to imagine a person voluntarily relinquishing the pleasure involved in driving their private passenger car. I drove a fifteen-speed gravel truck as a summer job during college and thought it was fun. Yet, my days as an underwriter often made me wish long-haul truck drivers were a little less “fun-loving” and a lot more predictable. In retrospect, a driverless car seems like it might be an underwriter's dream.

As an underwriter I once read a large loss report about a driver we insured who had hit an overhead bridge with his refrigerated trailer while hauling fruit from Texas to Minnesota. I could understand the driver miscalculating the height of the bridge. However, I was a lot less understanding a month later, when that same driver hit that same bridge on the other side with a newly refurbished trailer.

“The average tractor costs about $140,000,” Dale Bergstrom of Erickson/Larsen general agency offered. Bergstrom has been underwriting long-haul risks for five decades. “A trailer can cost between $40,000 and $200,000. The average price for physical damage and liability insurance for the average unit currently runs about $12,000 to $15,000. I'm reserving judgment on the overall impact on premium of autonomous freight hauling. There's too much to shake out.”

Issues to Solve

It's speculated that one of the problems with autonomous vehicles will be cargo coverage for unmanned units that are parked on the side of the road due to mechanical problems. That risk could be mitigated if the trucking industry has a fleet of pickups patrolling the freight corridors to provide protection.

Most experts indicate much more efficient fuel usage, but another problem suggested will be refueling. The corridors will probably have ports along the route, much like the current weigh stations, which are devoted to autonomous trucks.

Legal issues will be sorted. One issue might be the establishment of communal standards. What will take precedent in the computer's hierarchy when a collision with another vehicle is imminent? Will the computer opt to take action to preserve assets, or lives? And, if lives are considered a priority, at what dollar amount do assets prevail? These now clinical decisions will become quite emotional under tragic circumstances.

Privacy is also a concern, but usage-based auto insurance pricing is already breaking down consumer resistance to onboard data gathering.

Fait Accompli

We are already driving cars that have “driverless” features. Many experts believe that the more this trend broadens, fewer and less severe accidents will occur. Many obstacles have been overcome. States have acted already to approve the testing of driverless cars and more seem ready.

Our industry needs to prepare for the premium loss we will sustain, over the next very few years. Before too many tears are shed, we should consider that the premiums for freight delivery-drones will be huge and a new source of revenue.