The U.S infrastructure bill offers the groundwork for personalized insurance
Mandated safety technology will affect how carriers price auto risk in the future.
In its current form, the proposed infrastructure bill helps insurance companies reduce risk while potentially increasing prices as it evolves toward a more tailored approach. The requirement to have technology that identifies drunk drivers, provides automatic emergency braking or protects infants from accidentally being left in a hot car will change how insurers identify and charge for risk. There will also be a need for a system to track which cars have specific technologies and who manufactures them.
Defining auto risk profiles
According to the U.S. Department of Transportation’s National Highway Traffic Safety Administration, 38,680 people died in car accidents in the United States in 2020, up 7% from the 36,096 killed in 2019. This was the largest increase since 2007, and was an interesting anomaly given that there was a 13.2% drop in the number of actual miles driven during the pandemic.
Rather than having the manufacturers establish the criteria, the infrastructure bill will require minimum performance standards for specific safety systems and automobiles. These technologies will undoubtedly reduce crashes and make roads safer, and they will also increase the costs of repairs when a crash occurs. However, the infrastructure bill’s highlighted technologies are too expensive.
Because of the regulations for safety equipment, the vehicle will need to be scanned after an accident or damage to ensure that everything is still working correctly. If the equipment is not destroyed in an accident, the mere presence of the safety system will push up the price.
In the future, there will be fewer crashes, which means fewer insurance claims. Fewer crashes help to keep premiums low for everyone. On the other hand, the more significant maintenance expense for the vehicles that crash will offset some of the benefits of fewer collisions. If you have a lot of accidents and penalties, you will pay more. In addition to this, the vehicle system will play a part. If you drive a vehicle with safety features and are involved in fewer accidents, your insurance rate will likely reflect this.
The bill’s inclusion of mandated safety technologies and a push for more environmentally-friendly electric vehicles will result in more significant expenses because the infrastructure will also need to support them. However, those technologies will enable even more personalization in the insurance industry.
More alternatives and diversity will be available due to the investment in electric vehicles, allowing for greater customization. These technological advancements could lead to speedier innovation in driverless cars, which has been in development for years.
The part of the infrastructure bill that talks about the “per mile usage” of highways could also impact personalized insurance. For example, if a person lives on the West Coast and wants a car, he could rent an electric, self-driving car instead of Uber, and he might get specialized insurance for the vehicle that drives him.
The infrastructure bill would certainly help smaller startup enterprises, as they are the ones that bring technology and innovation to giant corporations. Experts are expecting an increased demand for insurance innovators in the future as well.
Lyle Solomon serves as a principal attorney for the Oak View Law Group in California. Contact him at lyles.esq@oakviewlaw.com.
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