The automotive and mobility space is changing dramatically with an ever-growing flow of innovations, making our cars smarter, more connected and increasingly automated. What is the effect of these new technological advancements on automotive insurance? How can insurers quantify and factor in the impact of advanced driver-assistance systems (ADAS) on insurance premiums?
The Automotive and Mobility Solutions (AMS) team at Swiss Re has been driving innovation in the automotive insurance sector since 2016, supporting primary insurers, mobility providers and OEMs with the latest challenges in the automotive industry. These include; increasingly automated, connected and electrically powered vehicles, new mobility models, as well as the digitisation of sales and distribution channels.
Over the last decade, automotive manufacturers have made substantial investments in car-safety technologies. Despite having a proven positive effect on road safety, the insurance industry is still struggling to quantify the impact of ADAS and thus take it into account when defining insurance premiums.
Some of the main challenges that insurers face when accounting for ADAS in their pricing strategies are access to granular ADAS data, as well as a lack of technical knowledge and infrastructure to assess the performance of such technologies and translate their impact into insurance terms. At present, most insurers still rely on standard demographic data (e.g. age, postal code, etc.) to set their automotive premiums, or a limited set of vehicle information, without systematic assessment of the car's safety features and the impact of these on insurance claims.
To help insurers quantify the precise impact of ADAS, Swiss Re has developed its ADAS Risk Score.
Using robust statistical methodologies, the Swiss Re ADAS Risk Score gives a clear indication of how the safety performance of a vehicle is affected by its ADAS equipment. The score allows insurers to accurately translate these technological improvements into insurance tariffs and underwriting activities.
Thanks to its collaboration with various automotive and technology partners, Swiss Re has access to granular ADAS data at system level, including ADAS technology specifications. The ADAS data is used to assess the effectiveness of new safety features in vehicles through a combination of backward-looking methods (experience analysis), complemented with forward-looking ones, such as vehicle track testing and simulations. This combination leads to a unique solution, allowing the evaluation and differentiation of ADAS with regard to car manufacturers (also known as original equipment manufacturers, in short OEMs), different vehicle models and technological evaluative steps. It also minimises scoring time delays, enabling Swiss Re to score new vehicles immediately upon market introduction.
This approach not only leads to much more accurate pricing and risk models for insurers, but also provides OEMs with closed-loop feedback about the effectiveness of their systems in real-life traffic situations. Available worldwide, insurers can access the ADAS Risk Score in real time through the Swiss Re ADAS Risk Score platform.
The Swiss Re ADAS Risk Score was launched in 2019 in Europe, initially focusing on BMW brands only. Since its launch, it has extended its geographic coverage – and is now available globally – and has added many more brands to cover 95% of car brands sold in main European markets. It has been embraced by several leading insurance companies looking to apply it to their automotive insurance portfolio. The most recent is Toyota Insurance Services (TIS), who recently announced they were joining the ADAS Risk Score platform. Using the ADAS Risk Score, insurers can boost their business results significantly: they are able to improve their claims predictions by 5% and enhance their segmentation, allowing for smart portfolio steering, with a positive impact (up to 2%) on their technical loss ratio.
"We want to drive innovation in the automotive insurance sector, helping our clients to enhance their product suite. By encouraging customers to purchase ADAS, accidents will be reduced. It completely fits our vision to make the world more resilient." Andrea Keller, Head of Automotive and Mobility Solutions, P&C Solutions, Swiss Re.