(Greg Horn is vice president of industry relations for Mitchell International. Previously, he served as vice president of material damage claims at GMAC Insurance.)
While attending a recent car show, I came across a reproduction window sticker displayed in a mint-condition 1966 Mercury Marauder. Full-size Mercuries from the 1960s are some of my favorite cars, so I spent a lot of time examining this one.
What caught my eye on the window sticker was the list of standard equipment. Under the subheading “safety equipment” were such high-tech features as four-way emergency flashers and a driver’s side door mirror. While these did have a marginal impact on accident avoidance, they added little to the overall cost of repair if damaged in a collision.
In today’s world, safety equipment is a lot flashier and accident-avoidance technology has advanced exponentially. It includes a combination of:
- Telematics, a broad range of technology that combines mobile/broadband telecommunications and computing that produces raw vehicle data, which is overlaid with GIS map data like road type and speed limits.
- Black box technologies like on-board diagnostics parameter IDs (OBD-II PIDs codes that request data from a vehicle and are used as a diagnostic tool).
- Event data recorders (EDRs) that developed out of vehicle air bag technology.
The impact of these advances on automotive claims is and will continue to be significant. While accident avoidance technologies hold the promise of reducing crashes and the frequency of claims, the complex technologies in place in the modern automobile have great potential to increase claims severity.
Parking and blind spot sensors are a good example of technology that will lower claims frequency but contribute to higher claims severity. Carmakers are making them a standard feature of all vehicles going forward. Parking sensors are located in the rear bumpers or the outside mirror of a vehicle. That’s ideal to both detect and prevent accidents before they happen, but also well-placed to receive the brunt of the damage. These sensors might mean fewer fender benders but those that do occur will be more expensive and complex to repair.
It is estimated that some 70 percent of 2011 vehicles are equipped with these technologies, which means a lot of auto claims involving some aspect of telematics technology will be coming your way. You might think only luxury vehicles like Volvo are equipped with the likes of these high-tech systems. It is true that Volvo has pioneered technology in the accident avoidance arena for several years now, particularly advanced driver assistance systems (ADAS) like autonomous emergency braking (AEB) as part of its City Safety system. Since 2010, Volvo has outfitted the XC60—as known as “the car that stops itself”—with this system, which is designed to address commonly-occurring low-speed, front-into-rear accidents like tailgating.
AEBs use a group of sensors—radar, light detection and ranging (LIDAR) or camera-based—to monitor the road ahead and identify possible collisions. AEBs can play a major role in our tech-saturated society because they can provide some relief from the distracted driving epidemic where it seems almost every driver is tempted to text and tweet via smartphones.
Some systems will first emit an audio, visual or haptic warning. (With a haptic system, when the sensor detects an imminent collision it issues both audio and visual warnings to the driver. If the driver does not respond, then the brakes are automatically applied.) So compelling is the case for accident avoidance that the European Commission recently passed legislation requiring that all vehicles for sale in the European Union have AEB as standard equipment by the 2014 model year.
The data that convinced European lawmakers came from Thatcham, Europe’s leading authority in collision repair research, which performs research similar to our Highway Loss Data Institute (HLDI). Thatcham performed a side-by-side study of the Volvo XC60 midsize SUV. Half were equipped with City Safety and half were not. The study concluded that property damage liability coverage claims were filed 27 percent less often for the XC60 with City Safety compared to other midsize luxury SUVs. HDLI performed a similar study in the U.S. and came to a similar conclusion.
While Volvo is known to be a leader in this area, other carmakers outside the luxury segment such as Honda, Toyota, Volkswagen, and Ford are also offering these systems in some capacity. Most offer them as trim options, but Ford is making this technology available to masses of blue oval drivers. Ford’s Active City Stop system, which was developed when Ford owned Volvo, is now offered as an option on the new Ford Focus—bringing AEB technology to millions of drivers. Active City Stop is just one portion of the company’s tech-packed driver assistance option, which also includes a lane departure warning, a lane keeping aid, driver alert, auto high beam, traffic sign recognition and a blind spot information system. And how do all of these systems work? In a word: sensors.
The result is that while there is a great deal of potential for advanced accidence avoidance technologies to decrease auto claim frequency, claim severity will correspondingly rise, due in large part to all of the sensors involved in making these systems tick. Sensor placement also plays a large role in this claim frequency/severity dynamic, as many of these sensors are placed in bumpers where most collision damage occurs. The countless collision claims resulting from common, everyday low-speed collisions make returning a vehicle to pre-accident condition even more complex, and pricier as well.
The Effect on Claims Handling
There’s no doubt that telematics are changing both the industry and how auto claims are handled. Leveraging telematics data can potentially shorten the claims investigation by providing vital clues to driving behavior immediately prior to impact. They can also help assess driver behavior and therefore driver risk. This will provide for more accurate underwriting and policy pricing.
In the meantime, on the front lines of claims handling, claims professionals must become familiar with the changed claims frequency/claims severity dynamic that advanced accident technologies have caused. The risk for auto claims handlers and their claims-handling operations is that unfamiliarity with the new inner workings of vehicles and their accident avoidance means ignorance as to the real cost of time and labor needed to return a policyholder’s vehicle to pre-accident condition.
Accident avoidance systems are costly to repair. Take for example that outside mirror on the 1966 Mercury. Back in the day, it cost $16.75 to replace. In today’s dollars, that would be around $80. But replacing an outside remote mirror with blind spot sensor can be over $800. In addition, today’s telematics systems such as AEBs and other accident avoidance systems can cost upwards of $2,200.
Collision repairers are taking full advantage of educational opportunities, including online classes that can be attended during down time or scheduled in, many companies are offering the same options for collision claims handling. Companies are also taking the time to make telematics part of industry updates to employees. Other resources include schools and associations that offer courses and seminars that are claims-focused.
There are also blogs and social media sites that have telematics content you can check out on your smartphone. Just not while driving, okay?