Insurers say no discounts for ADAS
Missing data means North American insurers won’t offer discounted premiums for ADAS-equipped vehicles.
A report released this week states that American insurers are not prepared to offer discounts for vehicles fitted with ADAS due to a lack of data to back up claims by auto manufacturers of reduced risk.
Some insurance companies recognise the potential of ADAS to reduce the frequency of accidents by as much as 25%. But they don’t yet have sufficient data to validate auto industry promises of safety benefits.
Potential to cut insurance revenues by $20 billion
Some auto-experts claim insurers’ reticence is more to do with potential revenue losses. Auto insurance provides the largest liquidity for insurers so a cut of 25% to global premiums from fully ADAS-equipped cars will cut revenues by $20 billion (17.9 billion euro) by 2020.
ADAS are usually optional extras at the point of purchase. According to Reuters, fewer than 20% of new vehicles have ADAS fitted as standard. Manufacturers have been accelerating the roll out of crash avoidance technology to increase margins. Many business and professional drivers have got used to features such as collision avoidance, adaptive cruise control, automatic emergency braking, blind spot detection, lane departure warning and so on, particularly at the higher end of the market.
In terms of insurance, what does this mean for fleet managers?
A statement issued by AAA in October 2018 warned car buyers to expect to pay more in repair costs for vehicles fitted with ADAS, for even minor accidents. It examined three of the top selling models in North America – a small SUV, full-sized pickup and medium sedan (although it didn’t reveal the makes).
Although the motoring association didn’t suggest ADAS is a bad thing, it found that repair costs for a minor front or rear collisions on a car with ADAS could run as high as two and a half times that of a vehicle without. A bumper is no longer a $300 (circa 270 euros) fix if it contains ADAS sensors it is more likely to be between $1,500 and $5,300 (1,346 – 4,755 euro).
Will ADAS bring about cheaper insurance in the future?
No doubt today’s vehicles are the safest in history and this is largely down to ADAS. And improving driver safety is a critically important objective for fleet managers. Fewer accidents also equates to more time on the road and less in the workshop. But ADAS-equipped vehicles are also the most expensive, in terms of capital cost, maintenance and repair. Plus, they introduce a raft of complications for maintenance management. Previously simple repairs come with new complexities, such as calibration of the ADAS system.
Clearly the business case for and against ADAS cannot include cheaper insurance premiums. Reductions in accident frequency and severity could eventually offset higher repair costs and insurance rates may reflect this but it’s doubtful insurers will ever offer discounts for ADAS-equipped vehicles.