Insurance companies have been working tirelessly to develop products that meet the unique needs of the automobile-sharing economy, exemplified by ride-sharing services like Uber and Lyft or car-sharing services like Zipcar or Turo. But as carriers work to innovate in this area, many are finding that the macro issues around risk ownership and liability are aligning with another trend that threatens to shake the industry to the core: the driverless vehicle.

The leading ridesharing companies are clearly preparing for an autonomous future along with insurers, tech firms and automakers. In November, Uber agreed to purchase 24,000 autonomous vehicles from Volvo to be delivered by 2021. Lyft also began offering autonomous vehicle rides in Boston in December, The Verge reports.

Many of the insurance gaps and regulatory issues present in adapting to the sharing economy will also be true in the era of driverless—as the industry attempts to answer coverage and liability questions around the technology itself.

That means data mining in this early phase will be important. Thanks to hundreds of on-vehicle sensors, the average autonomous car will churn out 4,000 gigabytes of data per day, Intel CEO Brian Krzanich said at the December 2016 AutoMobility conference in Los Angeles. In the past year, the chipmaker has acquired telematics provider Mobileye for $15.6 billion and begun testing 40 self-driving cars with BMW, equipped with both of the companies’ technologies. Intel was also an early partner with Tesla for its autonomous tech.

Insurers are preparing to ingest the large amounts of data autonomous vehicles will spit out. Many have entered connected-car partnerships with automakers and telematics startups to gather more customer data in addition to the use of dongles and usage-based insurance programs. Granular data available consists of acceleration, braking, total mileage per trip and how often drivers talk or text using a vehicle’s operating system. Even data on a car’s overall performance is up for grabs for insurers.

Also see: Insurance telematics space gets crowded as automakers, startups join the fray

“Autonomous vehicles are the end game. Being able to understand trends throughout the transition will allow Farmers to better prepare and adapt along the journey,” said Mariel Devesa, head of innovation at Farmers Insurance. “Connected-car data and driverless-car data are things we look at. We launched Signal [Farmers’ UBI offering] last year to get smarter insights on the driver itself.”

In a full autonomous stage, there will likely be a shift from personal to commercial risk, Devesa says. As vehicles become smarter, the frequency of accidents should also decline. The one caveat is when accidents involving autonomous cars do occur; repair costs will skyrocket due to the expensiveness of the technology installed.

On the insurtech startup front, SURE, an MGA distributing cellphone, travel and renter’s insurance coverage for clients such as Nationwide, Marsh and Chubb, has also developed a sharing economy product with an eye towards driverless vehicles. The startup’s offering, which is distributed through a mobile app, protects only the passenger, allowing policyholders to buy accidental death, injury, and dismemberment coverage before a trip.

“We realize autonomous fleets will not have drivers; just basically a smart robot driving around. What won’t change is the passenger,” said CEO Wayne Slavin.

SURE’s product was first debuted at the annual InsureTech Connect conference in Las Vegas this past October. The startup is currently A/B testing two option plans that will be announced next month, in addition to two industry partners rolling out the product in as many as 30 states. One option is a daily coverage plan. The other, an option where customers pay for a select number of rideshares, such as two round trips.

The startup is also working in conjunction with autonomous fleets to roll out their product, but that is in the early phases of development, with the current focus on the sharing economy. Its policies are underwritten based on time spent in a vehicle and number of miles traveled, according to Slavin. SURE also captures usage data through its mobile app to ensure a ride took place, the type of service used and the date.

“In the future, we’d want to leverage other forms of telematics data we collect into rating, but you have to crawl, then walk, then run,” Slavin said. “We are not trying to define a new type of insurance, but contemplating what insurance will look like in three to five years.”

As the industry transitions to driverless, Allstate wants to be a participant in feeding competitors telematics data, along with carmakers and startups, CEO Tom Wilson said at the Consumer Electronics Show in January. The company launched Arity, its telematics subsidiary, in the summer of 2016 with that in mind.

Like Farmers, Allstate’s DriveWise usage-based insurance program is already leveraging data and connectivity components that are feeding autonomous driving to make driving safer now. Wilson concluded “we need to spend more time on the transition,” not just the end state of a driverless future.

Allstate, however, does see an autonomous vehicle future “as a matter of when, not if, and we want to be prepared to best serve our customers no matter whom or what is behind the wheel,” the company said. “Allstate has and will continue to invest in technology that helps people protect themselves and stay connected to what matters most.”

Regulatory struggles

The reality is carriers’ progress in the ridesharing market has been limited. While carriers are in search of data detailing the volume of customers using such services, the preferred servicer of choice—Lyft or Uber—and other data points to help underwrite new products, few insurers have publicly announced how, if at all, they are planning to leverage that data or create products.

Much of this lack of innovation is due to regulatory restrictions, according to Adam Hamm, managing director at Protiviti. As a former state regulator and president of the National Association of Insurance Commissioners, Hamm notes both parties have struggled to identify viable products that tackle all off the coverage gaps for drivers and passengers while adhering to individual state rules.

Ridesharing is broken down into three periods:

  • Period 1 -- the time a driver turns on the app
  • Period 2 -- when a driver accepts a ride and is en route to the customer
  • Period 3 -- during the trip

“One of the toughest nuts to crack for insurers is period two,” Hamm said. “The added complexity is defining whether this stage falls under private or commercial. Yes, you have just accepted business, but it hasn’t started yet.”

Insurers early on have resorted to filling in some of the coverage gaps present in basic commercial insurance obtained by drivers working for Transportation Network Companies through period one. Many tier-one carriers, including Farmers, Allstate, Liberty Mutual, GEICO and more, currently offer such protections to customers that extend personal auto coverages into impromptu commercial policies for at least for a portion of time drivers are picking up and dropping off passengers.

The solution to solving the sharing economy puzzle, and deploying advanced products to market could be through the use of regulatory sandboxes or innovation labs, Hamm suggests. But carriers and lawmakers should work together. The opposite would make one of two outcomes certain: new products in market will be tacked onto existing offerings without all regulatory requirements—leading to fines—or proposed plans will undergo the approval process too late and risk becoming unviable products by planned launch dates.

“The sharing economy has reached a point of critical mass; a point where there needs to be a feedback loop between regulated insurance companies and regulators concerning customers wants and needs,” said Hamm. “It evolves so fast, it’s like a moving target for the industry that the normal insurance regulation structure is not equipped to handle.”

The industry has had better luck partnering directly with rideshare companies. Usage-based insurer Root, and CSAA Insurance Group, offer policyholders rideshare credits post-claim, while their vehicle is in the repair shop. Allstate this month also announced a fully commercial coverage for Uber drivers and passengers, adding to its Ride for Hire personal auto rideshare coverage launched in 2015—now available in 47 states. The commercial policies, managed by Allstate Business Insurance, provide coverage spanning when a driver-partner turns on the Uber app to begin accepting rides through the time trips end.

“As a commercial offering, there are fewer regulatory approvals necessary,” a company spokesperson said. “In addition, Allstate met in advance with the state regulators to provide an overview of the program and respond to any questions.”

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