HOW NEW INSURANCE PRODUCTS PAVE THE WAY FOR ADVANCED TECHNOLOGIES
We’re fascinated with the technology behind autonomous vehicles (AVs) and ride-sharing services such as Uber and Lyft. But for every revolution in getting Canadians from Point A to Point B, there’s an insurance product meeting that technology halfway.
AVs have made news recently, mostly because they’ve been involved in some highprofile collisions. For many industry observers, those incidents underscore the need to develop a harmonized national framework for safe testing and deployment of highly autonomous vehicles.
Mark Francis, FCIP, is doing exactly that.
Francis is the manager, driver & vehicle licensing, with the Insurance Corporation of B.C. (ICBC), and he is serving as co-chair of the Canadian Council of Motor Transport Administrators Autonomous Vehicles Working Group — which, among other things, has identified important issues that insurance companies will need to address as AVs become more common on Canada’s roads.
“Some manufacturers have said they’ll accept liability when the vehicle is operating in autonomous mode,” he says. “But not all manufacturers will offer this coverage, so insurers will have to adopt liability coverage that envisions both scenarios.”
Individual AV owners may also find themselves on the hook for greater responsibilities for the car’s performance.
“What if the owner doesn’t maintain and service the vehicle properly, download the latest software updates or respond to a vehicle recall notice?” asks Francis. “A collision in autonomous mode might then have to be covered by the driver’s personal automobile insurance.”
AVs also have implications for corporate transportation. Google’s parent company, Alphabet Inc., may soon be launching Waymo, the first commercial AV service.
“For such a service, insurance will have more to do with insuring the trip for the rider, as opposed to vehicle or crash insurance,” says Paul Godsmark, chief technology officer, Canadian Automated Vehicles Centre of Excellence. “There is a strong argument for the major AV developers to self-insure, particularly since the most profitable business models are likely to be transportation-as-a-service (TaaS) models with fleets, rather than private AV sales. Waymo, GM and Ford have all indicated that initial AV offerings will be via fleets and TaaS. There will be a need for auto insurance, but from fewer insurance providers who will primarily compete to sell to a small number of huge fleets.”
The advent of ride-sharing services has also required the development of new insurance products to satisfy the needs of a new industry, its drivers and customers.
Intact Financial Corp. struck a partnership in 2015 to develop a fleet insurance product for Uber. It also developed tailored insurance products for Turo, a service that allows individual car owners to rent their vehicles.
“The Canadian regulatory framework recognizes vehicle insurance for personal use and for commercial use, but the notion of a car being used for multiple purposes in a ride-sharing context did not previously exist,” says Karim Hirji, CIP, senior vicepresident, international & ventures, at Intact, who led the development of both products. “We needed to work closely with regulators and with Uber to devise a product that recognized the difference between the driver using a vehicle for personal use and for picking up ride-share passengers.”
Ryan Stein, CIP, director of policy at the Insurance Bureau of Canada, says he’s encouraged by regulatory developments in provinces including Alberta and Ontario that have allowed the creation of new insurance products. He notes, however, that there’s more work to be done with regulators to modernize insurance regulations and reduce claims complications.
“For example, in Ontario, there are existing rules that say that if a person is using their car for ride-sharing but claims from their personal policy, their personal insurance still must pay out part of the claim,” he says. “Modernizing the rules will lead to more innovative and complementary insurance products that will increase competition between insurance products and help the ride-sharing industry to operate more effectively.”
Hirji notes that regulators found it easier to integrate Intact’s Turo insurance product into regulations, because they’d already developed a familiarity with ride-sharing.
“When we introduced an insurance project for RVezy, a service that allows owners to rent their recreational vehicles, regulators approved the product quite quickly,” he says. “We’re all becoming more attuned to the sharing economy.”
Modernizing the rules will lead to more innovative and complementary insurance products that will increase competition.