A NIBA BROKERS’ GUIDE TO
AUTONOMOUS TECHNOLOGY ISSUE 1
CONTENTS ISSUE 1 FEATURES 4
Identifying motor risks of the future
6 The changing face of vehicle ownership and usage 8 Autonomous ag-machinery is changing how we insure 10 Autonomous vehicles: evolving technologies bring evolving cyber risks
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The NIBA Broker Guides are brought to you through a partnership of Allianz and NIBA. We hope the knowledge of our subject matter experts, coupled with Allianz’s industry expertise, helps you and your clients prepare for the future. We welcome ideas for future subjects.
WELCOME DALLAS BOOTH Chief Executive Officer, NIBA
DAVID HOSKING Chief General Manager, Broker and Agency, Allianz
Inside this guide we explore the world of autonomous technology and identify ways to help you and your clients prepare for risks of the future. Autonomous technology is often at the centre of an ongoing debate that modern technology has spiralled out of control. Regardless of whether you agree or disagree with the advances, there’s no denying that autonomous technology presents a raft of imponderables for insureds, underwriters and insurance brokers. This supplement is designed to help you identify and prepare your clients for the emerging risks associated with such technology. In the first instance, we explore motor risks as we head towards a driverless future and assess the complexities of determining causation and liability in autonomous vehicle collisions. Furthermore, we investigate the changing face of vehicle ownership and usage, and what it means from a risk perspective. Shifting our attention to autonomous machinery in the agricultural sector, we observe an increase in productivity, and uncover a number of growth opportunities for insurance brokers. Finally, our legal expert warns of exposure to new digital and cyber risks, an unfortunate consequence of evolving technologies. We hope you find this a relevant and interesting read.
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IDENTIFYING MOTOR RISKS OF THE FUTURE AUTHORS: LEON GETTLER & TIFFANY EASTLAND
Product liability claims can be quite complicated, particularly when it comes down to who owns the data.
Autonomous vehicles (AVs) are headed for a road near you. In fact, key policy decisions could be made as early as next year, enabling legislation to be drafted thereafter. Leon Gettler and Tiffany Eastland examine the motor risks in this brave new world. The National Transport Commission (NTC) is currently developing a regulatory framework for autonomous vehicles and examining the technology that goes into them. THE ROADMAP OF REFORM Transport and infrastructure ministers have decided, based on the agreed first supply recommendations from the Safety assurance system for automated vehicles project, that the ‘automated driving system entity’, the certifiers
HERE AND NOW Autonomous technology has already made a significant contribution to automotive safety improvements in Australia. According to the US National Highway Traffic Safety Administration, 90 per cent of car accidents are caused by human error, which means future and existing advancements could significantly reduce claims frequency. The NTC defines five game-changing automotive technologies shifting risk, here and now. Adaptive Cruise Control
Purpose: To monitor traffic and maintain a safe distance from the vehicle ahead.
of autonomous driving systems, is legally in control of the vehicle when the autonomous driving system is in operation. However, a human driver, known as the ‘fallback ready user’, is required to take back control of the vehicle if the system fails, and will be subject to normal alcohol, drug and fatigue requirements for a driver. The fall-back ready user must also be appropriately licensed.
Adaptive Light Control
Purpose: To make driving at night or in low-light conditions safer by increasing visibility around curves and over hills.
Autonomous Emergency Braking (AEB) Purpose: To detect an obstacle in the vehicle’s path and, without intervention by the driver apply the braking system.
Lane Departure Warning Systems
Purpose: To detect a vehicle unintentionally leaving its driving lane and alert the driver to take corrective action if required.
Telematics
Purpose: To collect diagnostic information about harsh braking, engine performance, routing, and to monitor drivers and the driving tasks through the exchange of data and information, to and from a vehicle. SOURCE: NATIONAL TRANSPORT COMMISSION
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The transport and infrastructure ministers have also decided to have a purpose-built national legal framework to manage the on-road operation of AVs, as opposed to different state laws. The Commonwealth Road Vehicle Standards Act will provide a framework to assure the safety of AVs when they are first introduced to the Australian market. The NTC finished a consultation in August on the role of automated driving system entities, enforcement officers (including police officers and council parking infringement officers), manufacturers, fall-back ready users, remote drivers, repairers, modifiers and road managers, in the inservice safety of AVs. NTC Project Manager, Dr Kirsten McKillop says, “We put up suggestions on how big their [the stakeholders’] influence was in terms of in-service safety and then we looked at whether they were regulated sufficiently.” “The next step for us is to analyse all the submissions and see what people’s views were on the options we presented,” she explains. The Commission’s consultation document proposed that a general safety duty be applied to the automated driving system entity, and that the associated parties should exercise some due diligence. Dr McKillop says there might be a need for prescriptive rules for remote drivers and road rules applying specifically to AVs. The NTC has also considered the issues relating to data, government access and privacy. A LEGAL EAGLE EYE Henry Silvester, Principal at Barry.Nilsson says countries like the UK and Germany had already introduced legislation on AVs and the hacking of data. He says the issue of data in the event of an accident would be critical for insurers, and that could be extremely complex. “The insurer would have the right of recovery against the programmer or whoever was responsible for the defect. It would turn into a product liability.”
THINGS TO CONSIDER • Continued advancement in technology will potentially continue to increase overall repair and maintenance costs. • Insurance products for the future will be different and may incorporate other product coverages not normally associated with traditional Motor Vehicle Insurance. • The advancement in technology will create opportunities for more granular data to be collected. • Cyberattacks on AVs and their supporting infrastructure will present insurers with a new form of catastrophe exposure.
Silvester says, though it sounds simple enough, product liability claims can be quite complicated, particularly when it comes down to who owns the data. INSURING THE FUTURE OF MOBILITY Marie Chand, Head of Liability for Broker & Agency at Allianz says whilst the human element will likely be significantly reduced, insurers will need to understand the technology that powers and controls AVs and work closely with Government on changes required not just to legislation but also existing infrastructure. “I would assume the AV will have different levels of technology controlling different aspects of the vehicle. Specialist technology technicians would need to determine which part failed, or perhaps AVs will be fitted with something similar to a Black Box to assist with the investigation of any incident?” The burning question being, who becomes responsible for what in the case of accidents? Chand says AVs would also need to consider external factors and be capable of managing changing weather patterns and any technology outages, and there would have to be collaboration to outline ethical considerations in determining liability. “My own view is that we shouldn’t be looking at what we have today. We should be creating for the future, and I think that becomes a collaboration piece across insurance companies, government and motor vehicle manufacturers.”
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THE CHANGING FACE OF VEHICLE OWNERSHIP AND USAGE AUTHOR: NINA HENDY
Ridesharing services have skyrocketed in popularity in recent years, and now autonomous taxi fleets are threatening major disruption. But what does it all mean from a risk perspective? Nina Hendy investigates. Growth in ridesharing services like Uber and Ola has been phenomenal in Australia. But it’s only just the start. Driverless cars are also about to change the face of vehicle ownership and usage. Tesla is promising to launch full self-driving capabilities to hundreds of thousands of cars in the US by the end of this year. And while autonomous taxi fleets are a few years off yet, David Levinson, Professor of Transport in the School of Engineering at the University of Sydney, wonders how long can Uber or Ola and the like sustain losses on their current business model before they can eliminate drivers? “Building new taxi fleets will also be a huge capital investment, while currently they exploit the vehicles owned by their drivers, who finances that?” questions Levinson. But rideshare is only the tip of the iceberg. It’s now widely accepted that by 2030, mobility in Australia will be dramatically different from today, according to a KPMG report1.
It’s now widely accepted that by 2030, mobility in Australia will be dramatically different from today
“In the future, transport will seamlessly connect people’s lives, where consumers are able to get from point A to point B in a way which is cheaper, cleaner, safer, and our journeys become productive and entertaining extensions of our day-to-day routines,” the report reads. GAZING IN THE CRYSTAL BALL Leading Australian futurist Steve Sammartino predicts that ridesharing operators will go broke as soon as cars become autonomous. “The transition will happen really quickly. Before we know it, this trend will be here.” Sammartino says people will pay a subscription fee to access and use a car marque as needed in the not-toodistant future. “There will also be services where someone will come and pick you up and you can drive yourself to your destination. In fact, this self-driving model already exists in some markets,” he says. It’s already happening in the US; Waymo is a self-driving technology company that began as the Google selfdriving car project in 2009. Since then, the company has been working to perfect the technology and it’s rolling out in the US. DISRUPTION IMMINENT All these changes are prompting a major collective rethink by insurers. The fact is that autonomous cars will completely disrupt current insurance business models and an appropriate response will be crucial, Head of Motor Fleet for Broker & Agency, at Allianz, Neil Parker explains.
1 https://home.kpmg/xx/en/home/insights/2017/04/mobility-2030-beyond-transportation.html
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“The motor insurance market could shrink from its current size within the next 25 years as a result of advances in this emerging industry, ” Parker says. A key factor moving forward will be understanding the customer. “As the emerging model of subscription and pay-as-you-go, connected cars and shared mobility evolves, it will change how our clients travel. This may lead to a reduction in asset ownership, prompting questions around whether a reduction of insurance needs will follow,” Parker says. “However, consideration must be given to associated services or emerging risks that will be impacted by this. Possible growth in other industry segments, such as technology driven hubs, infrastructure, risk management and cybercrime, for example,” Parker says. The prospect of autonomous taxi fleets raises a number of new considerations for insurers, he says. These fleets will be able to avoid dangerous situations and maintain direct routes and also alter routes based on traffic conditions or other disruptions, he explains. “Another risk consideration is reputational or brand risk. For an entire fleet, if one of its vehicles were involved in an accident, brokers need to consider the implications to the brand given the major exposure of their risk transporting people safely from point A to point B,” he says. A RADICAL RETHINK The good news is that brokers are in a strong position to prove their value, Parker says.
“The role of the broker has never been more important, in terms of matching insurance needs to the changing face of vehicle ownership, and addressing any gaps in coverage to limit risk,” Parker says. However, brokers need to approach this evolving space with an entrepreneurial mindset, according to Sammartino. “People outsource their risk to insurers, and insurers will need to look at insuring different things and create new insurance products if autonomous vehicles don’t have the capacity to crash,” Sammartino says.
THINGS TO CONSIDER • Plan ahead. Ride sharing services and autonomous technology may threaten your current business model, and you will need to respond. • Take advantage of the evolving nature of the risk. As vehicle ownership evolves, so will the insurance needs of both the car and the individual. A broker should bear this in mind as it won’t be a ‘one size fits all’ approach. • Know your customer. Understanding how your clients travel and considering the associated services and emerging risks that may be impacted, is critical. • Think unconventionally. Look out for potential growth in other industry segments such as technology driven hubs, infrastructure, risk management and cybercrime. • Prove your worth. If your client suffers loss of earnings from an accident, or a business incurs loss of goods, interruption of service, or even damage to reputation they will likely need guidance in quantifying and recovering those losses.
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AUTONOMOUS AG-MACHINERY IS CHANGING HOW WE INSURE AUTHOR: PRIMACY UNDERWRITING MANAGEMENT
Across Australia and the globe, autonomous machinery is playing an increasingly important role in driving productivity gains and creating new efficiencies. The development of autonomous machinery technology coupled with the ability to harness the power of big data is helping to pave the way for a more automated future and is also transforming our ability to more accurately insure and assess claims. Today, 37 per cent of the world’s land is used to produce food to feed the global population of about 7 billion people. By 2050, food production will need to increase by 30 per cent to feed the world’s rapidly increasing population1. The agriculture industry is turning to technology to increase productivity, support smarter planning and speed up recovery from natural disasters. AUTONOMOUS MACHINERY, DATA AND AGRICULTURE: TECHNOLOGY COMES TO LIFE Data tops the agenda in almost every discussion around technology and autonomous machinery. Through innovation in drone technology and greater access to satellite imagery, the agriculture industry has the ability to create and take advantage of big data. Chief Executive Officer at Primacy, Marcus Pearl notes that from an operational level, satellite imagery providers like Geosys will allow farmers and agronomists to map and understand, at a very granular level, almost every aspect of their land. “This can range from areas of moisture in the paddock, growth levels of specific crops in each paddock and even the most appropriate crops to plant at each location on
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This type of technology can reduce a farm’s cost base and unnecessary input through fertilizer application. the farm. This type of technology can reduce a farm’s cost base and unnecessary input through fertilizer application,” Pearl said. Access to this level of data will lead to significant productivity gains and greater crop yields. It will allow farmers to use smart algorithms and autonomous machinery like drones to apply fertilizer and plant in more efficient ways with fewer physical resources. “From an insurance perspective, crop satellite technology allows us to paint a substantially more accurate picture for policy assessment. We can now see, in detail, the full breadth of a client’s property and deliver the most accurate outcomes for our customers,” Pearl said. “Satellite and drone technology allow insurers to settle claims more accurately and fairly, and, importantly, it also allows us to very quickly access damaged areas or incidents and progress claims,” Pearl added. In the past it might take weeks for a loss assessor to access a remote property or restricted area, but with satellite mapping technology sometimes the claim process may start almost immediately. UNDERSTANDING THE RISKS While the advent of new technology and autonomous machinery brings untold opportunities for claim accuracy and assessment, there are still variables that need further definition. An increasing use of automated machinery will require adaptation and evolution from the current assessment of policies and claims. The use of automated machinery to support or replace human tasks will remove the assumptions and certainties that are currently taken for granted. For example, during transition periods where machines and humans coexist in the workplace, the industry will likely see an intensified period of risk.
“Traditionally, humans are the most common cause for error2. However, when co-working with autonomous machines, there is an increased level of uncertainty when establishing liability and establishing levels of cover for unforeseen risks,” Pearl noted. The introduction and eventual growth of automated machinery in agriculture may also pose the risk of new entrants into the agri-insurance space. Big data will play a core role in connected farming and as a result, insurers could see competition from data technology and software companies. Without adaptation and an understanding of the changing technologies used by clients, insurers and brokers could be forced to play catchup to new entrants.
THINGS TO CONSIDER • Harness the power of new technology Autonomous machinery presents the opportunity for new industry leaders in agricultural broking. Explore how you can innovate to develop market leading products and policies that demonstrate your knowledge of the changing industry and future opportunities for your clients. • Understand the value of big data The adoption of autonomous machinery is still in its early stages but that does not mean you can afford to delay your understanding. Your ability to explain and discuss the role of big data with clients will be a significant differentiator as the use of autonomous machinery becomes the norm. • Don’t underestimate the risks The introduction of new technology brings a world of uncertainty for your client’s business. Underestimating potential risks could have significant impacts for you and your clients. Take the time to explore and map out all potential risks, no matter how removed, to ensure you are providing true value to your clients.
1 Source: https://data.worldbank.org/indicator/AG.LND.AGRI.ZS 2 CRO Forum, Autonomous Machines: Emerging Risks Initiative – Position Paper, November 2017, https://www.thecroforum.org/2017/11/20/eri-autonomous-machines-position-paper/
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AUTONOMOUS VEHICLES: EVOLVING TECHNOLOGIES BRING EVOLVING CYBER RISKS AUTHOR: MARK DOEPEL
Incredible new technologies that increase security, improve safety and make the driving experience more comfortable and convenient are now commonplace for motor vehicle manufacturers. However, these new technologies bring new digital and cyber risks, explains Mark Doepel, Partner at Sparke Helmore.
(such as automated emergency calls, theft tracking and vehicle breakdowns) providing a more accurate rateable risk quickly and efficiently.
In 2015, Chrysler recalled 1.4 million vehicles after hackers demonstrated they could remotely hijack Jeep’s digital systems over the internet.
We expect the cost of autonomous vehicles will mean companies and ride-share services predominantly purchase them, which can increase profits by not needing drivers. It’s likely that a portion of the market – previously dominated by a ‘one vehicle, one policy’ attitude – will be overtaken by autonomous fleet policies.
Similarly, wireless communication functions (Wi-Fi, Bluetooth and GPS) also create potential vulnerabilities for hackers to exploit, posing serious security risks for drivers, the automotive industry and for insurers.
As security features emerge to protect against cyber security risks, insurers could insist these measures are implemented and may decline to cover risks unless minimum cyber safety standards are met.
While autonomous vehicles are revolutionising transport, law, regulation and insurance offerings must adapt to keep pace. Insurers should stay abreast of cyber and autonomous vehicle government reforms and adjust existing policies or create new ones to cover unchartered territory.
Finally, brokers should be aware that the emergence of autonomous vehicles may require multiple types of insurance or endorsement add-ons, for example CTP policies may have to be supplemented with cyber security insurance. Similarly, manufacturers may need new product liability cover for sensors or infrastructure, or PI cover for autonomous software program development.
WHAT ARE THE RISKS? The vehicle and the entertainment products within it each have different areas of vulnerability, resulting in separate cyber risks. The ‘Controller Area Network bus’ system (essentially the vehicle’s brain) has become more advanced as technologies evolve. It communicates in real time between (potentially) the engine, electronics, brakes, collision-prevention systems, smart keys, lights and immovability sensors. If a hacker exploited this system, they could take control of the vehicle, leading to driver functions failures (loss of brakes, engines, steering), vehicle systems failures, collisions and vehicle theft. The second system is the ‘infotainment system’, which controls the functions that make driving more enjoyable – Wi-Fi, Bluetooth, USB, phone connectivity and GPS. Hackers could use the infotainment system as a gateway into other systems – leading to issues such as stealing information on a connected smartphone. IMPACT ON THE INSURANCE INDUSTRY Initially, there could be a lack of data leading to difficulties in rating the risk and therefore disproportionately large premiums. However, this will probably be self-limiting, as the technologies insured are likely to collect data on factors
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THINGS TO CONSIDER • Prepare for new risks. Autonomous vehicles will transform the transport industry, but face digital, cyber and safety risks, as well as commercial and reputational risks for the manufacturers, should an incident occur. • Keep abreast of change. It’s critical that brokers are across cyber and autonomous vehicle government reforms and up-to-date with changes in the industry. • Look beyond the obvious. The autonomous vehicle industry participants will require multiple types of insurance or endorsement add-ons, giving brokers the opportunity to look at new types of cover for allied industries.
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We’re committed to being here for Aussie farmers, through the good times but also when things are tough. You feed the nation, and the world. You’re a farmer, scientist, business owner and technology expert, all at the same time. And whether you’re doing it tough during a drought, or keeping pace with the rapid rise in AgTech, having the right insurance in place can protect your livelihood. That’s where we come in. Allianz Farm Pack provides a wide range of specialised insurance solutions for farmers. And through our partner brand, Primacy, we also offer Australia’s widest range of crop cover. With our team of agricultural specialists, we’re here to support farmers in regional and rural Australia for the long term. Ask your local insurance broker about Allianz and Primacy products today.
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