A recent report jointly created by the Insurance Institute for Highway Safety (IIHS) and the Highway Loss Data Institute (HLDI)* clearly illustrates the benefits of advanced driver assistance systems (ADAS) in reducing the number of collisions.Depending on the type of ADAS feature, collision frequency is reduced anywhere from 7% to 78%. And, ADAS adoption is growing. Our own internal research indicates that since 2014, the inclusion of at least one ADAS feature per vehicle has increased approximately 300%. In the 2019 model year, 76% of the vehicles produced were equipped with at least one ADAS feature. There’s no doubt ADAS can significantly improve driving safety and is on the rise.
In my previous blog post, I talked about how we’ve demystified ADAS classification with a classification system that standardizes ADAS features so carriers know what those features are and what they do, regardless of what the manufacturer calls them. This expanded view of vehicle build can help you make more informed decisions about potential risk, boost customer loyalty and improve business performance. In this blog post, I’m going to do a deeper dive into how ADAS could impact your book of business.
ADAS has powerful transformational potential
In a recent study we conducted of 11 million vehicles model years 2014 to 2019, we saw some significant reductions in claims frequency involving vehicles with ADAS. ADAS equipped vehicles resulted in 27% fewer bodily injury claims and 19% fewer property damage claim when compared with similar vehicles that did not have ADAS. In terms of claims severity, it has been theorized that vehicles equipped with ADAS will be more expensive to repair when they’re involved in an accident. Our internal research estimates a modest lift in claims costs of around 1-2% for ADAS-equipped vehicles depending on the type of claim. We would even expect these costs to trend downward as ADAS features become more mainstream in the market, bringing down component costs due to the economy of scale, and repair shops become better trained with access to the correct tools and equipment.
ADAS can impact your business in several ways
The potential impact of ADAS on your business is related to the age of the vehicles you insure. The vehicle make and type or segment (such as small hatchbacks or large SUVs) can also have a bearing on ADAS availability and fitment. ADAS features started becoming significant around model year 2014, which we at LexisNexis consider to be the beginning of the ADAS era. We estimate that approximately 37% of the vehicles on the road today come from the ADAS era. We have seen an approximate 6% point growth in that number for the past several years. Our contributory data indicates that ADAS-era vehicles account from about 9.5% of book for the carrier with the least ADAS-era vehicles to about 52% of book for the carrier with the most ADAS-era vehicles.
The IIHS/HLDI study also shows variations in feature availability over time as well as whether a feature is standard or optional. For example, forward collision with automatic emergency braking is available for about 62% of the 2018 models, but and is only equipped on approximately 24% of them. Thus, there is great importance in understanding at a VIN level what features a particular vehicle is actually installed with.
Feature availability might provide some additional insight. We’ve seen some significant loss cost differentials for vehicles equipped with ADAS features. Because ADAS features are still predominately offered as options, an owner that “buys up” to include these options could be considered a much more safety conscious driver.
These are all considerations in determining the impact of ADAS on your book of business.
Make sure you get the information you need
When we deliver vehicle build data to a carrier, we deliver it in one of two ways:
- Automatically, through our auto data prefill product
- In a standalone fashion, where the carrier sends us a VIN and we send back build data
The bulk of the insurance industry uses auto data prefill today. The auto data prefill we return provides an enhanced VIN decode that includes ADAS features―normalized and detailed according to the classification system I discussed in previously. This means that when a consumer asks you for a quote on an ADAS-equipped vehicle, we can tell you exactly what ADAS features that vehicle has and you can factor that information into your underwriting. Based on the accident trends we’re seeing, we believe that a discount will be justified on many ADAS-equipped vehicles. The more you understand those vehicles, the more appropriately you can discount.
And so begins a virtuous cycle of consumers purchasing ADAS vehicles and receiving insurance discounts, automakers seeing their brand reputation improve, and carriers like you enjoying the benefits of premium more appropriately matching risk and increased customer loyalty.
*Real-world benefits of crash avoidance technologies. 2019, Insurance Institute for Highway Safety, Highway Loss Data Institute.