Automotive > Powertrain, Body, Chassis & Safety Blog

Insurers, Regulators Impeding Safety System Adoption

by Roger Lanctot | Jan 16, 2012

The very organizations that present themselves as most concerned with the welfare of the driving public are actually impairing the adoption of automotive safety systems. Insurance companies in the U.S. refuse to offer discounts for safety systems and the inability of regulators to prove the efficacy of active safety systems will likely prevent the National Highway Traffic Safety Administration (NHTSA) from mandating these enhancements.

In spite of the lack of regulatory support and insurance incentives, Strategy Analytics actually foresees robust adoption rates for advanced driver assist systems (ADAS) among auto makers. (New ADAS Systems: Reaching Compact Segments, Reaching Greater Volumes, More Sensor Fusion But that uptake will come in the absence and in spite of a lack of commercial incentives.

Soft mandates and incentives

The best that regulators can muster in the U.S., Europe and Asia is NCAP “recognition” for cars that offer these technologies – even though few are offered as standard. The safety mantra among regulators has shifted to crash avoidance from crashworthiness. This does not mean that crashworthiness has been abandoned, but the perception is that reductions in accident fatalities from mandated systems such as airbags have reached a point of diminishing returns and that most future reductions in fatalities will come from ADAS systems intended to avoid accidents altogether.

This shift in emphasis is also aligned with the long-term plan to deploy intelligent highway systems built around V2X vehicle connectivity. The key problem with this approach is that regulators are now facing the considerably more difficult task of proving that new ADAS technologies – candidates for new mandates – have actually or are actually preventing crashes. Crash worthiness is easier to demonstrate, measure and mandate.

The one company that stands out for its standard fitment of cutting edge ADAS technologies is Volvo. One might be forgiven for expecting the company and its well-appointed vehicles to be a shining commercial success for its leadership in safety system adoption. The XC60 – with its standard City Safety crash avoidance technology – has been blessed with research findings validating its effectiveness at crash avoidance, but nary a single insurance carrier in the U.S. offers a discount for the car as a result of its safety system.

Volvo’s XC60 changes the game

In 2011, the U.S.-based Highway Loss Data Institute released a study of claim frequency and severity for the Volvo XC60 – equipped with City Safety crash avoidance technology – and found that the estimated claim frequency was 27 percent lower than that for all other midsize luxury SUVs combined. The study concluded that “the overall loss ($68 per insured vehicle year) for the XC60 was lower than that for other midsize luxury SUVs combined by 20 percent, a statistically significant result.”

Strategy Analytics noted that this finding together with “the indication that the system reduces injury rates” provided some of the first real evidence that ADAS technologies can have a measurable, real-world impact on safety. But insurers have remained on the sideline. (For a description of the XC60 and the HDLI study: Advanced Safety Systems in the Real World: They Work!

There is a legitimate concern for insurers arising from the City Safety technology deployed by Volvo. City Safety is intended to operate under congested, low-speed traffic circumstances – applying emergency braking with no alerts or warnings to the driver in order to avoid collisions. The HLDI study validated the insurance savings attributed to this system, but the implications of such systems are only beginning to be grasped.

A new acronym AEB for autonomous emergency braking has emerged to describe this class of safety system and the insurance industry is clearly struggling to assess its attraction to consumers and life and property saving qualities in practice. As the HLDI study has shown and anecdotal evidence suggests, AEB may actually have the ability to pay for itself especially in the age of the distracted driver.

Of course, if insurers will not step forward to incentivise consumers to purchase XC60’s, it is no shock that cars equipped with more familiar safety offerings such as blind spot detection and lane departure warning also fail to qualify for discounts. The same applies for telematics equipped cars offering automotive crash notification and stolen vehicle recovery technology. Discounts are available for limiting miles driven for OnStar drivers with State Farm insurance policies, but not for any other purpose.

Discounts for everything BUT safety systems

The reason this lack of insurance discounts is so aggravating is that it seems that insurers will offer discounts for almost anything else including student driver good grades discounts, online policy signing discounts, and accident forgiveness. In the words of Progressive Insurance from their Website: We offer dozens of discounts depending on your state. You can receive discounts for mileage, students, coverage choices and more. Simply complete your quote and we'll include any applicable discounts for you.

It is no less than shocking that even research findings from the insurance-industry funded HLDI are not enough to justify even the shadow of a discount. At one level, this failure is understandable, given the nature of insurance selling in the U.S.

Most consumers walking onto a dealer lot in the U.S. already have insurance. This proposition makes it difficult for a dealer to access or offer a discount since it would, in most cases, require the consumer to change his or her coverage or carrier – especially since, in the U.S., a substantial proportion of drivers have combined their car with their home insurance.

A lost opportunity?

Still, given the mature nature of the insurance industry – where large market share swings are almost unheard of – the opportunity to steal customers away from competing insurance companies ought to represent an opening to reward safety-system-buying consumers. The problem, though, is that the automotive insurance industry is as conservative as it is mature and the industry is also subject to 50 state regulatory bodies in the U.S. Insurers will not offer these discounts until there are more cars fitted with the technology, according to industry experts. And the low number of XC60’s on the road limits the attraction of reaching out to these buyers.

Here we arrive at the chicken and egg conundrum where consumers will resist adopting these advanced safety technologies because they are expensive, often hard to find on dealer lots and there is no reward – ie. a discount on insurance. The lack of a discount actually sends a secondary negative message that maybe these systems really aren’t worthwhile in the first place.

Further validation of the value of Volvo’s City Safety technology arrives in the form of a recent report in FenderBender magazine. (Cars with Crash Avoidance Steer Clear of the Repair Shop - The article notes: An October report from the Institute of Electrical and Electronics Engineers (IEEE) estimated that crash avoidance technology could eliminate all accidents caused by driver error. That’s a whopping 90 percent of crashes.”

European insurers crack open the discount door

A glimmer of hope for drivers and Volvo arrives in the form of an emerging array of insurance company discounts, some in place and some under consideration, across Europe for the XC60. Volvo executives indicate some progress with European carriers even as they continue to lobby U.S. insurers.

The company says it has seen some reductions ranging from 10 percent to 30 percent for cars with City Safety. In some cases, the insurer requires the additional bundling of the full Driver Support package: blind spot detection, lane departure warning, active cruise control, front collision warning, etc. (See chart below.)


All indications suggest that there is some hope for ADAS systems finding additional regulatory and insurance industry support. The current sad state of affairs where consumers obtain no insurance rate advantage from opting for advanced safety systems not only discourages interest but sends a strong message about the effectiveness of those systems.

Car makers bear some of the responsibility for low fitment rates and a lack of emphasis in advertising messages. Volvo and Mercedes are standouts in their safety messaging – focusing heavily on safety messages in their national advertising.

The opportunity for insurance companies to steal business from rivals with safety-system-based discounts ought to be attractive – especially in light of the HLDI study. But insurance companies may have been burned in the past by new technologies that failed to deliver discount-worthy savings.

By now, though, it is clear that these increasingly sophisticated safety systems – which are finding their way to larger volume vehicle segments – are very likely saving lives and money. When repair shops are starting to complain, as in the case of the FenderBender article, it is a strong indication that an insurer does not need a sophisticated study to interpret the writing on the wall.

For NHTSA, the emergence of advanced, active safety features represents a new opportunity to provide carrot and sticks to guide the industry, but unlike more mechanical solutions such as airbags, the path is less clear for software-based technologies such as LDW and BSD. New kinds of metrics are called for, although they may be, by necessity, rearward looking.

The HLDI study of the XC60 may ultimately serve as a preliminary template for creating standards recommendations for future enhanced safety systems. But given the wide range of functionality and performance of these camera- and radar-based systems it is likely that NHTSA, like the NCAP movement, will be forced into more of an advisory role.

Above all, NHTSA will have to walk a fine line between too-specific standards and providing no guidance or vision at all. The best outcome might be for NHTSA to define a roadmap or vision of ADAS development and deployment to assist the industry in prioritizing its development activities. This process will put at the top of the list those technologies or systems expected to save the most lives. But again, NHTSA will do best to mandate solutions such as automatic crash notification without specifying the physical implementation.

And it is time for NHTSA to intervene on behalf of the automotive industry and the driving public and insist on insurance industry support for safe driving technologies. Consumer-driven adoption of safety technologies is a proven life saver, after all.

Additional insight:

ADAS Supply & Fitment Database:

Automotive RADAR: Design Trends Point Towards Performance And Affordability:

Advanced Safety Systems in the Real World: They Work!

New ADAS Systems: Reaching Compact Segments, Reaching Greater Volumes, More Sensor Fusion

NHTSA Rear View Requirements Will Provide up to 10 Million Unit Boost to Automotive Camera Market

ADAS Demand Outlook: Affordability and Reliability Key to Future Growth


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