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Get Government and Insurers Out of the Safety Business

by Roger Lanctot | Jul 18, 2014

The time has finally arrived to privatize the safety testing activities of the National Highway Traffic Safety Administration and to shift the funding model of the Insurance Institute for Highway Safety away from the insurance industry. Here’s why.

Thatcham Research in the UK and the Insurance Institute for Highway Safety are nearly identical organizations founded with nearly identical missions:

“The Insurance Institute for Highway Safety (IIHS) is an independent, nonprofit scientific and educational organization dedicated to reducing the losses — deaths, injuries and property damage — from crashes on the nation's roads.” - IIHS Website

“Thatcham Research is the motor insurers’ automotive research centre. Established by the motor insurance industry in 1969, the centre’s main aim is to contain or reduce the cost of motor insurance claims whilst maintaining safety standards.” - Thatcham Website

Both organizations help to set safety standards and can ostensibly be held accountable to one degree or another for the rate of highway fatalities in the respective countries. This is a vast oversimplification, but it is intended to call attention to the fact that in the U.S. we are slaughtering approximately 100 people a day on our highways while in the U.K., as of 2010 and according to World Health Organization estimates, about 7 people are dying per day.

To be sure, every fatality is a tragedy and the United Nations is in the midst of its “Decade of Action for Road Safety” while Sweden has adopted “Vision Zero.” Even the newly-elected Mayor of New York has set a goal of zero pedestrian fatalities for the city.

But the shocking truth is that the U.S. is failing badly in preventing highway fatalities. The U.S. has long been a “leader” in killing people with cars, only recently surpassed by Brazil (as a result of a booming auto market and lax safety standards). The difference between the U.S. and the U.K. is just as stark as the difference between the U.S. and Brazil, where the fatality rate is 22 deaths per 100,000 population annually as of 2010.

Of course, the difference between the U.S. and Brazil is more obvious from the standpoint of the quality of the cars and the roads. But an even bigger difference is that the U.S. has a significant safety testing and certification infrastructure that Brazil lacks.

But the safety testing infrastructure in the U.S. is failing. While Thatcham in the U.K. is a powerful advocate for vehicle safety systems – currently pushing for a government subsidy to support the purchase of new cars equipped with automatic emergency braking technology – IIHS offers nothing more than brochures and Website resources. And IIHS executives insist they have nothing to do with lobbying legislators.

The difference between Thatcham and IIHS is that Thatcham goes so far as to quantify the societal benefits of safety system adoption based on its own testing. In fact, Thatcham has taken up the banner of vehicle safety and carried it to international forums to promote its cause of collision avoidance globally.

Says Thatcham on its Website: “Around 23 per cent of new cars on sale today have AEB available as optional or standard fit. Insurers recognise the benefits, with AEB-fitted cars given a rating of as much as five groups lower than their counterparts, and potentially saving up to 10 per cent on insurance premiums.”

Thatcham goes further, stating on its Website:

  • 90 per cent of road crashes are due to human error or distraction
  • £90,000 - total cost of the average injury crash
  • 18% reduction in third party injury claims for AEB-fitted cars
  • 550,000 whiplash claims annually in the UK cost £2B, adding £90 to the average car insurance premium
  • 23% of new cars on sale today have AEB as optional or standard fit
  • Less than 10% cars sold have AEB specified
  • Regulation or Government incentive of £500 needed to accelerate take up

So Thatcham tells the safety story in terms of both societal and consumer financial benefits. IIHS steers clear of suggesting or promoting insurance discounts for safety systems. In fact, more often than not, IIHS either avoids the insurance premium savings conversation entirely or seems to go out of its way to avoid endorsing new technologies as potential life savers – based on the ambiguous findings of its own safety tests – ie. the test outcomes were unclear therefore we cannot endorse technology X.

A typical example comes from IIHS's testing of Volvo safety systems: "This initial analysis of the effect on insurance claims of 4 crash avoidance features, 2 of which are combinations of multiple features, suggests that they are helping drivers avoid some crashes reported to insurers. However, except in the case of Volvo’s steering-responsive headlights, the estimated benefits are not statistically significant. Volvo’s Active Bending Lights reduce PDL claim frequency as well as BI claim frequency, but there was not a corresponding reduction in collision claim frequency."

In other words, you, Mr. Consumer, may as well not bother with these safety systems because they won't save you a nickel on your premium.

It is perhaps no surprise, therefore, that better discounts for safety systems can be found in Europe than in the U.S. And it should also come as no surprise that annual highway fatality rates are almost universally and substantially lower in Europe, with a few exceptions.

Some insurers in the U.S. will offer discounts for some safety systems. But the dominant rating scheme in the U.S. is to focus almost exclusively on the driver and such rating factors as driving history and education, including driver education.

It is true that the roads and the cars and the rules are different in Europe, but the vastly lower fatality rates are hard to ignore. As with so many areas where the U.S. lags – education, healthcare, etc. – we spend more on road safety and get less benefit.

There are two problems with the automotive safety testing regime in the U.S. The pre-eminent safety authority for setting standards and issuing mandates is the National Highway Traffic Safety Administration (NHTSA). NHTSA is led by political appointees hamstrung by limited funding options and staffed with engineers buffeted by changing regulatory priorities.

Currently NHTSA is more than five years into a shift in its mission from surviving accidents to preventing them altogether. This shift in focus ought to have produced a complete revamp and re-staffing of the organization to address the modified technical demands of the new mission. Needless to say, the limitations of NHTSA being a government agency prevented any such sea change.

IIHS, too, is hamstrung by its funding model and its own perception of its role. The institute is a non-profit funded by the insurance industry. This puts IIHS in the awkward position of conducting safety research and assigning safety scores for the automotive industry, while its fundamental objective is seeing to the priorities and concerns of the insurance industry – which may conflict with the concerns of both car makers and consumers.

(It is worth noting that apart from IIHS’s research activities, individual insurers in the U.S. do conduct outreach directly with car makers to advise on the construction of cars to enhance safety and reduce the costs of repairs. These activities, which directly relate to Thatcham’s vehicle repair research and protocol development efforts in the U.K., are worthy and ought to continue.)

The government and the insurance industry need to be removed from the safety testing and standards setting activity, which ought to be funded by the industry. Government oversight may be an appropriate role, but not direct government management. The recent spate of recalls including the very public Toyota and GM recall controversies have demonstrated clearly that NHTSA lacks the necessary expertise or the funding necessary to acquire it.

With 100 Americans dying on the highways every day it is clear that we, as a country, can no longer depend on the government or the insurance industry to solve this problem. Vehicle safety should be put into the hands of independent commercial interests charged and evaluated on the basis of protecting consumers and saving lives. We are fighting a war and the body count is rising.

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