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Vice President and Underwriting Manager,Inland Marine

As autonomous commercial vehicles hit the streets, vigilance in underwriting must shift into high gear

It’s an idea that has captured our imagination in folklore and science fiction. From The Legend of Sleepy Hollow to the latest blockbuster movies, we’ve long been fascinated by the thought of transportation with no human controlling the reins, steering wheel, or cockpit. But now the trucking industry is moving that possibility from the screen to the streets — from fantasy to fact.

But first, let’s review the spectrum for autonomous trucking levels. This is important because the terms “driverless”, “autonomous”, “semi-autonomous” are used loosely and often interchangeably.

  • Level 1: Driver Assistance — one function controlled automatically (i.e. cruise control)
  • Level 2: Partial Automation — both steering and acceleration/deceleration are automated, with the driver ready to take vehicle control
  • Level 3: Conditional Automation — all safety-critical functions are automated, but the driver is present for certain traffic and environmental conditions
  • Level 4: High Automation — automated to perform all safety-critical functions and roadway conditions for a full trip (driver still present)
  • Level 5: Full Automation — expected to perform equal to a human driver, in all scenarios and conditions (driver not present)

How soon until we reach Level 5? Sooner than you think….

This year, Walmart is partnering with the startup Gatik to make deliveries in Arkansas between a fulfillment center and neighborhood market store. Initially the box trucks will have a safety driver on board for backup, but this route will soon be "Level 5: Full Automation" (no driver present).

As recently as two years ago, most didn’t expect this capability to come into play as quickly as it has. Concerns about off-highway driving, in particular, reinforced the belief that human drivers would be working in tandem with semiautonomous vehicles for an extended time. The technology took everyone by surprise by evolving more rapidly than anticipated. While this development is still in its infancy, it’s time to ensure that underwriting parameters take into account all the risks particular to insuring cargo that’s being transported by driverless trucks.


The risks are the same, but different

Cargo transport via autonomous trucks won’t eliminate the risks that insurance coverage has always addressed, such as accidents or theft. The propensity for loss from these perils may be reduced, however, if all works as expected.

Government statistics on accident records, rates of speeding or other violations, failed inspections and other indicators are essential to underwriting trucking companies and facilitate the ability to extrapolate risk. Autonomous trucks reduce or ultimately remove the human factor from the equation and so change the focus of concern. There will be a lower incidence of drivers who are prone to exceeding the speed limit or getting distracted (leading to accidents) or who are facilitating cargo theft, for example.

Nor do they eliminate the issue of the quality of U.S. roads, which have been graded a D by the Society of Civil Engineers. A further complication is that road quality and signage standards vary from one state to another. These were originally seen as obstacles to widespread use of autonomous vehicles, but the technology has proven itself adept at acclimating to those variables.

Autonomous trucks are increasingly relying on advanced camera tools rather than LiDAR or radar, and that further enhances their adaptability. That’s a key point because trucks have an emergency stopping distance far excess of cars (525 vs. 300 feet) and so need to be able to “see” well beyond that expanse of road. Cameras are equipped to sense objects farther away than LiDAR or radar and have different light sensitivities as well.

As implementation of this technology proceeds, underwriters must be attuned to new and emerging threats. What is the quality of the cyber controls? How efficiently can the trucking company put its backup plan into action if the autonomous network fails or is hampered by unforeseen weather? What is the company’s emergency response record in the event of simple everyday occurrences such as faulty software upgrades?

Once autonomous trucks are in business, the industry needs to get up to speed on risks such as cybersecurity and terrorism in this context. In effect, it’s going to be necessary to underwrite the quality of the technology that powers these vehicles, which means understanding the hazards that reliance on that technology brings into the equation.

Some of the components offer surprisingly uncomplicated access to the system. For example, a dongle — a simple gadget that plugs into the dashboard to monitor location, speed and efficiency — is susceptible to hacking that could disable the brakes. A more complex and sophisticated, but no less possible, risk scenario involves a terrorist attack that scrambles the network (a potential event similar to an attack on the power grid). And because the future of autonomous trucking depends on building confidence in its reliability, a single incident of hacking one 18-wheeler to cause a major accident could prove a significant setback for adoption.

While this development is still in its infancy, it’s time to ensure that underwriting parameters take into account all the risks particular to insuring cargo that’s being transported by driverless trucks.

Take things slowly, but be ready fast

It’s a lot to digest, and there’s no time to lose. The underlying technology is functioning only in certain states today, but the target is to have it operational in all 48 contiguous states by 2024.

That doesn’t mean autonomous trucking will be in a position to become the norm while all these variables are being assessed. There’s also a good chance that autonomous vehicle design will be rethought entirely to optimize driving capabilities and jettison traditional parts and design elements that are no longer needed.

But underwriters can’t be complacent about the technology’s expansion and the market conditions (from the shortage of truck drivers to the need to manage labor costs) that are driving its adoption. The industry also has to appreciate and plan for the impact of the concurrent influx of big data that promises to emerge with this trend.

By generating real-time data continuously, autonomous trucks will offer underwriters more precise insights into how the account is performing. That capacity could, in turn, influence considerations as diverse as loss control, interaction with the agent, pricing, terms and conditions. The sheer volume of data will facilitate identifying broad patterns and improve the accuracy of projections.

This data can also help to identify driver actions and behaviors — such as excessive idle time, harsh braking or rapid acceleration — that reduce fuel efficiency and elevate carbon emissions unnecessarily. The information can also aid drivers by providing real-time traffic and weather updates or helping them to get to maintenance or repair facilities more quickly. The results have the potential to minimize drivers’ downtime and optimize their on-time delivery records.

These changes are expected to reduce fuel consumption - the #1 expense in running a truck - by ~10%. And the #2 expense? Salaries. You can see why the trucking industry is keen on adopting this technology.

For underwriters, the challenge is navigating a shift in mindset and adapting to a trucking industry in which risk is no longer centered on the driver. Rather, it is dependent on the quality of technology, maintenance procedures, upgrade practices, cyber controls, and other emerging factors. By understanding this shift and the value of analytics, underwriters can get a more up-to-date and accurate handle on coming changes that will be required in evaluating segment risk and pricing.

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