The high cost of safety
Health Insurance

The high cost of safety

What is ADAS?

Even medium-priced cars today come with automated safety features and convenience a like forward-collision avoidance, automatic braking, electronic stability control, blind-spot detection and lane-keeping assist, together called Advanced Driver Assistance Systems (ADAS). 22 US carmakers have pledged to make basic ADAS standard by 2022.


  • Collision: Avoidance detects imminent collision and activate audible warning and automatic braking
  • Electronic Stability Control: adjusts individual-wheel braking and engine power to countersteer the vehicle when it skids
  • Blind-spot Detection: audible notification of objects in the driver’s “blind spot i.e. area obstructed by pillars etc.
  • Hill Descent: Control helps manage steep descents through controlled braking
  • Fatigue Detection: detects fatigue by looking for nodding or sudden lane changes
  • Adaptive Cruise Control: keeps a safe distance between you and the car ahead

Catch-22: The Paradox of ADAS

This technology is reducing accidents. Data from the US Highway Loss Data Institute (HLDI) show lower claims for cars equipped with ADAS. Common sense suggests that as driving aids reduce the number of crashes, premiums should fall. But the average premium has risen 14% since 2014 to $990.

That’s because ADAS relies on expensive electronics placed in bumpers, fenders and mirrors - the areas that get hit in a crash. After an accident, cameras, radars, lasers and sensors must be reset. Ordinary repair shops can’t handle these repairs, and spares are not easily available. Moreover, unlike pilots, drivers aren’t trained to work with safety devices and tend to lose focus if little input is required.

Trying to Reduce Costs

Carmakers are trying to lower claims costs. Subaru now puts ADAS equipment in areas less exposed in crashes, e.g. behind the windshield. Insurers are also experimenting. In the US, Hartford and Liberty Mutual offer discounts for drivers who use ADAS features like automatic-braking.

Realising the benefits of ADAS

Insurers estimate 25-50% of all vehicles must have forward-collision prevention before accident rates decline enough and parts become cheaper and more widely available to deliver the savings of ADAS. HLDI says it could take three decades for 95% of cars to be equipped with standard ADAS. Collision avoidance systems are unlikely to be widely available till 2050. Till then, costs will rise.

Whose fault is it?

The nature of insurance liability will change as safety aids increase. The RAND Corporation believes liability could pass to the manufacturer, or even the government, for accidents due to faults in ADAS, or road infrastructure that is critical to ADAS (e.g. lane markings).

Product liability insurance might cover the concept of cost benefit analysis to control the cost of claims to manufacturers. Vehicle-related workers’ compensation claims will drop, as will the share of car-induced healthcare and disability insurance costs. Manufacturer liability must also be considered in the case of self-insured fleets.

With more automation, manufacturers may have to prove their equipment wasn’t responsible for a crash. This is complicated and expensive, requiring telematic “black box” recorders to measure data indicating fault in a crash.

One potential solution is a no-fault compensation program, to ensure that manufacturers aren’t discouraged from creating life-saving technologies due to injury claims. Or perhaps insurance could become like a utility cost, with a premium priced according to mileage.

When ADAS fails

In May 2016, a driver died when his Tesla Model S crashed into a truck while operating on Autopilot, a system which keeps the car in-lane, adjusts its speed and changes lanes autonomously. The car failed to brake when the truck made a left turn in front of it.

Tesla explained that Autopilot “did not notice the white truck against a bright sky”. The US regulator concluded Tesla wasn’t liable because the driver had enough time to brake, and Autopilot wasn’t expected to detect traffic crossing in front of the car.

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