ISO Introduces Solutions for Insuring Vehicles with Advanced Driver Assistance Systems

New policy manual rule and rating factors that account for effect of advanced driver assistance systems give carriers tools to benefit policyholders with ADAS-equipped vehicles.

(Image source: Volvo.)

ISO, a division of Verisk (Jersey City, N.J.), a provider of forms, rules and rating information to the property/casualty industry, has introduced new solutions to help auto insurers underwrite and price coverage for the growing number of cars with advanced driver assistance systems (ADAS).

Donald Light, Director, North America Property/Casualty Practice, Celent.

“Over the years, we’ve seen an increase in vehicle safety technology, such as blind spot intervention, lane departure prevention, and forward collision warning,” comments Jared Smollik, VP, personal lines actuarial and analytical products, ISO. “Our new rule and rating factors will help insurers apply real-world experience with this technology in support of actuarially sound risk selection and pricing.

The new solutions include a manual rule and related factors for the ISO personal Auto Program. The rating factors are based on an in-depth actuarial analysis that included a review of loss data reported through the ISO personal Auto Statistical Plan, according to the vendor.

ISO reports that a key finding of the analysis showed that ADAS features have reduced accident frequency, but the effect is somewhat offset by the expense of repairing vehicles with ADAS technology after an accident.

“ISO currently expects collision experience to improve with time as more vehicles with aDAS features hit the road and frequency of accidents continues to drop,” adds Smollik. “Meanwhile, as these features become more common, economies of scale in producing associated sensors and other parts may reduce their cost.”

To complement the release of the new rating factor, Verisk also offers VINMASTER-VINterpret Safety. It provides electronic delivery of ADAS information using a 10-digit vehicle identification number (VIN), which the vendor says helps insurers determine which vehicles have certain ADAS technology as standard or optional features.

Financial Benefits for Policyholders, Incentives for Manufacturers
“For years the auto industry has promoted ADAS technology as providing significant safety benefits to drivers and passengers, and for years, the insurance industry has sponsored studies that tried to assess the impact of ADAS on the frequency and severity of losses,” comments Donald Light, Director in Celent’s (Boston) North America Property/Casualty Insurance Practice. “ISO’s announcement of ADAS-related rules and rating factors is a welcome step forward, giving insurers the tools to build and price policies that will—hopefully—provide financial benefits for policyholders with ADAS equipped vehicles. And it will likely provide an incentive for auto manufacturers to accelerate production of ADAS equipped models.”

Eventually other lines of insurance—e.g. homeowners, commercial property, and workers’ compensation—may follow suit, Light adds. “However, there are real challenges to creating actuarially sound products for those lines, such as identifying the kinds of IoT sensors that are present, determining how those sensors are being used; and accumulating sufficient loss data to be credible,” he says.

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Anthony R. O’Donnell // Anthony O'Donnell is Executive Editor of Insurance Innovation Reporter. For nearly two decades, he has been an observer and commentator on the use of information technology in the insurance industry, following industry trends and writing about the use of IT across all sectors of the insurance industry. He can be reached at [email protected] or (503) 936-2803.

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