This article was produced in partnership with Munich Re Specialty Insurance.
Gia Snape, of Insurance Business, sat down with Leo Grimm, head of mobility at Munich Re Specialty Insurance, to discuss tackling the risks associated with the growing use of autonomous vehicles (AVs) in trucking fleets and the hurdles to investment and development in AV technology.
With more trucking companies investing in and developing self-driving or autonomous vehicle technology, the industry is at the cusp of a transformation.
AVs promise increased efficiency, reduced costs, and improved safety for fleet owners and operators. But the road ahead for driverless trucking is paved with risks.
According to Munich Re Specialty Insurance, the insurance industry must quickly adapt to emerging AV technology, which involves reevaluating traditional risk models, addressing system vulnerabilities, and staying ahead of regulatory shifts.
While the promise of autonomous trucks is vast, the underwriting risks associated with these vehicles require careful consideration.
Autonomous trucks rely on a combination of sensors, cameras, radar, and lidar systems to navigate the roads. These factors introduce unique challenges from an underwriting perspective.
Leo Grimm (pictured), head of mobility at Munich Re Specialty Insurance, described the challenges of underwriting AVs.
“When we underwrite a traditional trucking fleet, we have the complete risk history of the fleet. We can look at how the risk behaved in the past and use this to design the insurance product,” he said.
“But in AVs, we do not have any history, so we need to change our methods to gather data and understand risk. This starts with the equipment: we look at what kind of equipment is on the road and how it is operated to know how the risk works.”
One of the primary underwriting challenges in autonomous trucks lies in the technology itself. The sophisticated systems that enable these vehicles to operate autonomously are susceptible to malfunctions, hacking, and software errors.
Insurance providers must grapple with the uncertainties surrounding these technologies and develop comprehensive risk models to account for potential failures and vulnerabilities.
Safety engineers who oversee the AV operations will also need to be evaluated in the underwriting process.
“We also pay attention to the operational design of the vehicle and how it’s implemented,” Grimm said.
“For example, if you have a fleet of trucks transporting goods between Dallas and Austin, you can get regulatory approval by the state of Texas, but only in a defined operating domain. This defined operating area helps keep the risk controlled and limited to the area in which it is licensed to operate.”
The lack of loss history data on AVs poses another challenge for insurers. To get around this, insurers anchor their underwriting decisions on so-called “near-misses,” or incidents which are close to losses.
“We can’t expect the same number of losses in AVs as in a New York taxi fleet, for example,” Grimm said.
“However, the technology allows us the ability to take additional data within each trip and how the AV interacts within that area into account and transfer that to the risk loadings which you integrate into your underwriting decision.”
Collaboration between insurers, technology experts, and policymakers will be essential to ensuring the seamless integration of AVs into our transportation ecosystem.
For now, there are no federal regulations on AVs in the US. According to the National Conference of State Legislatures, 29 states* and Washington DC have enacted legislation related to autonomous vehicles.
According to Grimm, the lack of federal legislation inherently makes the AV industry opaque and difficult to evaluate for the public. A big part of building public trust in AVs is making sure that there is a public understanding AVs are following rules and regulations associated with current laws within each operating domain and are insured according to those regulations.
Some states, such as California and Texas, have more confidence and trust in AVs due to their experience with the technology. But other states remain wary.
“We have experience in other West Coast states, such as Oregon and Washington state, but less in the highly regulated states on the East Coast, such as Massachusetts, New York, and Illinois,” Grimm noted.
“I think we will see interesting things in Florida, Georgia, and the Carolinas in the next few years because there’s so much car industry down there, but it’s still too early to say.”
Despite the regulatory and insurance challenges of AVs, many factors are pushing the trucking sector towards adoption.
A shortage of drivers and recruitment challenges in the trucking industry will incentivize operators to seek autonomous fleets. The America Trucking Association (ATA) estimated that 1.2 million new truck drivers would be needed over the next decade to fulfill demand.
“In the end, what will drive AV development is the need to replace drivers, which is crucial as we try to keep up with our transportation demands amid a shortage of drivers,” said Grimm.
High severity losses in the commercial auto space, the rise of nuclear verdicts, and increased pressure on fleet profitability have also driven the adoption of risk-reducing technology and AV solutions to help mitigate the risks for commercial fleets, improve safety and reduce claims.
Though the road ahead is still unclear for AVs, Grimm is confident that advancements in technology, underwriting and risk mitigation in anticipation of a broader rollout are already positively impacting the transportation industry as a whole.
“Autonomous vehicles are already influencing the daily lives of drivers and pedestrians because the roads are safer because of this technology,” he said.
With the complexities of commercial fleet operations in mind, Munich Re Specialty Insurance is designing transportation solutions that not only provide commercial auto insurance but also drive a culture of reduced risk across the entire fleet.
* Alabama, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New York, Nevada, North Carolina, North Dakota, Oregon, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Vermont, Washington and Wisconsin
