The Road to Autonomous Vehicles

We all know that autonomous cars are coming but a question that is often asked is when. Well the following is how I like to think about how the development of autonomous vehicles will unfold. I like to think of it in four stages:

Stage 1 - Feet-off:

This stage has already been reached, in fact, it was reached a few years ago with the introduction of adaptive cruise control and slightly more recently traffic jam assist where the vehicle will slow down even to a halt and then progress again once the traffic moves. Currently the majority of a journey could be completed feet-off.

Stage 2 - Hands-off:

We're almost at this stage as most higher end vehicles allow the driver to take their hands off the wheel for a minimal amount of time and the car will steer along the motorway. Full hands-off is something that is certainly technically viable right now but is limited by safety concerns. As has been seen with Tesla's Autopilot people are idiots behind the wheel (or not in this case). This means that all manufacturers currently require a hand to be placed back on the wheel within 10s of seconds.

It'll likely be around 12-18 months before manufacturers allow full hands-off driving for extended periods of time.

Stage 3 - Eyes-off:

In this stage there still needs to be a driver behind the wheel ready to take over in case of emergency but that driver does not need to be concentrating on the driving or be doing any of the driving. Here you could see the driver perhaps in the drivers seat but reading a magazine or using their phone. This will be largely during motorway type journeys.

As with feet-off driving the technology is pretty much there with manufactures such as Volvo going through thorough testing and refinement. Interestingly, Volvo have pledged that by 2020 nobody will be killed or seriously injured in their cars and in the US since 2009 this has already come true for the XC90 and 9 other models.

Full eyes-off driving is probably another 3-5 years away for the mainstream manufacturers. Perhaps two years away before Tesla puts out a Beta product.

Stage 4 - Driver-off:

This is the final fully autonomous stage where no driver is required to be in the vehicle. This requires some quite substantial developments to happen not only in vehicle technology but in infrastructure, legislation and importantly culture. Following several years of eyes-off testing and refinement it's likely that the vehicle technology will be there and legislation will probably have caught up to an extent that innovators will find a way to bring driverless vehicles on to the roads.

Infrastructure is something that is a concern currently. Given how different roads and associated infrastructure is around the world there may be difficulties, for example, road works are often ad-hoc with no real standard way of closing off lanes and roads, how will autonomous vehicles navigate around ad-hoc road works? Autonomous vehicles will enable great changes to our cities as large car parks become unnecessary and a thing of the past there will need to be large drop-off areas created which currently doesn't exist.

The other thing that needs to happen is a culture change. People today are generally unsure about autonomous vehicles with many say they wouldn't trust or use one. However, as autonomous features are slowly introduced through stages 2 and 3 this nervousness will wane.

This level of autonomy is around another 10 years off, perhaps 15 years for the majority.

So that's how I think about the development of autonomous cars. Don't forget to follow for more posts in the future.

How will self-driving cars affect the insurance industry?

As we all know autonomous cars will arrive in the next 10-20 years (if you don’t have a read of my previous post here. The effects on you or I will be extraordinary and the affect on businesses in all industries will profound with one in particular - the insurance industry.

A recent KPMG study [1] found that the majority of insurance companies thought that autonomous cars were too far in the future for them to worry about now. This I think is a major error on the part of the insurance companies. There’s likely to be two paths to autonomous cars with the regular manufacturers such as BMW, Audi, Ford, etc slowly introducing self-driving tech in to their vehicles over the next 20 years or so while high tech companies such as Google, Apple and Tesla will completely leap frog the regular human-driven car and go straight to autonomous vehicles in the next 10 years (I know Tesla makes regular vehicles but their autonomous driving tech is well ahead of others). What this means is that insurance companies are likely to be taken by surprise sooner rather than later as consumers start wanting/needing insurance products that they don’t yet offer for vehicles from these high-tech companies. The advance of autonomous vehicles from regular manufactures will also creep up on them just as the continual advance of mobile has snuck up on so many industries such as retail.

There’s currently around an 85:15 split between personal and commercial insurance [2] across the industry but as mobility on demand increases, spurred on by the introduction of autonomous cars, insurance companies will need to refocus their products to the commercial side. The ‘uberisation’ of autonomous cars will remove the need for the majority of personal car insurance policies. As an aside and in the shorter term though is the increase in car sharing services such as BlaBlaCar - I’m yet to see insurance policies specifically designed for people that regularly use these services.

Data is already prolific in our lives but one aspect that its yet to really arrive in is our cars and particularly our car insurance. While there’s a few companies offering black box policies they’re few and far between and mainly aimed at new young drivers. With the increase in data in our cars there’ll be a huge shift to data based insurance policies but one has to question how many insurers are ready for this change, how many have a data analysis skill set, do they have the processing, storage and security requirements - I suspect not.

One of the major reasons for the introduction of autonomous cars is to increase safety. Today, around 94% of crashes are caused by human error (the rest a mix of component failure and environmental factors) [3] so with the introduction of autonomous cars will inevitably come a huge reduction in crashes and therefore insurance claims. This you’d think would be good news for the insurance industry but consumer demand and competition in the industry will most definitely lead to much lower premiums. In addition to this there’ll be much fewer cars being purchased and therefore fewer policies. With the huge advancements in technology and the naivety of the current industry players there’s bound to be start-ups offering insurance products that people want - I could quite easily see black boxes in cars with dynamic pricing based on how much you use the autonomous features, if you drive manually then you pay more (this goes back to the previous paragraph). You could also see manufacturers themselves offering this insurance as part of the vehicle cost (remember that we’re unlikely to own cars in the future but rent them per thousand/miles).

The aggregate of all of this could spell bad news for many of the big players - who will be the Blackberry and Nokia of the insurance industry?

[1] Automobile Insurance in the era of autonomous vehicles. Survey results. June 2015. KPMG.

[2] UK Insurance Key Facts 2013. Association of British Insurers.

[3] Traffic Safety Facts. Crash Stats. February 2015. National Highway Traffic Safety Administration.

The Future of Personal Transport

Personal mobility and freedom is the ultimate for most people and I've been thinking recently about how people will get around our towns and cities of the future... and it's pretty exciting. Firstly let's throw away things like flying cars and personal jet packs - I'm fairly confident that we'll be keeping our feet firmly on the ground (other than the usual intercity, and maybe intracity, flights of course).

Looking at the current state of personal transport is probably a good thing to do first. The majority of people get around in a car, in fact in the UK there are 35 million registered cars on the road [1] and over 38 million people have a driving licence [2] which represents around 60% of the population. Even those that don't drive I'd say generally get around via friends and family and taxis.

Cars represent something that's quite intangible, they represent freedom and mobility on demand, for many they represent themselves, their wealth, personality, culture and so on. I can't see this feeling diminishing in the future. Due to this I do think that cars represent the future of personal transport.

However, we all know that cars are terrible economic decisions. The average car sits idle for about 95% of the time [3]. Think about it, you drive to work in the morning and back home in the evening - lets say each way is 30 minutes, then you drive to the shop in the evening, another 30 minutes both ways. That's 1.5 hours of use in a 24 hour period - little over 6%. The rest of the time this piece of metal and electronics (that you love) is sitting completely unused, yet you're still paying for it. Add to this that cars are dangerous and inefficient and you have to wonder why we use and love them so much (hint: look at the previous paragraph).

These are some big problems that the Millennial generation have realised. The number of young people getting driving licenses has fallen [4] [5] and people are driving fewer miles - 14% less in 2013 than 2002 [6]. In cities people are shunning the car altogether [7], helped along by the rise of technology giving us on demand mobility services like Uber, Lyft, and City Car Club where a selection of over 800 vehicles can be hired on demand from your smartphone on your door step (#nonspon). This gives us a glimpse in to the future of personal transport - on demand and non-ownership.

Within the next 10 years we're likely to start seeing autonomous cars on our roads, although a 'driver' will most definitely still be needed and in the next 20 years we could see fully autonomous, get in, press a button, fall asleep type cars available [8]. We already have cars such as the Tesla Model S that can drive autonomously on motorways (highways for the Americans) and we'll see this kind of technology trickle down in to the lower end of the market fairly soon as more driver assist technology is developed for the high end market. The trend for more and more autonomy can only continue.

So the combination of on-demand, non-ownership and autonomy gives a pretty exciting vision for the future of personal transport I think.

We may see the business models of car manufacturers change dramatically in the future - think something like mobile phone networks where you pay for a certain amount of data each month. I think we could be paying for a certain amount of miles each month in the future. The vision I see is cities of fully autonomous (electric) vehicles which can be hired on demand from your smartphone (or wrist, or whatever interface we have by then) just like you do now with Uber. You may have use of certain type of vehicle so you'll always get a BMW 1 Series or an Audi A4 or whatever it is you pay for - remember that for many cars represent themselves, but you won't actually own the car you'll just pay £x per month for y number of miles and when you're not using it someone else will be meaning utilisation will drastically increase.

Now that's a bit of a personal vision but given current trends I don't think it's too far off the mark, however, don't be expecting this too quickly given that truly autonomous cars won't be around for at least another 20 years or so.

References:

[1] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/302409/vls-2013.pdf

[2] http://data.gov.uk/dataset/driving-licence-data

[3] http://www.reinventingparking.org/2013/02/cars-are-parked-95-of-time-lets-check.html

[4] http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/self-driving-cars-next-revolution.pdf

[5] http://www.washingtonpost.com/blogs/wonkblog/wp/2014/10/14/the-many-reasons-millennials-are-shunning-cars/

[6] http://www.bbc.co.uk/news/uk-england-28546589

[7] http://www.bbc.co.uk/news/business-20671090

[8] http://www.zdnet.com/article/ford-ceo-fields-on-autonomous-cars-big-data-tesla/