Autonomous trucking – and related insurance – still down the road

By Doug Bailey

The expectation that by now we’d all be whizzing around in self-driving cars – texting, reading, or snoozing while being autonomously delivered to our destination – hasn’t really lived up to predictions. A similar hope for an automated trucking industry is also in abeyance as we wait for technology to catch up.

Despite the delays, we’re told auto driving cars are still on the near horizon – the Insurance Institute for Highway Safety still says there will be 3.5 million autonomous vehicles on the roads by 2025; 4.5 million by 2030. Still, that’s a fraction of the nearly 300 million vehicles on the roads in the U.S., and the IIHS even admits that its definition of “autonomous” doesn’t mean fully self-driving. More like “assisted driving capabilities.”

“There was a lot of hype in the beginning, and the technology progressed really rapidly. Now we've gotten to the really hard stuff... ” Mike Dorfman, co-founder and COO, Koffie Financial

And there is a plethora of barriers to overcome before fully self-driving becomes a reality and not all of them technological. There’s a huge inventory of safety and legal issues to contend with before self-driving cars and trucks really hit the road.

“There was a lot of hype in the beginning, and the technology progressed really rapidly,” said Mike Dorfman, co-founder and COO of Koffie Financial, in Wilmington, Delaware. “Now we've gotten to the really hard stuff, like the long tail of issues that that need to be solved. And those are tricky and will take a long time before people are comfortable with everything.”

Dorfman’s company is a modern trucking insurtech offering comprehensive coverage and simplified services for fleets and brokers across the country and is a leading advocate and expert in insurance for the autonomous trucking industry.

Koffie obviously sees a profit potential in underwriting autonomous trucks, but its ancillary goal is to improve the industry’s safety record and thus bring down costs. A KMPG report predicts that by 2050, the adoption of autonomous vehicle technology could reduce the frequency of accidents by almost 90%, significantly boosting insurer profitability.

“Although U.S. auto insurers have posted weak earnings over the last two years because of higher auto repair costs, including parts and labor, and higher used vehicle prices, we expect that as intelligent technologies get better, insurer loss costs (the total cost of collisions including loss adjustment expenses) will start to decline over time,” reads a recent report from Moody’s Investor’s Service.

Autonomous vehicles may reduce insurer profits

Long-term, however, the profit picture doesn’t look as bright with autonomous vehicles

Autonomous vehicles could dramatically reduce premiums and profits for auto insurers,” the Moody’s report said. “As advanced autonomous vehicles become prevalent, accident frequency is likely to fall precipitously over time, and could ultimately translate into significantly lower loss costs and premiums for auto insurers. Profits are likely to also decline, since most insurers set profit targets as a percentage of premiums.”

Nevertheless, it’s likely the trucking industry, which is facing a severe shortage of drivers and may more readily adapt to autonomous vehicles, will lead the way with self-driving technology. But fears that humans will be replaced by robotic trucks are probably overstated, Dorfman says.

“The trucks still have to be loaded and unloaded, there's still paperwork that needs to be signed,” he said. “So, I think our view is that autonomous technology can enable human drivers. Maybe they’re not actually driving so much, but they can be doing paperwork, they will be less fatigued and can run for more hours. Maybe they’re even able to sleep while running on the highway. But when they get to off ramp, the human drivers have got to take over and park the truck.”

Major corporations with reliance on trucking like PepsiCo, Walmart, and others are making huge investments in all electric and semi-autonomous vehicles and experimenting with cutting edge technology, Dorfman said. But there’s still a while to go for public and governmental acceptance of true self-driving.

“You look at aviation and it’s on its third generation of auto-pilot capabilities,” he said. “But people aren’t yet ready to fly in a plane with no one in the cockpit.”

As more autonomous long-haul trucks become available, trucking companies could be under economic pressure to replace their fleets with autonomous trucks given lower operational costs of drivers’ wages, less required downtime due to driver fatigue, cheaper insurance costs, lower wear-and-tear on the vehicles, and better fuel economy algorithms, according to Moody’s.

“However, we expect resistance from labor unions and from professional drivers, which make up over four million jobs in the US,” the Moody’s report said. “Given the high damage that a long- haul truck can cause in an accident, driver oversight will likely be required for many years. Truck drivers also watch over valuable cargo to protect it from theft or vandalism. As these jobs are eliminated, there could also be reduced demand for workers’ compensation insurance.”

Liability a thornier issue

The thornier issues still waiting to be resolved involve legal liability and what happens when self-driving vehicles get in an accident. Will the human "copilot" be at fault, or will the car's manufacturer, the software company, or the computer coder? Will the 'driver' have to maintain a constant vigil on the road ahead? And what is allowed inside a self-driving truck while it’s moving. Can “drivers” nap, read a book, watch a video, or text messages while the truck handles navigation? Will truckers even need to be licensed or insured?

Currently, 42 states and Washington, D.C. have enacted legislation related to autonomous vehicles, most involving changes in insurance liability wording.

“The large outstanding questions concern whether the insurance products actually need to change,” Dorfman said. “Does the policy wording need to change? Do we need different parties carrying different types? Some coverage that can buy now subrogate liability. So, a trucking company that’s buying a commercial auto liability policy, anything that happens with that truck is on its policy. But when there’s no driver, and a piece of software is operating the truck, who’s fault is a crash. Is that still the responsibility of the trucking company? Or should it be the hardware provider? The software provider? Do we have to get down to the actual failure that caused the crash and pin that on to the proper party?”

“The technology is here,” Dorfman said. “A large percentage of the trucks that we insure have taken baby steps towards full automation. They have assisted braking and steering, blind spot detection, lane and stability controls. What we think of full automation is really a compilation of all of these different advanced driver assistance systems plus some driving software on top of it to operate all those systems correctly.”

Dorfman admits to a bias when talking about insurtechs like his spearheading advancements in autonomous trucking. But, he says, there’s precedent for it.

”The insurance industry has a large role to play,” he said. “It played a huge role in the auto, aviation, and marine industries in getting safety technologies incorporated. Auto insurers were large proponents of airbags before the automakers wanted to include them, for example. So, I think we are well positioned to spearhead similar change with advanced safety technology, and we should see the results soon.”

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].