CALIFORNIA DEPARTMENT OF INSURANCE Public Hearing on ...€¦ · 15/09/2014 · Unofficial...
Transcript of CALIFORNIA DEPARTMENT OF INSURANCE Public Hearing on ...€¦ · 15/09/2014 · Unofficial...
1
CALIFORNIADEPARTMENTOFINSURANCEPublicHearingonAutonomousVehicleInsuranceIssues
UnofficialTranscript
September15,2014
The following is an unofficial transcript prepared by a California Department of Insurance intern. The Department provides the transcript for ease of reference but does not guarantee its accuracy. The Department advises those relying on the hearing to review the official video available online at http://www.insurance.ca.gov/0400-news/multimedia/0030VideoHearings/.
*** 0:00–TitleCard+IntroMusic0:22‐AudienceConverseamongThemselves+RemainingSetUp
*BeginningofHearing*
0:49‐INSURANCECOMMISSIONERDAVEJONES:
GoodMorning.MynameisDaveJonesandIhavethepleasureandprivilegeofservingas
California’sInsuranceCommissionerandIamtoldthatIhavetospeakrightintothis
mikeinorderthatit’spickedupbyallwhoarewatchingathomebecausewearelive
streamingthisevent.Iapologizeforthoseintheaudienceifmyvoiceisboomingalittle
bitbutwearetryingtoaccommodateboththeaudiencepresenthereaswellasthe
audiencesathome.Welcome,Iwanttothankeveryonewhohaseithertunedinoris
presenthereattheTechMuseumofInnovation.Weareexcitedtobehereintheheartof
SiliconValleywhereinnovationisaconstant,wherenewtechnologies,newbusiness
models,andentrepreneursarehardatworkbringingtomarketallsortsofthingsthat
improvethelivesofconsumersandcommunitiesacrossCalifornia,thenation,andthe
2
world.Iapologizeforourlatestart.Perhaps,ifthereweremoreself‐drivingcarsonthe
roadsalready,Imighthavebeenherealittlemoreontime,butweranintoalittlebitof
trafficandsoweareexcitedtobehereandexcitedtohaveallofyouaswell.Forthoseof
uswhoarejoiningusviaourlivevideofeedontheweb,theagendaandbackground
paperareavailablefordownload.Youcangotoinsurance.ca.gov,clickonthebuttonfor
thishearingontheCaliforniaDepartmentofInsurancehomepage,andyoucanviewthe
documentsthathavebeenpreparedforthishearing.Thisisapublichearingandweare
invitingpanelistswhoareexpertsinthesubjectthatwearegoingtotakeuptoday,which
areself‐drivingcarsandinsurancetopresenttous,butaswelltherewillalsobean
opportunityatthecloseofthehearingformembersofthepublictotestifydirectlytous.I
actuallyhadtheopportunity,theotherweek,tobedriveninoneofthesefullyautomated
self‐drivingcarsanditwasafascinatingexperience,averyexcitingoneandoneinwhich
thecar,foressentially25minutes,navigatedaverycomplexintercitystreetscapeanddid
soflawlessly.IhavetosayitwaswithalittletrepidationthatIfirstsatdowninthecar,
butafterafewminutesIwasquitecomfortabletoseethesteeringwheelmovingbyitself.
Ithinkthatthistechnologyholdsgreat,greatpromise.Andwearegoingtohearalittle
bitaboutthattoday,thepossibilityoffeweraccidents,fewerinjuries,fewerfatalities,and
saferdrivingforallofus.Ithinkatthesametime,weinthepublicsectorandthosewho
areintheinsurancesectorhavetothinkabouthowwearegoingtoaccommodatethis
newtechnologyandhowdowemakesurethatthereareinsuranceproductsavailablefor
themanufacturersofthesevehicles,forthosethatwritethesoftware,forthosethatmake
orinstallthedevices,insomecaseswearetalkingaboutcarsthataremanufacturedthat
3
areself‐automated,insomecasescarsareretrofittedandalsoforthedriversthemselves
–howdowemakesurethattherecontinuestobeinsuranceproductsavailableand
insuranceproductsthatprotectconsumersinallfacetsoftheoperationoftheself‐
drivingcars.That’saveryexcitingprospectforallushereandthereasonIhave
convenedthispublichearingasthisstate’sinsuranceregulatoristomakesureweare
ready.IthinkitwouldnotbegoodforgovernmenttobebehindonthisandIthinkwith
manytechnologieshereinCalifornia,thoseofusinthepublicsectorareacutelyawareof
theimportanceofmakingsurethatthepublicsectorkeepspacesoourgoaltodayistodo
exactlythatandtocollectasmuchinformationaspossiblefromthosethatareinvolvedin
creatingthesecars,thosethatareinvolvedininsurancemarkets,thosethatareinthe
publicwhocanprovideuswithinputattheDepartmentofInsurancesothatitwill
informourthinkingabouthowwegoforwardtomakesurethereareinsuranceproducts
availableandwhattheappropriateregulatoryframeworkis.So,withthatinmindIlook
forwardtohearingfromthefolksonthepanelstoday.Ialsowanttothankourpartners
inthisendeavor,whoincludetheDepartmentofMotorVehicles.Thedirectorhasbeen
veryhardatworkleadinganinteragencytaskforcetoconsidernotonlythequestionswe
aregoingtobecoveringheretodaybutabroadersetofregulatoryquestions,whichare
notthesubjectofthishearing,butweappreciateherleadershipandtheleadershipofthe
finestaffattheDepartmentofMotorVehiclesandtheirpartnershipasweconsiderthese
issues.Ourhopeistotrytowrapupaboutahalfanhourafterthanweoriginally
intended.Originallywewerescheduledtocloseat12:30,butnowourgoalistotryto
closeat1:00.Withthat,itismypleasuretowelcomeourfirstpaneltothehearingandI
4
wanttothankspecificallythemembersofthatpanel–wearejoinedbyProfessorAlain
Kornhauser,whoisaprofessorofoperationsresearchandfinancialengineeringat
PrincetonUniversity,aswell,wearejoinedbytheDeputyDirectoroftheCalifornia
DepartmentofMotorVehicles,BernardSoriano,andIwanttowelcomeyoubothand
thankyouforyourpatienceinourgettingstartedandalsothankyouforyour
participationinthishearingandforthetestimonythatyouareabouttoprovideus.So,I
thinkwhatwewouldliketodoisstartnowwithMr.Kornhauserandreceivehis
testimonyandthenmovetoMr.Sorianoandthenwemayhavesomequestionsfromthe
panel.IamjoinedhereontherostrumbyDeputyCommissioner,ChrisShultz,who
overseesourcommunityprogramsbranchandalsoSummerVolkmer,whoiswiththe
legaldepartment–legalbranch–oftheDepartmentofInsuranceandIwanttothank
thembothforhelpingusgetthishearingorganizedandforthematerialsthatwere
preparedaswell.Withthat,whydon’twestartwithProfessorKornhauser–Welcome.
6:45‐PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY: Thankyou.Goodmorning.Itisapleasureformetobeherebecauseitismyviewthatthe
insuranceindustryanditsregulatorsarethekeyplayerspositionedtoacceleratethe
consumeradoptionofautomationinroadvehicles.Automationofvehicleshastwo
distinctmarketopportunities,initially,thesubstantiallyenhancedsafetyand
unburdeneddrivers.Tobefollowedbythedeliveryofsafe,economical,highquality
mobilitytoeveryone.Inthepast,wehavebeenreluctanttobuysafety.No–everyone
wouldbedrivingVolvos–Why?BecauseIamasafedriver‐it’stheotherguy,heneedsit.
Idon’t.Can’taffordit.Alsoinsurershaven’tbeensothrilledwithpastcrashsafety
5
measures–sureliveshavebeensavedbutthecostofaccidentshasactuallygoneup–
Why?Becausethefocushasbeenoncrashmitigation.Crushzones,seatbelts,airbags–
liveshavebeensaved,andinjuryseverityreduced,butsavedlivesincuragreater
financialcost–fixingthecrushcarismoreexpensive,insuranceburdenhasincreased,
automationtechnologyapproachessafetyfromadifferentperspective,thatofavoiding
theaccidentinthefirstplace.Thepurposeofanalogbreaksistohavethevehiclestop
faster,that’savoidingaccidents.Similarly,electronicsstabilitycontrol.Interestingly,both
ofthesesystemsmonitorthedriver’sbehaviorandatsomepointautomaticallydecideto
takeoverbecausetheydeterminethedriverisnotdrivingproperly.Withrespectto
analogbreaks,I’mpushingtoohardonthebrakepedal,theywon’tletme.Withstability
control,I’mtakingaturntofast,steeringaloneisn’tgoingtosafelynegotiatethecurve,
whatisimportantisthatthesesystemstakeoverautomaticallyandcounterwhatIam
doingwrong.Theydon’twarn,theydon’taskforpermission,Ican’tturnthemoff‐they
justdoit.Automateddrivingextendsthesecrashavoidancesystemsandwill
substantiallyreduceaccidents–reducingthefinancialliabilityofthisillequipped
vehiclesirrespectiveofwhoisinthedriver’sseat,thusinsurancehasagreatdealtosave
andgainfromtheacceleratedadoptionofthesetechnologies.Ibelievethatwewillbe
abletoofferthesetechnologiesatapricethatislessthanthepresentvalueofthe
expectedliabilitysavingsthatthesetechnologieswilldeliver.Thus,atexistingrates,the
insurercanpayfortheautomatedtechnologiesandmakemoremoneyandatno
additionalcostlivesaresaved,injuriesavoided,socialpainisdiminished.Thishastobe
theidealarbitrageopportunityfortheinsuranceindustryanditsregulators–keeprates
6
thesame,makemoremoney,savelives–wow.Thisissuchafantasticopportunitythata
substantialpartofthismeetingshouldbefocusedonfiguringouthowinsurance
regulatorscanhelpacceleratetheresearch,certification,andcommercializationofthese
technologies.Moreover,thesetechnologieshavetheopportunitytoevolvenaturally,
propelledbyever‐increasingvaluedeliveredtotheinsuranceindustryandtosociety.
Initially,atNHTSALevel2s,wheresubstantialactionandreduction,reducesinsurance
liabilitiesandsaveslivesasthesystemimprovetoLevel3,theopportunityforthe
driverstotextsafelyduringsanctionedportionsoftheirdrivecyclecreatesatangible
incentiveforconsumerstopurchasethisincrementaltechnology‐enhancingthe
arbitrageopportunityforinsurersandthepublic.WithrespecttodriverlessLevel4cars
thatcangoemptyforAtoB,Ianticipatetherewillbeverylittleconsumerdemandfor
personalownershipofdriverlesscars.Thus,littleneedforprivatepassengerauto
insurance.However,driverlesscarcreatetheopportunityforafleetownertooffer
commoncarrier,ondemandubiquitouselevator‐likemobility24/7withoutincurring
laborcosts.Noneedtoownacarwhenthiskindofmobilityisavailableinexpensively.
Summarizing,Level2isanidealarbitrageopportunityfortheinsuranceindustryandthe
publicatlarge.Accordingly,itsinsuranceproductsshouldtheincentivizeresearch
certificationandcommercializationofthesetechnologies.ThepersonalbenefitsofLevel
3willacceleratetheadoptionofevensafertechnologies‐expandingthearbitrage
opportunity.Consumersand/orthecommunicationsproviderswillgladlypaytheextra
technologicalcostsbecausenowdriverscannowtextsafely.Societybenefits.Level4
driverlesscarswillcausefleetoperatorstosubstantiallyerodeconsumerdemandfor
7
Level2orLevel3carsbutthesenewandexpandedfleetswilldeliverunprecedented
mobilityforallwhilerequiringfleetorientedinsuranceproducts.Thankyou.
12:30‐INSURANCECOMMISSIONERDAVEJONES:
Thankyouverymuch.Ithinkwhatwewilldois,we’llholdourquestionsuntilwehear
fromthesecondpanelistwhoisMr.BernardSoriano,theDeputyDirectorofthe
DepartmentofMotorVehicles.Welcome.
BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
Thankyou,CommissionerJones.Iwouldliketothankyouforgivingustheopportunity
totestifyatthehearing.Asyousaid,I’mBernardSoriano.I’mtheDeputyDirectoryofthe
CaliforniaDMV(DepartmentofMotorVehicles).I’moneoftheco‐sponsorsofthe
autonomousvehiclesprojectandtodayIwouldliketospeaktothedifferentregulations
thatwearedevelopingwithinthedepartment.First,wehavefinisheddeveloping
regulationsformanufacturerstestingautonomousvehicles.Infact,thoseregulations
wereapprovedinMayandtheywillbeeffectivetomorrow.So,asoftomorrow,any
carmakerthatwantstotesttheirautonomousvehiclesonCalifornia’spublicroadways
willneedtomeetcertainspecificationstodosoandtheyneedtohaveavalidpermit
fromustodoso.Inorderforthemtoreceivethatpermit,theyneedtoidentifytous,the
testdriversthatwillbetestingthevehicles.Thosetestdriversneedtomeetcertain
qualificationsforexampletheyneedtonothavemorethanonepointontheirdriver’s
licensewithinthelastthreeyears.Theycan’tbeanat‐faultdriverinacrashinthe
previous3yearsandtheycan’thavehadaDUIinthepast10years.Wehaveputinplace
certainrequirementsforthosetestdrivers.Inaddition,wearerequiringthatthe
8
manufacturershaveafullydevelopedtestdriverprogram,thatthosetestdrivers
successfullycompletebeforetheytakevehiclesoutonourroadways.Anotheritemthat
wehaveisthatwearerequiringmanufacturerstorecordanyunanticipated
disengagementofthetechnologyduringtestingaswellasanyaccidentthatoccursduring
testing–andtheyneedtoreportthatonanannualbasis.Andthen,finally,thereisa
requirementthatthemanufacturerscarrya5milliondollarinsurancepolicyinorderto
moveforwardwiththetesting.Therearesomeotherprovisionsaswellthatareinthose
testingregulationsbutthosearethehighlightsthatIwantedtoreporttoday.Inaddition
tothetestingregulations,weareworkingonthedeploymentregulationsorthe
operationalregulationsasweliketocallthem,andthesearetheregulationsforthe
carmakerstomeetinordertodeploythosevehiclesaswellastheregulationsforyouand
Itomeetinordertooperatethemwhentheyareonpublicroadways.Wehavemadealot
ofprogress,thoseregulationsareinthevettingprocessandwearehopefulthattheywill
beavailableforpubliccomment–theyneedtogothrougha45daypubliccomment
period–andwearehopefulthatthatperiodwillbeginsoon.SomeoftheitemsIcansay
willbeinthoseregulationsareinstatute,soit’ssafetosaythattheywillhavetheminthe
regulations.Oneofthemisthatthereneedstobearecordingdevicethatisseparatefrom
theEDRdatarecordedthatiscurrentlyonvehicles–ontheroadway,thereneedstobea
separateone‐thatwouldrecordatleast30secondsofsensordatapriortoacrash.We
willhavethatintheregulations.Inaddition,whatwearecontemplatingisfora
completelyselfdrivingcar–aNHTSALevel4car–wearecontemplatinghavingspecial
licenseplatesforthosevehiclesandwearealsocontemplatinghavingthemanufacturers
9
disclosetotheoccupantsanydatathatisbeingrecorded–notdisclosethedatabut
disclosethatfactthatdataisbeingrecorded–datathatisnotnecessaryforthesafe
operationofthevehicle.Wearenotbeingprescriptiveintermsofhowthatdisclosureis
made,givingthemthefreedomtobeabletodesignitwithintheirvehicle.Ifa
manufacturerisgoingtodeployacompletelyself‐drivingcar,again,aNHTSAlevel4
vehicle,thereisaprovisionfortheDepartmentofMotorVehiclestonotifythelegislature
andthereis180dayperiodbeforewecanissueapprovalfordeployment.Inessence,
thereisa6‐monthwaitingperiodfromthetimetheapplicationismadetous.Then
finally,thereisaprovisionfora5milliondollarinsurancepolicythatthecarmakersneed
tohave.Withthat–Iwantedagainsummarizethatweareworkingoncompletingthe
deploymentregulationsandwehopetohavethatavailableforpubliccommentvery
soon.Thankyoufortheopportunitytotestifytoday.
17:39‐INSURANCECOMMISSIONERDAVEJONES:
Thankyouandweappreciatethepartnershipwithyourdepartmentandthankyoufor
yourleadershiponthisissue.Perhapswecangoback,bothofyouIhavereferredyouas
theNHTSAarchitecturetypologyfordifferentdegreesofautomationofvehiclesand
that’sspelledoutinthewhitepaperthatwereleasedforthishearingbutitmaynotbe
immediatelybeunderstoodbyeveryoneintheaudienceorthosethatareonlineand
watchingthisinthefutureso–Professor,I’mwonderingifyoucouldwalkusthrough,if
youcan,theNHTSAtypologysothatweareallclearastowhatitisandwhatthe
gradationsare.
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:
10
Yes.Thereare5minutes.Ididn’thavemynormal80minutesorwhatever,400slides.INSURANCECOMMISSIONERDAVEJONES:Ihavenodoubtyouwouldhavedoneithadweallowedyoutoearlier.
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Yes,letmejuststartwithLevel2whichisreallytheimportant–itisacombinationof
technologies.Themainpurposeistodocollisionavoidanceandkeepyouinlanes.The
primarythingisforthevehicleitself,byitselftodeterminewhetherornotit’sgoingtoor
itneedstoapplyitsbreaksoritneedstosteersothatitstaysinthelane.Ifonereally
looksatthedrivingfunction,mostofthetime,wepickalane,stayinthelane,don’thit
anything,soinfactthisisprobablytheaspectofitthatdeliversthemostvalue,butthis
piecerequiresthedrivertoremainvigilant,inotherwords,whileyoucantakeyour
handsoffthewheeloryourfeetoffthepedal,itrequiresthedrivertoremainvigilant.
Somesuggestthatthecurrent,reallybigproblem,withrespecttoaccidentsinthecars,is
thethingsthatgoonwhenwearenotvigilant.Texting,Iusetextingtomeanalotof
differentthings.Itisnotuntilwegetthistechnologytobesogoodthatitthenbecomes
certifiedthatwedon’thavetostayvigilanttotakeoverthatthelastinstance–notifwe
couldreallysavethedayIdon’tbelievethatwecan,Ithinkthesesystemscandoitbetter
thanwecan,butLevel3basicallysaysokay,it’sokay,Icantextandtheanticipationis
thatcertainroadwaysatcertaintimeswouldbecertifiedsothatyoucouldactually‐you
don’tneedtoremainvigilant.Youdon’tneedtohavealltheroadways,ifyoudo,justthe
11
roadwaysthattake80%ofthevehiclemilestravelled‐that’snotthatmanymilesofroad.
Wecouldhavesafehavenscreatedthere,goodpaintoutthere,goodcapabilitiesforthese
systemstowork,itwouldn’ttaketoomuchofaninfrastructureinvestmenttohaveit.
That’satLevel3.Level4,infactthesevehiclesaregoingtogofromAtoBwithout
anybodyinit.That,inasense,isthegreatvaluethatcandeliverthemobility,becauseif
onelooksattheproblems–lookatthetaxidriver–realvalueofacabdriveristotake
theemptyvehiclefromwherethelastpersongotofftowhereIgetinandsoinfactifyou
coulddothiswithoutadriverthenthecostofoperationofthiscouldprobablygodown
byinorderofmagnitude.That,tome,isthegreateconomicandmobilityopportunityof
Level4.It’snotformetojustbeabletohopinthebackseatandhaveitgofrommy
garagetomyparkingspaceatworkwithoutmebeinginit,Icouldhandlethefrontend
andthepieces.Butifthevehiclepicksmeupathomeanddropsmeoffatthemovies,
goesanddoessomeotherstuffwhenthemoviecomesout,it’sthereIgetin,gobackto
whereverI’mgoing–it’sanenormousmobilityopportunity.Andthattomeisthe
fundamentalconceptofLevel4andwherethevalueoftakingthelaborcostoutofthat
transportationelementreallydeliverssocietalvalue.Iguessthatwasalittlelong.
INSURANCECOMMISSIONERDAVEJONES:No.Thatwasveryhelpful.AndIsaid5levels,thereare5levels,thereisactuallyaLevel0,
whichIguessisnoautomation.
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY: Level0,Icallthata’55Chevy.IcallLevel1justtheanalogbrakesorthestabilitysystems
thatarecurrentlyincars.Level2isreallythesafetysystems;thisisthecollision
12
avoidance.Tomethisiswherethebigsocietalvalueofimprovingsafetyreallyexists.I
havecalledLevel3textingmachines.Why‐becauseitliberatesmeandallowsmetodo
stuffinthecar.WhenIgotintheairplanelastnight,Ididn’trunuptothepilotandsayI
wanttoflybutIsatbackthereandIdon’tknowwhatIdid,Idrankacoke.Thisisthe
opportunityofLevel3istobeabletodothatofcourseandLevel4justdoesitformeand
Idon’tneedtoownitandwearelikegood,wejustgetaround.
INSURANCECOMMISSIONERDAVEJONES:ArethereinthemarkettodaycarsthatareavailablethathaveLevel2underNHTSA’s
typology‐combinedfunctionautomation?
23:22‐PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Youknow,Iboughta2014SClasswiththe997Packageanditcomesclose.Itreally
comesclosebecauseinfactthecollisionavoidanceandthejamassistreallyworkwell.
Lanekeeping,theyhavegotawaystogobutit’sthefirstoneandIthinkthattheywill
haveit.AndIcanseethateasily,withthenextgeneration–andhopefullytheywillgive
mealittlebitofanelectronicupgrade–Ithinkthatthesensorsaretherebutthe
softwareneedsalittleworkbutIthinkthatshouldbeheresoon.Thepointatwhichwe
allagreethat,infact,youcantakeyourhandsoffandsitthereandtextbetweenmobpost
andsoandsoonU.S.whatever–that’sprobablygoingtotakealittlebitoftimeandit’s
goingtotakecoordinationandsoontobesurethatit’sgoingtobelegitandthat’sgoing
totakesometime.WecouldhaveLevel4ingatedcommunitiesverysoonbecauseinfact
thereissomedemosthataregoingoninEurope,inrespectto,puttingtheseinatlow
speeds,inmixedenvironmentsthatinfactyoucangetstartedinaretirementcommunity
13
andagatedcommunity,onecouldhaveademonstration,workoutthebugs,getthemout
there,andhavethemleakoutinsociety.Iseethatinthewayitwouldevolve.
INSURANCECOMMISSIONERDAVEJONES:
Great.Iknowyouarefromadifferentstatethanours,Ibelieve,soyourrulesmaybea
littlebitdifferent–Iwascurious,ifyouwouldbewillingtoshareorcanrememberhow
wasyourcoastalLevel2carratedbyyourinsurer,inotherwordsarethereany
acknowledgementthatithadthesefeatures,wasthereanycorresponding–I’llposethis
questiontotheinsurersaswelltogivethemachancetoansweraboutCalifornia.I’mjust
curious.
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:OnOctober3rd,I’moutholdingathingatFortMammothinNewJerseyandBernieFlynn
–theCEOofNewJerseyManufacturers,myinsurancecompany,isgoingtobethereand
I’mgoingtosay,HeyBernie.Youknow2grandforayeartoinsurethisvehicle–yougave
menocreditforthis.Ipersonallybelievethatthecarreducedtheprobabilityofmedying
inthatcarbecauseofitstechnologyby.25.Ibelievethatthecarreducedtheprobability
ofmebeinginjuredinthatcarby.25.Thatisanenormouslylargenumber.Forwhatare
costs,thatisvaluableandIthatitwillsubstantiallyreducetheexpectedliabilitytoNew
Jerseymanufacturersforthatcar.BernieFlynnisgongtomakeatonofmoneyoffofme
butthat’sfine,I’mwillingtocontributeatthispoint.Wehavereachedapoint,thatwas
mypresentvaluecomment,thatthistechnologyissoinexpensivethataninsurercango
outandgiveapersonacoupontogodowntoPepBoysandhavethisputin,justcontinue
topayyourratesandwe’llbuythetechnologyforyouandtheywillmakemoremoney
14
andthelivesandtheinjurieswillbesaved.Thisisthewaytorapidlyintroducethe
societalvalueofallthistechnologyand–ofcourseI’massumingitworks–butnoneofus
wouldbeinthisbusinessifwedidn’tthinkithadtheopportunitytoworkorwasgoingto
work.
INSURANCECOMMISSIONERDAVEJONES:
Great.Thankyou.Ourjurisdictionisinsuranceandmakingsurethatthereareinsurance
productsavailable–ofcourse,theDMVisheadingupaninteragencygroupthat’slooking
atavarietyofdifferentissuesandoneissueI’msurethatisbeingconsideredthereisthe
questionof–wellfromatrafficviolationsstandpoint–whoisorshouldbeheld
responsibleifthecompletelyautomatedorthepartiallyautomatedcarengagesinsome
sortofatrafficinfractionandthatdecisionastowhoshouldbeheldresponsibleanddo
youcontinuetoholdthedriverresponsibleorsomeoneelseresponsiblehasimplications
Ithinkontheinsurancesidebecausewereallyallaregrapplingontheinsurancesideis
liability–who,inthischainofcommercerunningfromthemomentofdesignand
manufacturerallthewaytothedriver,whomightbeheldliableintheeventofan
accidentandthenisthereinsurancetomakesurethatallofthoseactorshavesomething
tofallbackontomakesurethattheyarenotwipedoutfinancially.OnethingIthink
aboutisthemanufacturer,thedesignerofthesoftware,theinstalleroftheself‐driving
cardevice,ifthereisaretrofitofanexistingvehicle,thedriverhimselforherself,dowe
haveinsuranceateachstepofthatcontinuum,butcorrespondingly,thereisasimilarand
relatedquestiontowhoisresponsibleforsomethinggoeswrongandI’mjustwondering
ifthereareanythoughtsyouwouldhazardinregardtotrafficviolations.Thatseemsto
15
beaveryspecificexamplewhereapartiallyautomatedormaybeacompletelyautomated
cardoessomething,whichviolatesourtrafficcode,whoshouldbeheldresponsiblefor
thatbecausethatmayhaveimplicationsforliabilityandforinsurancetoo.
29:15‐BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
RightandProfessorKornhausergaveareallygooddescriptionofthoseNHTSAlevelsand
oneofthethingstoseparatetheLevel2andtheLevel3vehiclesisthatwiththeLevel2
vehicle,thedriverisstillincontrolandthatdriveristheonethatisdrivingthecarand
whenhe/shedoesnotwanttobeincontroltheypushabuttonandthecartakesoverbut
thatdriverstillneedstobevigilantandbereadytotakeover.WiththeLevel3car–that
linehasbeencrossedandthecarisonethatisprimarilydrivingandcanoperateitself
undermostconditionsandtherearesomeconditionswhereitwon’tbeabletooperateif
youtalkaboutconstructionzoneorsomethinglikethat–atthatpointthedriverneedsto
takeoverbutProfessorKornhauserisright–whilethecarisbeingoperated,thedriver
couldbedoingsomeothertasksbuttheystillneedtobereadytotakeovershouldthe
situationarise.Whenwearedevelopingtheregulations,theissueofthetrafficviolation
isbeingdiscussedanditcomesdowntothepointofwhoisthe(operatorofthatvehicle)
–thevehiclecodeisveryspecificintermsofwhotheoperatorisnowbecausethat
vehiclecodewasdevelopedwithoutany–atatimewhenadriverwithadriverlesscar
wasnoteventhoughtof–wearelookingatthevehiclecodeandwearealsolookingat
thedefinitionofthedriverandthedefinitionofoperatorforaLevel4vehicle,noneofthe
occupantscouldpotentiallybeconsideredanoperatorofthevehicle,infact,theoperator
ofthevehiclemaynotbewithinthevehicleitself.Theoperatorofthevehiclecouldbe
16
outside–thatpersoncouldbewithinanofficebuildingandsoallofthosearebeing
discussednowandwearetryingtocometosomeconclusionastothedefinitionof
operatorwhenitcomestoaLevel3aswellasaLevel4vehicle.WithaLevel3vehicle,it
issafetosayitwouldbesomeoneinthevehiclebecausesomeoneneedstobeincontrol
ofthatvehicleshouldthesituationarise.Butitisaverycomplexquestionthathasalotof
differentinputstogettotheanswerto.
INSURANCECOMMISSIONERDAVEJONES:�
Ithinkit’saquestionof–theanswertoofwhichweareallcollectivelyengagedintrying
toprovide–andatpointthelegislaturemaydecidetoprovideanansweraswellbutit
hassignificantimplicationsforlicensingfortheCaliforniaDepartmentofInsurance.The
insurancecompanies,whethertheyareprovidingcommercialproductorapersonal
automobileproduct,becausewherethatlinegetsdrawneitherstatutorilyorfroma
regulatorystandpointasimplicationsforthemaswellintermsofwhattypeofproducts
theymightwanttoprovideorwhattheywillbeabletoprovide,soweareappreciativeof
theopportunitytoparticipatewithyouandyourtaskforceandprovidingourinputon
thatandthat’sabigpartofthishearingtodayistohearfromthepublic,other
stakeholders,andinsuranceindustryaswellastotheirthoughtsonthequestionstoo.Le
measkDeputyCommissionerShultzorMs.Volkmeriftheyhaveanyadditionalquestions
forthispanel.
CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Mr.Soriano,IwanttomakesureweunderstandSenateBill1298andwhatitallowsDMV
tohypotheticallydo–settingasidethetestingregulations–fortheoperational
17
regulations.DoIunderstandcorrectlythatthemanufacturersmightproposeunderthe
regulationsyouwillsoonadoptbothaschemewherethereisalicenseddriverinthe
vehicleengagingthebuttonandalsoaschemewheretheremightnotbealicenseddriver
inthevehicleatall–bothofthosethingsmightbepossibleunderyour2ndsetof
regulations.
BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
That’scorrect.
CHRISSHULTZ,DEPUTYDIRECTORY,CALIFORNIADEPARTMENTOFINSURANCE:Andifthoseregulationsareadopted,let’sjustpickadate,January1st,then181daysafter
thatdateamanufacturercanproposetoDMVforadriverlessvehicleand180daysfor
thelegislaturetoconsiderthat?I’mjusttryingtowrapmyheadaroundthetiminghere.
BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
Fromatimingperspective,whatweareshootingforistheregulationstobeapprovedby
theendoftheyearandshouldthathappenamanufacturercouldsubmitanapplicationto
usthatwouldhavetheirintentiontodeployacompletelyselfdrivingvehicle–atthat
pointweneedtonotifythelegislatureand180daysfromthatdateiswhenwecanissue
approval,soessentially6monthsfromthetimeanapplicationarrivesinourofficeis
whenwecanapproveamanufacturertodeployacompletelyself‐drivingvehicle.Ifit’s
notacompletelyself‐drivingvehicle,wedon’thavetonotifythelegislatureofthat
application.
CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Thankyou.
18
INSURANCECOMMISSIONERDAVEJONES:
AndIwouldimaginethatthatisdesignedtotrytogivethelegislatureachancetoweigh
inbutit’snotthecasethatitissomethingshortofafullblownenactmentofalawthat
wouldimpedethemanufacturerfromcomingintothemarket,oncetheyhavemetyour
regulatorystandardsprovidedthenotice,sometimeslegislationprovidesforalegislative
vetoifyouwill.Aparticularcommitteeorparticularcommitteeshavetoact,notactin
orderforsomethingtobeallowedtooccur–inthiscaseitisanoticerequirementsolely‐
butunlessthelegislatureactsorenactsnewlegislation,whichIguessisthensignedby
theGovernor,thatmanufacturerisfreetomoveforwardiftheyhavemetallyour
regulatoryrequirements.
BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
That’scorrect.
INSURANCECOMMISSIONERDAVEJONES:
Ok.Great.IguessI’msortofcurioustoo,Imeanmaybethisissomethingyouarestill
consideringasapartofthisfullblownregulationbutobviouslyasdriver’shave
infractions,theyhavepoints,thatisimplicationsultimatelyforwhethertheykeeptheir
license,thatisimplicationsalsoforthemfromaninsurancecontext–istherebeenany
thoughtbeengiventosomeparallelstructureforautomatedvehicles,inotherwords,say
youareinatwoorathree,whereyouarestillsupposedtoengageinsomeway.Level2
orLevel3wassupposedtostillengageinsomeway.There’saninfraction;youdon’ttake
astep.Doyougetahalfpoint,aquarterpoint,what’sthe–generically–theappropriate
publicpolicyresponse?Ordoyougetdingedasyouwouldfullyinthecaseofany
19
infraction.
BERNARDSORIANO,DEPUTYDIRECTOR,CALIFORNIADMV:
Thosearethequestionsandtheissueswearediscussingnowbecauseoneofthethings
wehavebeenlookingandwearelookingatiswhetherornotthereneedstobea
separatelicenseforsomeonetooperatethesevehiclesandifso,whattypeofexamdowe
give,whatdowetestthoselicenseesfor?Thatissueiscurrentlybeingdiscussed.
INSURANCECOMMISSIONERDAVEJONES:
Great.Rightnowtoo,asapartofgettingapermittotestthesevehiclesnotonlyistherea
requirementthatyouhave5milliondollarsintheformofabondorsomesortofproofof
insurancethatisifyou’retheentitythatistestingthesethings,butyoualsohavetomake
surethatthedriversmeetthestate’smandatory,minimuminsurancerequirementsas
well,Iunderstand.
37:04‐BERNARDSORIANODEPUTYDIRECTOR,CALIFORNIADMV:
Thatisright.Thatisabsolutelyright.Becausedriver’sthemselvesneedtomeetthe
mandatoryinsurancerequirementssotheprovisionsforthosetestdriversmatchwhat
thegooddriverwouldbe.
INSURANCECOMMISSIONERDAVEJONES:
Ok.Verygood.Ms.Volkmer?
SUMMERVOLKMER,ATTORNEY,CALIFORNIADEPARTMENTOFINSURANCE:
IhaveaquickquestionforProfessorKornhauser.DidIunderstandcorrectlythatyoudo
notbelievethatapersonalownershipmodelisrealisticforaLevel4vehicle?
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:
20
WhywouldIwanttobuyacarthatIcan’tdrive?Imean,Ijustdon’tthinkthereisa
marketforit.
INSURANCECOMMISSIONERDAVEJONES:
Iwouldliketobuymykidacarshecan’tdrive–I’dgethertwo.
PROFESSORALAINKORNHAUSER,OPERATIONSRESEARCHANDFINANCIALENGINEERING,PRINCETONUNIVERSITY:Yeah,no,especiallyIthinkthisissuchanincentiveforanyhostoffleetoperatorstogo
outthereandputthesethingsoutthereandprovidemobilityandifyoudon’thavelabor
costsassociatedwiththat,youshouldbeabletoofferthatataveryattractivepriceand
opportunitiestosharerideswiththisthing,youcanactuallyeliminatecongestion,you
canreduceenergyandpollutionby50%.Theforcesonthefleetsidearegoingtobeso
greatthatthecompetitivemarketouttherearegoingtosaythereisnoneedforyouto
buythattechnology,thefleetwillbuythat–offerthatupandIthinkthat’sthedynamics
ofthemarketthataregoingtoplayout.Suretherewillbeacoupleofguyswhatever,just
toysIdon’tknowwhy,andthat’smybelief.
INSURANCECOMMISSIONERDAVEJONES:
Verygood.Wellthankyouboth;Ireallyappreciateyourtestimonyandyourtakingtime
tojoinusthismorning,thankyouforyourresponsetoourquestions.So,whatwewould
liketodonowistoexcusethispanelandinvitethenextpanel.Ifyouhavethetime,both
gentlemen,ifyouhavetimetostaythat’swonderfulbecausewewillhavepublic
questionslateron.Iunderstandifyouhaveotherpressingthingsthatdon’tallowyouto
staybutifyoucancontinuetostaywithusthatwouldbewonderful,andthankyouagain
21
verymuch–wereallyappreciateit.Whydon’tweinviteoursecondpaneltotaketheir
seatsnowandastheyaredoingthat,I’llidentifythemandwe’lltaketheminturn.Next,
we’regoingtohaveapanelthatlooksatquestionsaroundinsuringautonomousvehicles,
intheshortandlongterm.WearejoinedbyRobertPeterson;ProfessorRobertPeterson
istheDirectoroftheCenterofInsuranceLawandRegulation,whoisalsoaProfessorof
LawattheSantaClaraUniversitySchoolofLaw.We’rejoinedbyHillaryRowen,whoisa
partnerattheSedgwicklawfirm,andwereallyappreciatebothofyourparticipation.
We’rejoinedbyMichaelStienstra–whoisthechairmanoftheCasualtyActuarialSociety
TaskforceonAutomatedVehicles.Trytosaythatquickly.Mr.Stienstraisanactuaryin
hisownrightandwereallyappreciatehisparticipationaswell.Weareverypleasedas
welltohaveKathySchwambergerwho’swithus,who’sanassociategeneralcounselfor
oneofthenation’sleadinginsurers,StateFarm.Thankyouforjoiningus.Aswell,
MatthewGilbert,whoalsorepresentsoneofthenation’sleadinginsurersandwhoisthe
CaliforniaAutoProductmanagerforNationwideinsurance,andfinallybutcertainlynot
least,RichardHolober,whoistheExecutiveDirectorofaveryimportantconsumer
organizationhereinCalifornia–TheConsumerFederationofCalifornia.Sowelcome,I
thankeachandeveryoneofyou;thanksforyourpatiencewithourdelayedstarttime
andwhatwewouldliketodoistohearfromyouinturn,startingwithMr.Peterson,Ms.
Rowen,Mr.Stienstra,Ms.Schwamberger,Mr.Gilbert,andthenMr.Holober.We’ve
allottedfiveminutesforeachandthenwearegoingtohavequestions.Ithinkwhatwe
wouldliketodoishearfromallofyoufirstandthenwe’llhavequestionsfromthepanel
andletmebeginbywelcomingProfessorPeterson.Welcome.
22
41:20‐PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,THEUNIVERSITYOFSANTACLARA:ThankyouverymuchCommissioner.Iwasgoingtosaythatasaregulator,insurance
ratingisdrivenbydataandIthinkyouaregoingtobeveryfrustratedwhenthesecome
beforeyoubecausewhetheritispersonalliabilityorcommercial,thereisnotgoingtobe
alotofdataabouttherisksthesecarspresent.Theywillbetestedwithexpertdriversin
them.Theywon’tbetestedwithordinarypeopledrivingthemorwithexpertdiversat
theirside.They’llbetestedinsimulationsandthat’sgoingtobeaboutit.There’sgoingto
bealotofinformationreportedtotheDepartmentofMotorVehicles,butthat
informationmayormaynotbeavailabletousasinsurersbecausealotofthedevelopers
considerthattobeatradesecretandconsequently,insurersaregoingtohavetodoalot
ofguessingwhentheyfirsttrytoratethesecars.Iknowsomeinsurersareworkingvery
closelywithcarmanufacturerssothattheycanunderstandthetechnologyandmake
theirbestguessbutIthinkinthebeginningtherearegoingtobesomeroughedges
aroundhowyouratethese.Nowwhenthesecarsactuallycomeintothemarketplace,we
aregoingtostartgettingsomefrequencyandseveritydatathatIthinkisgoingtouseful
butitsnotgoingtobelikethekindofdatayouareusedtodealingwith–that’sbecause
itscredibilityisgoingtochangeveryquicklybecausethesearecomputersonwheels–
thesearen’tordinarydrivers.Soanydownloadthatupgradesoneoftheseautomobilesis
goingtoprobablydramaticallychangeitsprofileofriskandreducingtheinsurance
burdenonthedriversofthesecarswillincreasetheacceptanceofthesevehicles,which
willmakealotmoresafercarsontheroad.Unfortunately,Californiaandalotofstates
butparticularlyCalifornia,hasnotpositioneditselftonimblyadjustitsinsuranceratesso
23
thatsavingscanbepassedontoconsumersasthesecarsquicklydevelop.Therewillbea
lowerfrequencyofaccidents,weallhopethat,ifthereisn’tthenthecarsshouldnotbeon
theroad,andtherewillalsobesomeeaseinassigningresponsibilitybecausethat
informationwillbestoredinthatblackbox–thelast30seconds.Thereareacoupleof
thingsthatmaypushusinanotherdirection.Letmeputittoyouinthreeverysimple
hypotheticals.Youandyourfamilyaregravelyinjuredbyanimpecuniousdriverwitha
15/30/5policy,theminimumpolicyinCalifornia.Bigcasebutyouwillsettlethatcasefor
15/30becausethatisallthatthereis.Nomatterhowseverethosedamagesare,theyare
notgoingtobereflectedintheratesthatinsurerschargebecausetheyhaven’tbeenpaid.
Hypotheticalnumber2.Younegligentlydriveyourselfandfamilyintoatree.Grave
injuriesagain.Youarenotgoingtorecoverobviouslybecauseyouranthethingintoa
tree,buthowaboutyourfamilymembers?Youareliabletothemfornegligentlyinjuring
thembuttheyarenotcoveredbecausethereisfamilyexclusioninthestandard
automobilepolicy.Majorinjuriesbuttheyarenotgoingtobereflectedintheratesthat
personalinsurerscharge.Thirdhypothetical:Yourignitionswitchfailsanddrivesyour
carintothesametree.Nowyoucanrecover,yourfamilycanrecover,andyoucan
probablyrecoverclosertothefullvalueofthoseinjuriesbecausenow,it’stheOEMthat
isresponsible.Sothosecostswillbefoldedintothecostofautomobilesandpassedonto
peoplewhopurchasedthecars.Consequently,thereisachancethatthosecostsaregoing
togoup.Whetherornotthatisbalancedbythelowerfrequencyisaquestionthat
remainstobeseen.TurningtoProposition103–theverygoodbackgroundmemothat
wascirculated‐coversalotoftheissuesthere.ThedifficultyisthatProposition103is
24
it’sdriver‐centric.Itisnotvehicle‐centric.Twoofthemandatoryratingfactors,your
drivingrecordandyouryearsofdrivingexperience,assumethatthereisadriverwhois
legallyresponsiblefordrivingthevehicleandlikewisethegooddriverdiscount–the
20%gooddriverdiscountassumesthatthereisadriver,whoifgood,deservesthe
discountandifnotgood,willnot.Thesemandatory‐ratingfactorscancausesome
unreasonablevariationsoftherates.Agooddriverforexamplemaypaylessforaself‐
drivingautomobileeventhoughthegooddriverseldomactuallydrivestheautomobile.A
driverwhoisanot‐gooddrivermayhavetopayagooddealmoreforthatautomobile.
That’stheverykindofpersonyouwantinaself‐drivingcar.Thisstrikesmetoasboth
discriminatoryandpoorpublicpolicies.It’salittlebitlikechargingapoordrivermore
forabusticket.Whatcanwedotogetaroundit?Thereareacoupleofpossibilitieswe
couldexplore.OneiswecouldinterpretorpossiblyamendInsuranceCode,Section660,
whichisincorporatedbyProposition103.Thereisaliveryexclusioninsection660.
Thesecarsarebeingdrivenbysomeoneelse–theyarebeingdrivenbyaprogram.And
moneyischanginghandstodothat.Theylookanawfullotlikeliveryvehicles–maybe
wecouldshoehornthemintothat.Wejustwentthroughtheprocessofdoingsomething
verysimilarwherepersonalautomobilesthatarebeingdrivenby‘Uber’and‘Lift’and
others–theTNCs.Ithinkwehaveestablishedtheprecedentthatacarmaybealiveryor
livery‐likevehicleforpartofthetime–whileitisstillapersonalautomobilewhenyou
aredrivingitpersonally.Thismakessensebecauseifyoutrytoapplythemandatory
ratingfactorstoliabilitythatwillultimatelybepassedupthechaintothecommercial
line,thepeoplewhosuppliedthecar,theywillfoldthosecostsintothecostofthecarand
25
theywillsellthecarfreeofanyoftheconstraintsofProposition103.Putinanotherway‐
thegoodandthebaddriveraregoingtopaythesamepriceforthecar.It’snotgoingto
makeanydifference.It’sapointlessexercisewhenultimateliabilityisgoingtopassup
thecommercialchain.Wemighttakealookataffinitygroups.Thatissomethingthatis
somewhatcontroversialrightnow.Butmightn’tweputallself‐drivingcarsintoan
affinitypoolsothatatleasttheyareallbeingratedtogetherandnotmixedinwithalotof
othercars.YouCommissionerhavequiteabitofdiscretionwithrespecttohowyou
manipulateboththerelationshipbetweenthemandatoryratingfactorsandthe16
optionalratingfactors.Youareprobablyfamiliarwiththehistoryofterritorialratingand
thecaseofSpanishSpeakingCitizens,whichactuallyconfirmsyourdiscretion.Theremay
besomethingsyoucandointhatregardtoelevatetheimportanceofthecarasthe
importanceofthecarbecomesmuchmoreimportant.Youalsohavetokeepinmymind,I
suggest,isthebroodingomnipresenceofthefederalsystem.Carsafetyisafederal
concern.NHTSAsetstandardsforcars;theypreemptstatelaws.NHTSAwillundoubtedly
participatewithrespecttodevelopingthesecarsbutifinsuranceregulationsofthestate
impedetheintroductionofsafervehicles,thatisaninvitationandpossiblyanincentive
forthefederalgovernmenttostepinandsaylook,withrespecttothesekindsofcars,you
can’tdothis.JusttwootherpointsandthenI’llshutup.Aswegetmoreofthesecarsin
themarket,itmaybethatpeopleprefertoinsurethemselvesagainstinjuriesarising
fromfaultycarswiththoughtlessdrivers.Firstpartyinsurance,theremaybea
marketplaceforUM/UIMrightnow.Wehavealreadydonethatwithhealthcare,allofthe
healthcarecoststhatarisefromanautomobileaccidentareeithercoveredbythe
26
healthcareyouhaveorbyoneofthegovernmentprograms,sowehavealreadymoved
thattointofirstparty.Thesecondpointisthatasgoevenfurtherdowntheroadandget
intowhattheycallV2VandV2I,therearecarsthataretalkingtooneanotherandwe
haveanaccident,theremaybedozensofcarscommunicatingwitheachotheratany
particulartimeanditmaybeeitherbeimpossibleornearlyimpossibletofigureoutwho
isatfaultorevenwhatthecausewas.Thatmightbeatimewhenwewanttomovetoa
completelydifferentcompensationsystemandtheonethatsuggestsitselforsomething
alongthoselinesistheNationalVaccineInjuryCompensationProgram.Youdon’thaveto
showfaultifyouhaveabadreactionfromavaccine.Youcanrecoverwithincertain
limits,sowesimplymoveawayfromafault‐basedsystemalltogether.Thatwaslikea
rapiddisclaimerattheendofaradioad.Thankyou.
INSURANCECOMMISSIONERDAVEJONES:
Thankyou.Thanks,Professor.Ms.Rowen.
HILARYROWEN,PARTNER,SEDGWICKLLP:Yes,IamgoingtoelaborateandexpandonsomeofthepointsthatBobraisedandfillin
someoftheintersticeshedidnotaddress.First,Ithink,I’mgoingtolayoutwhatIthink
isalikelyscenarioforhowthefleetisgoingtochangeinthenextyears,beingdefinedas
inthetwototenyeartimehorizon.IthinkwewillseeincrementalmovementintoLevel
2andtowardsLevel3.Ithinkitisgoingtobeveryhard,insomecircumstances,todraw
thetypeofbrightlinethattheNHTSAcategorysetsbetween2and3.Wearegoingtosee
thesortofcarsthatareat2.3,2.5,2.7,andit’sgoingtobeveryfuzzyline.Incontrast
however,theleapfromLevel3toLevel4isgoingtoabsolutelybeaclearcutdistinction
27
thatisyou’regoingtohavevehiclesinwhichthedriverhasatleastthepotentialtotake
overoroverride,I’llgetbacktotheoverrideprobleminasecond,theselfdriving
autonomousfeatures,whereastheLevel4vehicles,maybemovingoutofour
commonsenseunderstandingofanautomobile,it’saseparatequestionwhetheritis
movingoutofthevehiclecodedefinitionofanautomobilebutwhatitreallyisorwillbe
isastreetlegalrobot.Itisarobot.Youcan,leavingasidethequestionofwhatpeoplewill
orwillnotdotoactuallypersonallyownoneofthese,butfrommyparadigm,I’mgoingto
assumetheywillbecauseoftheprivatepassengerautoissuesfrontandcenter,atleast
that’swherewewantthemfordiscussionpurposes.LetusassumeyouownaLevel4
vehicleandinfactyouhavean8yearoldandperhapseverymorningthatisnotaschool
holiday,thevehicleisprogrammedtosuchthatyouplopthekidintothecar,ittrundlesit
offtoschool,itdropsthekidsatschool,itthentrundlesitselfhome.Endofschool,it
repeatstheprocess.Thenavigationsoftwarehasbeenriggedsoyourkidcannotoverride
andgotoDisneyland.Somecleverhackerkidiseventuallygoingtooverrideandyouare
goingtohavetohaveacarwitha10or11‐year‐oldtakeofftoDisneylandandthemedia
willhaveafieldday.Thatvehicleisprobablyastreetlegalrobot.Rightnow,probably,
welltodayitisastreetillegalrobotbutpresumablybythetime,peopleareactually–
they’reinthefleet,itwillbestreetlegalrobot.YourLevel3car,yourLevel2car,yourcar
issomewherebetweenwhatiscurrentlyontheroadrightnowandLevel3cars,pose
interestinginsurancequestionsbecauseyouhaveascenarioswherethecarisdriving
itselfwithmoreorlessinputsomeofthetime.Itisdrivingitselfentirely,butonlysome
ofthetime.Thedriverhas,atleastintheory,thecapabilityoftakingitoutofautonomous
28
modeatjustaboutanytimeandthereforeyougetawholebunchofquestionsbothin
termsofthestandardliabilitycausation.Idon’tthinkweneedtochangetheliability
rules,thebasicliabilityrulesstillapply:whathappened,who’satfault,howmuchwere
theyatfault,dotheyhaveinsurance.Thedetailsintermsofhowdowedetermine
causationandtowhatextentarewerelyingorourinsurersarerelyingon,orevenlaw
enforcementofficialsifit’saveryaveryseriousaccident,arerelyingonblackbox
informationforexample.Howisthisgoingtoimpactessentiallythelossadjusting
expensesandtheinsuranceproductbecauseIthinkeverybodyisanticipatingthe
frequencyisgoingtogodown,yeahseverityisgoingtogodown.Bigquestionmarkon
propertydamageseverity,verywellbesaidthattherepaircostsgouponaperinstance
basis,butthefrequencygodownsoyouarelikelytoseetheoverallcostofinsuranceto
godown.Asthelosscostcomponentgoesdown,itisnotatallclearabouttheloss
adjustingexpensesoratleastintheinitialphaseorastechnologykeepschanging,going
togodownatthesameratesoyoumayverywellseeasystemwheretheProp.103
historicaldata,whichassumesacertainrelationshipbetweenlosscostsandnon‐loss
costs,rapidlygetsoutofwhack.Particularlyaslostcosts,youknowtheoverheadisgoing
togoupaslostcostsdropbecausethereisonlysomuch,youcanskinfatoutofthe
systembeforeyouarereallycuttingmuscleandfurthermore,it’smorecleartotheextent
youhavesituationswherethedrivercantakeover.Thoughyouaregoingtohavealotof
causationargument,wasthisaccidenttheresultofatruesoftwareorsensorfailureor
wasittheresultofthedrivertakingoveranddoingsomethingfoolish.Notthingsthat
lendthemselvesperhapsreadytoreallygoodbulk,productliabilitysegregationclaims,
29
asyouwouldbethecaseifyouactuallyhadatruesoftwareflawthatcausedtheaccident,
youwouldkindofhaveasimilarpatternofaccidents.Youmighthavealotofclaimsbut
theprocessofactuallyresolvingthemonabulkbasisbetweentheaffectedinsurersand
whoareresponsibleforbonefidesoftwaredefectorbonefidesensordefectwould
probablybeprettystraightforward.Butifyouhavealotofclaimsinwhichthereisan
argumentastowhetheritwasasoftwarefailure,aself‐drivingcarfailure:wasthecarat
faultorwastheclientatfault–yougetalotofclaimsalongthoselines–youarenotlikely
toseeaproportionaldropinLAErelativetotheoveralllostcost,sothat’sgoingtobea
factor.Thenyougetintotheclassplanissuesandthereyougetallofthecomplications
involvingthethingsBobalreadyaddressedinvolvinghowmuchdoesdrivingrecord
matterwhenthecarismostlydrivingitself,howmuchdoesmileagematter–thatis
somethingIthinkisaveryinterestingquestionbecauseIthinkitisgoingtobecome
increasinglytruethatnotallmilesaregoingtobecreatedequal.Thatisthemilesdriven
underautonomouscontrolaremuchsafermiles,butitmaybethecasethattransition
milesorthatmileinwhichthedriverhastoretakecontrolofthecarareparticularly
unsafemiles.Itmaybethatifyouareadriverwho,forwhateverreason,goesfrequently
fromautonomoustonon‐autonomousmode,andifitturnsoutanditprobablywill,
peoplehaveslowerreactiontimesthanwhentheyareretakingcontrolthanwhenthey
aresimplydriving.Thenyoumayagainhaveaquestiontothequantityofthemilesas
wellasthequantity.[Quality]maybecomemoreimportant,significantlymoreimportant,
thanthequantityofmiles.Now,Ithinkthatthatcanactuallybeaccommodatedwithout
amendingProp.103butitcertainlywillrequireaverydifferentsetofregulationsto
30
capturewhatvehiclemilestravelsmeantocapturebothtocapturethetypeofmileas
wellasthemodeoftravelaswellassimplytheaggregateself‐reportedmiles.
INSURANCECOMMISSIONERDAVEJONES:Verygood–Thankyou.Let’snowgotoMr.Stienstra.
59:15‐MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Allright.IwouldliketothanktheCaliforniaDepartmentofInsuranceforhostingthis
hearingandformyinvitation.Actuariesarenotinvitedtoalotofthings.Iamanactuary
atQBENorthAmerica,FellowattheCasualtyActuarialSociety,andtheChairmanofthe
CasualtyActuarialSociety’sAutomatedVehicleTaskForce.BothmyemployersandCAS
aresupportiveofmypresenceandtheywouldlikemetonotethatthefollowing
statementsandviewsonlyrepresentmyownopinions.Inordertobetterunderstand,the
riskofthepublicandtechnologyphaseandtherolethatactuariesintheinsurance
industrycanplay,Iwouldliketodiscussthreespecificissuesatthispointintime–they
allrelatetosafety.First,betterunderstandingofautomatedvehiclesriskenvironment
relatedisrequiredtounderstandthehurdlesthattechnologyfaces.Whilemanystudies
havefoundapproximately90%ofautomobileaccidentsareattributedtohumanerror,
noneofthesestudieswereaimedatorconsideredautomatedvehicles.UsingtheNational
HighwayTrafficSafetyAdministration’s2008NationalMotorVehicleCrashCausation
Survey,whichfoundthat93%ofaccidentsareattributedtohumanerror.TheCasualty
ActuarialSocietyAutomatedVehicleTaskForcehasreevaluatedautomotivevehiclesrisk
environment.Thefindingshavethreekeytakeawaysforthispanel.First,thetechnology
facesavastarrayofrisksasinclementweather,failinginfrastructure,andundesirable
31
driverbehaviorsmaydisablethetechnologyorreduceitseffectiveness.Forscale,
approximately49%oftheseaccidentshadoneormoreoftheseriskfactorsattachedto
them.Second,theserisksimportantwilldifferbylocation,withthemostobvious
examplebeingthevaryingimpactinclementweatherhas.Third,anumberofnon‐
technologicalsolutionsmightbeabletohelpovercometheserisks.Forexample,better
infrastructuremaintenancecanreducethepotholesorinoperabletrafficcontroldevices
risk.Drivertrainingprogramsorautomatedvehicle‐onlylanesmightincreasethe
likelihoodthetechnologyisusedcorrectlyandsafely.Longerterm,removingthedriver
fromtheequationcompletelymayactuallyproducethesafestresult.Understandingand
quantifyingthehurdlesthistechnologyfacescanhelppolicymakersestimatethevalueof
differentproposalsthroughanaccuratecostbenefitanalysis.Next,actuariesinthe
insuranceindustrycanalsohelpestablishamoreaccuratesafetybenchmarkoftoday’s
drivers.Thiscanbeusedtohelpmeasureautomatedvehicles’relativesafety.Accident
ratesvary/differacrossdifferentdrivingtypessuchashighwayorcity,timeofday–rush
hour,midday,ornighttime–anddrivercharacteristicssuchasage.Thusanaccurate
comparisonwouldrequiretheselectionofthemostappropriatebenchmark.Further,it
maybedesirabletocomparethetechnologytoboththeaverageaccidentrateandasyet
undefinedsafedriveraccidentrate,asthisaverageratewillincludebothteenagedrivers
anddrunkdrivers,miles,andaccidents.Lastly,Iwouldliketoofferthreeobservationson
therisksassociatedwithtransferringtheresponsibilitytothesystemthatcurrently
providesprotectionagainstautomobilemanufacturererrors.First,NHTSAregulatory
processdoesnotprovidesufficientprotectionforthemanufacturersorconsumers.The
32
1980caseofRichardDawsonv.ChryslershowsthatfollowingNHTSAregulationsisnota
sufficientdefense.Conversely,theillusoryparkcaseagainstFordinthe1970s,which
resurfacedChryslerinthe1990s,sothatknownriskswouldnotonlybeidentifiedand
fixedinatimelymanner.Second,it'sworthnotingthatpersonalautoinsurersspend
approximately60billiondollarsayearonexpensesdedicatedtowardssellingpolicies,
quantifyingrisk,anddeterminingfault.Thisis400timeslargerthanNHTSA’s150million
dollarannualvehiclesafetybudget.Third,theautoinsuranceindustryincentivesare
alignedverywellwiththesocietalroletheyareaskedtofulfill.Tochargeapremiumthat
accuratelyreflectstheaccidentriskandsettleclaimsfairlyandefficiently.Productsafety
regularsdonotfacethesamefinancialdownsidewhentheyoverorunderestimaterisk.
Manufacturerslikewisefaceaverydifferenteconomicoptimizationequationwhen
addressingaproductsliabilityclaim.Atthispoint,myonlyrecommendationwouldbefor
theCaliforniaDepartmentofInsurancetoengagemanufacturersandbothpersonaland
commercialinsurerstocreatearobust,transparent,andcollaborativetestingapproach.
Thiswillallowthepoliciestodevelopalongwiththetechnologyandhelpthetechnology
cometomarketassafelyandefficientlyaspossible.Thankyou.
INSURANCECOMMISSIONERDAVEJONES:
Thankyou.Ms.Schwamberger.
CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:
I’veneversaidthisbefore,butanactuaryjustkindofstolesomeofmythunder.Good
morningandweappreciateonbehalfofStateFarmtheopportunitytoparticipatein
today’shearing.IwouldliketobeginbyacknowledgingCommissionerJonesandyour
33
teamforputtingtogetherwhatIthinkisathoroughlistingoftheissuesthatweallneed
tobethinkingaboutasthistechnologyadvances.Briefly,ithasbeensuggestedbysome,
notherebutinthepublicdialogue,aboutthistechnologythatinsuranceoreveninsurers
couldbeanobstacletothedevelopmentofthetechnologypresumablybecauseitcould
disruptinsurers’businessmodels.AnytimeIhearthis,Idisagree,Ipushback,andIask
formoreinformationbecauseIdon’tbelievethatwillbethecase.Speakingonbehalfof
StateFarm,wehaveadecadeslonghistoryofstandingforautosafetyforthebenefitof
ourcustomersandbecausethistechnologyhasthepotentialofreducingcrashes,reduce
injuries,reducedeath–IwanttomakeitclearthatStateFarmdoessupportandour
officialpositionistosupportthedevelopmentofthistechnology.AsMichaelsaid,thereis
alotofinformationtobegainedandweareactivelyseekingtounderstandhowthis
technologywillreducerisksandwhetheranynewriskswillemerge.Aspartofthat
effort,weareamemberoftheCenterforAutomotiveResearchatStanford.Theyhavea
projectlookingatautomatedvehicles.WeareinvolvedinacollaborationwithFord
MotorCompanyrelatedtotheautomatedvehicletechnologyandjustonSeptember5th,it
wasannouncedthatStateFarmwillbeafoundingpartnerintheUniversityofMichigan’s
MobilityTransformationCenterwhichisapublic/privateR&Dinitiative,thegoalof
whichistoacceleratetheprogressinthedevelopmentandimplementationofboth
connectedandautomatedvehicletechnology.Isayallthattosaythatwearelooking
forwardtobeingapartofthedialoguehereinCaliforniaasinsuranceissuesare
addressedrelatedtothistechnology.Whenwethinkabouttheinsuranceconsiderations,
Ithinktheycanbebrokendowninthreeareas:theunderwritingarea,thepricingand
34
ratingarea,andtheclaimhandlingarea.Andfirstawordaboutunderwriting,andthis
hasbeensaid,historicallythecharacteristicsofthedriverhavebeenveryimportantin
assessingriskbutIthinkaswegoforward,thecar’scharacteristicmaybecomemore
importantwhilethedriver’scharacteristicswilldeclineinimportanceandthatincludes
drivingsafetyrecordsandyearsofdrivingexperience.Now,whenwethinkaboutpricing
briefly,weknowinCaliforniathatpricingissuesarecomplicatedbyProposition103.As
Michaelsaid,aninsurer’sgoalistoestablishapricethatmatchestheriskascloselyas
possibleandthat’salreadyachallengeunderProposition103sowearegoingtohaveto
thinkthroughsomeofthoseissues.Now,aswithunderwriting,evenwithpricing,the
vehicles’characteristicswillprobablybecomemoreimportantovertime,whiledriver’s
characteristicsmaydeclineinimportance.Atthebeginning,andthishasbeensaidas
well,insurerswillbechallengedtogatherthelossexperiencethatweneedtoestablisha
pricethatmatchesriskandobviouslythisisverynewandthatwillbeachallengefor
everyone.Finallythinkingaboutthisfromaclaim‐handlingstandpoint,againthe
importanceofdata.Insurerswillneeddatafromthevehicletounderstandhowthecrash
occurred.Andfortunately,thatisincludedintheCalifornialawastherepresentative
fromtheDepartmentofMotorVehiclestated.Wehavebeengoingforwardasdrivers
havebecomelessattentivetothedrivingenvironment,theywillbecomelessawareof
whatleadtoacrash.Sothecensordatafromthevehiclewillshedlightonthecauseof
theaccidentandthat’simportantbecauseweneedto–goingforward–ensurethat
injuredpartiesarecompensatedfairly,thatliabilityisapportionedappropriately,andto
theextentthatthedriverisnolongeragreatwitnessthatthedatafromthevehiclewill
35
beveryimportant.Nowhavingsaidthat,thereareotherissuesrelatedtoclaims.Ithink
Hilarymentionedsomeofthese.Theassumptionisthatcrashfrequencywillgodownbut
wereallyneedtoseewhatwillhappenwithseverity.Willtheaccidentsthatdooccurbe
worseperchance?Certainlyweneedtobethinkingaboutthecostofrepairofvehicles
thathavethistechnologyandsomethingthathasn’tbeenmentionedtodaythatIwould
considerthisaninsurancechallengeforallofus,willthereberepairersequippedtodo
therepairstoaddressthistechnology,that,Isuppose,willbeanimmediateconcernfor
insurersbutIthinkit’ssomethingforustobethinkingabout–whowillbeabletofix
thesecars.Inlightofthesecomments,Ididwanttobrieflyaddresssomeofthese
questionsthatwereraisedinthematerialthatcametousaheadoftime.Oneofthe
questionswaswhetheraproductwillbeavailablein2015andwillitwillbeatraditional
autopolicy.Wethinkthataslongasthedriverisresponsibleformonitoringthevehicle
andcantakecontrolasneeded,certainlyLevel2,maybetoacertaindegreethrough
Level3,wethinkatraditionalautopolicywillstillberelevantandwillstillbe
appropriate.Thecoveragesinthemincludesuninsuredandunderinsuredmotorist,
medicalpayments,comprehensive,andcollisionandofcourseliability.Manyofthese
coverageswillbeneededasthetraditionalvehiclecontinuestobeontheroad.We’ll
continuetofacehazardslikefallingorbouncingrocks,animalscrossingtheroad,bad
weather,asithasbeensaid.Withallthatsaid,wedothinkthatinsuranceproductswill
probablyneedtochangeovertimeasriskschange,especiallywhenvehiclesbecome
completelyautonomousandalsoifliabilitylawsevolveovertime.Ithinkasthis
technologymovesforward,Ithinkoverthelongerterm,insurancepoliciesneedwillneed
36
tochangetomatchtherisks,tomatchthelawsinplace,andeventhroughinnovation.
Second,youaskedhowdoinsurersratevehicleswithothersemi‐automatedsafety
featuresthatalreadyexists.Iwouldsaythisgoesbacktodata.Insurersgatherdata,they
gatherlossexperienceovertimeandthentheymaketheappropriateadjustmentbased
onthatdata.Wegenerallylooktoourownlossexperiencetodeterminethesethingsbut
sometimesifclaimexperienceisunavailablefornewtechnologyfornewvehicletype,we
mayseekthedatafromelsewhereandthatmayneedtobethecasewithincreasingly
automatedvehicles.Youalsoaskedhowwillinsurershandleaftermarketautomated
vehicletechnologyandDr.Kornhauserbroughtthatup.Fromanunderwriting
perspective,insurerswouldcarefullyconsiderthesafetyandtheeffectivenessofthat
aftermarkettechnology.Fromaratingperspectiveitmaybedifficulttogetthevolumeof
dataneededtoassesstherightrateformarkettechnologyandalso,thiscouldbeanissue
forusearlyon,totheextentinsurersusetheyear,make,andmodel,andeventheVIN
numbertoidentifywhatsafetyfeaturesexistonthatcar,theymaynotbeabletogetthe
factthatthereisaftermarkettechnologyonthatvehiclebylookingatyear,make,model,
VIN.So,thatmaybeachallengewhenitcomestoaftermarkettechnology.Finally,you
askedwhatcouldtheDepartmentofInsurancedotoaccommodateautomatedvehicles.
AndwewouldsaythatwouldbeimportantforDepartmentstafftobeflexibleasthey
reviewratefilings.Wewon’thavealargeamountofdataasweseektoestablishprices
thatmatchriskforincreasinglyautomatedvehiclesandwealsothinkitwouldbecritical
fortheDepartmenttoallowthecompanyactuariestomakereasonableassumptions
basedonthedatathatisavailable.Wethinkthatthisflexibilitywillbekeytoallowing
37
insurerstosetapricethatmatchestherisk,andwethinkthatthatisimportantbecause
thatmayhelpconsumersseethevalueinpurchasingautomatedvehicles.Ifconsumers
seethevalueinthistechnologyandpartofthatmayhingeonwhethertheyperceivethey
aregettingabetterinsurancepremiumbecauseofit,thiswillthencreatedemandforthe
technology,andinturnleadtotheproductionofitandIthinkthatisagoodthing–
becausethisispotentiallylifesavingtechnology.Thankyou.
INSURANCECOMMISSIONERDAVEJONES:
Thankyouverymuch.Mr.Gilbert.
1:13:06‐MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:Goodmorningandthankyouverymuchforhavingushere.Ijustwantedtosaythat
Nationwideisreallyexcitedabouttechnologiesthatpromisetoreducetrafficrelated
injuries.Wewanttostayasclosetothedevelopmentonthisaspossible,wethinkit
representsjustagreatoutcomeforsocietytohaveaworldwithfeweraccidents.We
wereplanningonbeingabletomeettheinsuranceneedsofvehicleswithautonomous
technologies,whateverthismaybe.It’sreallynotclearaswehavekindofdiscussedand
foundout,it’snotclearhowthetechnologyisgoingtoevolveonceitismadeavailableto
thegeneralpublicorevenhowitisgoingtolookbutwedoknowthatitisrapidly
approachingandweareprobablyveryclosetothatLevel2implementationwithinthe
nextfewyearsIwouldthink.Thequestionswereposedtousandthemainquestionsthat
wereaskedwereifwehadtheabilitytoofferaninsuranceproductandwhatthismay
looklikeintheshortandlongterm.Thethingthatimmediatelypopsintomyheadand
whatmakesitsdifficultfortheinsuranceagency,isthatweareinsomewhatofa
38
reactionarypositionhere.Wearenotdevelopingthetechnology;we’rejustkindofseeing
whereitisgoingandtryingtokeepinline.So,we’veheardalotofdiscussionaboutthe
liabilityquestion,whichisalsomynumberonebulletandisthe64,000‐dollarquestion.
Nationwidewouldsupportthecurrentliabilitysystemaswellaspossiblyshiftingsome
theliabilitytothemanufacturersandthedevelopersofthistechnology,dependingon
whereinthespectrumeachriskislocated.Longterm,itisbecomingverycomplicated
especiallyasmoreandmoreautonomousmilesaredrivenanditisdefinitelyanarea
wherewearelookingofregulatoryclaritytogiveusguidanceonhowtheywillbetreated
underthelawandthedifferentiationbetweenthedifferenttypes.Now,shiftingfrom
liabilitytophysicaldamageratesisadifferentquestion.Fromaratingperspective,Ithink
it’saprettycommonthoughtthatwewillseeasignificantdecreaseinaccidentfrequency,
whileatthesametimewewillseeanincreaseinthecostofrepairortoreplacethose
vehicles.Particularlyasthisnewtechnologyisnewtothepublic,oneofthefirststepsI
seeisbeingabletoidentifyoneofthevehiclesaswellastheautonomouscapabilitiesthat
theyhave.Realistically,Icanseetherecouldbesituationswherewecouldhavevehicles
ateverydifferentlevelontheroadatthesametime.Youaregoingtohavepeopledriving
aLevel2carandsomepeoplemighthaveaLevel4.Traditionally,theVINnumberhas
containedinformationaboutthesafetyfeaturesandmostofthecarrierstodayuseitto
classifylikeriskforthepurposeofrating,similarlyhowKathywasexplaining.Another
complexissueisthesamevehicleintwodifferenthouseholdsmaybeusedvery
differently.Thiscouldbeduetofactorslikedrivingpreference,drivingconditions,
weather,andevengeographytonameafew.Thisdifferenceinusecouldactuallymeana
39
significantdifferenceinexposureatthistime.Ideally,itwouldmakesensetoratebythe
typeofmileagedrivenbutIfullyagreewithHilaryaboutthedifferenttypesofmileage‐
notwomilesarecreatedequal.Youmighthaveonesetofratesforasemi‐autonomous
mileandyouhaveonesetofrateforafullautonomousmile.Ofcoursethiswouldmeana
hugeamountofdatawouldneedtobecollectedforthepurposeofquantifyingthe
exposure,butalsowewouldneedtheabilitytousethisandinformation.Technologyis
alreadyusedbytheinsuranceindustrytotrackdistance,speed,accelerationtrends,
hard‐breakingeventsinrealtime.WhilethisisnotabletobeusedinCalifornia,thisis
showingasareliableandaccuratewaytocollectapredictiveratingfactorandprovide
anotheroptionforinsurance.Thisbringsmetomylastpointofratingcapability.
CurrentlytheCaliforniaCodeofRegulationssetsthemandatoryandoptionalfactorsthat
aretobeusedinratingprivatepassengerautos.Withthecurrentstructure,wherethree
ofthemandatoryfactors‐twoofthethreedriverexperienceanddrivingrecordbecome
lessandlessrelevantasmoreautonomousmilesaredriven.Optionalfactorsthatallow
forratingbasedontypesofvehiclesareavailabletodaybuttheyareweightedlessthan
themandatorythree.Inclosing,ourplanistoevolvetomeettheneedsoftheinsurance
industryfortheprivatepassagetransportation,whateverthatmaylooklike.Withthat
said,wedoneedclarity,underthelawespeciallyaroundliabilityaswellasexploringthe
possibilityofexpandingdifferentinsuranceratingmethodologies.Thankyou.
INSURANCECOMMISSIONERDAVEJONES:
Thankyouverymuch.Thatwasveryhelpful.Mr.Holober.
RICHARDHOLOBER,EXECUTIVEDIRECTOR,CONSUMERFEDERATIONOFCALIFORNIA:
40
Goodmorningandthankyouforholdingtheworkshopandforinvitingme.Idowantto
thanktheCommissionerforyourleadershipandreallyanticipatingawholenewsetof
insurancequestionsbeforeweareinareactivemodesowebelievethatworkshopsinthe
areaarecalledforandlookforwardtoparticipatinginthemandalsoclearlythereisa
needfordatatobecollectedandperhapsrequiredbytheDepartmenttobecollected
frominsurersasmoreexperienceoccursaroundtheLevel2typesofautonomous
vehicles.Asthetechnologiesdevelop,Ithinkmoredatawillhelpusalldefinethemerits
andhowtheyshouldbefactoredinrates.Ithinkautonomousvehiclesareveryexciting,
whenIthinkofthedrudgeryofcommuningandwhenIthinkofplaceswherepublic
transitisnotavailableandnothavingtobestressedoutbehindasteeringwheelsounds
likeawonderfulthing.Ontheflipside,drivingandowningacarissointegraltowhatitis
tobeanAmericanthatIimaginethattherewillbeagradualacceptance,notanovernight
acceptance,ofautonomousvehiclesandyouknowmycommentswillbebasedonthe
Level3typeofautonomousvehiclesthatseemtobeinthemoreimmediatefuture.
ClearlyifLevel3autonomousvehiclesareresultinginfeweraccidentstheyareloss
mitigationtoolsandassuchthebenefitshouldbetotheconsumer,notsimplyawindfall
totheinsurerandinCaliforniaourregulatoryschemewouldrequirethatanysavingsbe
passedalongtotheconsumerwithintheparametersofProp.103.Wedobelievethat
thereisconsiderableroomwithinProp.103toaddressLevel3autonomousvehiclesand
Ijustwanttopointoutacoupleofconsiderations.Aslongasthereisasteeringwheel,
thatadrivercantakeovereitherbychoiceorbynecessityifthereisafailureofthe
autonomoussystem,yoursafetyrecordmattersanddataIimaginewillhelpusbut
41
considerthedriverwhosefirstexperienceisdrivinganautonomousvehicleandthey
havegottheirdriver’slicensetheystartdrivinganautonomousvehicleandhavelittleif
anyexperiencereallydoingthedriving.Iftheyhavetotakeoverinanemergency
becauseofafailureormaybesomeotherdrivernotdoingtherightthingintraffic,isthat
driverasaferorlesssafedriverbecauseofthelackofexperience,thelackofknowing
whentoreactinthoseemergencysituations.So,Idon’tthinkit’sthatsimpleorisaone‐
sidedcalculationtodeterminethesafetyrecordofdriversofautonomousvehicles.Again,
Ithinkweneedtocollectalotofdatabeforewereachthosekindsofconclusions.There
isplentyofroomwithinProp.103,particularlyundertheoptionalratingfactorsinterms
of1,2,and8togiveconsiderableweighttoautonomousvehiclesunderthetypeof
vehiclesperformancecapabilitiesorvehiclecharacteristicsifinsurersarealsowillingto
de‐emphasizeoreliminatetheweighttheygiveotheroptionalratingfactorssuchas
martialstatus,smoking,orzipcode.Becauseifthetheoryisthattheautonomousvehicles
isthesafervehicles,thenwhyshouldmaritalstatus,whyshouldwhereyoulive,or
whetheryousmokecarryanyweight.Prop103hasenoughflexibilitytoplaceemphasis
onthenewtypesofvehiclesifinsurersarewillingtode‐emphasizethingsthatare
becominglessandlessrelevant.Letmestatetheobvious,youcan’tchangeProp.103
withoutavoteoftheCaliforniapeopleorbythelegislationthatadvancesthepurposesof
Prop.103,alotofthequestionsofamending103throughavotewilldependonthe
public’sacceptance,whichwon’thappenovernight,itwillhappengraduallythatpeople
willfeelcomfortablethattheseareinfactoverallsafervehicles.Ithinkifexperienceover
theyearsprovesthat,thentherewillbeanamendmentsputbeforevoters.HoweverI
42
thinkdoingitthroughlegislation,Iwouldcautionthatwillcertainlybeoppositionto
changestodefinitionswithinInsuranceCode,Section660asawayofcircumventingthe
requirementsofProp.103.So,wedonotthinkthatthevehiclesthatareownedby
privatepeoplefortheiruseorfortheirfamily’suseareliveryvehicles.Wealsohave
concernsaboutthewayinwhichaffinitygroupsarebeingused.Weappreciatethatthe
Commissionerheldaconversationwithstakeholdersonthatandhopethatthatwill
continuetobepursued,butIthinkthesemaybebecomegimmickstotrytocircumvent
ratherthandealAVtechnologywithinthecontextofProposition103.Letmeraisea
coupleofotherissuesthatneedtobepartofthediscussion.Therehasbeensometalk
aboutprivacyandwebelieveprivacyisaverykeyissue,sowedoapplaudthe
regulationstheDepartmentadoptedaroundthekindofdatacollectedfromthe
transpondersortheblackboxesthatareinvehicles.Insurancecompaniescancollect
datarelatedtothenumberofmilesdrivenwhichisperfectlyappropriate,it’sconvenient
anditmakessense,butnototherdatainCaliforniathatreallyisnotrelatedtoProp.103
factorsandIthinkweneedtofollowthatmodelinthecollectionofdataonautonomous
vehicles.Certainly,therewillprobablybevaluableneedtocollectaggregate,anonymous
dataabouttheoverallsafetyexperienceofLevel3vehiclesbutwehavetobecarefulto
protectinformationthatreallywouldbemadeprivateaboutindividualdriversand
wheretheydrive,whentheydrive,andsoforth.Andtheotherissuethatoccurredtome
whenreadingthematerialsandconsideringtheconceptthattherewillbethissortof
ongoing,thisdaily,veryfrequent,updatingofyourAVcontrol’ssystemasinformationis
refinedandsoforth.Astechnologyadvances,thereisgongtobesignificantconcernswith
43
hackingandmaliciouskindsofattacksonthesystems.Anysystemthat’screatedisa
targetforhacking,asatargetnotjustmischief,butseriousharm.Idon’tknowwherethat
factorsinbutitseemstomethatthatneedstobepartoftherisk.Therearealotof
wonderfulthingsthattheseautonomousvehicleholdforthefuture,butalongwiththatI
believeisahugeriskthatnotonlyonevehiclecanbetamperedwithbysomeindividual,
butthatthousandsormillionsofvehiclescanbetamperedwithinsomehorrificwayand
that’sapartoftheequationthatIthinkneedstobeaddressedandpossiblypartof
insuranceregulation.Thankyouverymuch.
INSURANCECOMMISSIONERDAVEJONES:
Thankyou.ThatwastremendouslyhelpfulandIreallyappreciateeachandeveryone’sof
yourinsightandperspectiveonthisissue.Onequestionthatimmediatelycomestomind
fortheinsurersonthepanelhastodowiththesemi‐autonomousfeaturethatare
currentlyavailableonanumberofmakesandmodelssuchasadaptivecruisecontrol,
laneassistance,parkingassistance,accidentavoidance,driverfatiguedetection.I’m
watchingcommercialseverynightthatshowsomeofthesetechnologiesandhowthey
canavoidcollisionsoravoidpeoplerunningoverpeoplethathaveselfparkingfeature,
etc.I’mwondering,ifyouknow,ifMs.SchwambergerandMr.Gilbertcansharewithus
howthosefeaturesareincorporatedintoratingcurrentlyinhereCaliforniatotheextent
thattheyare,howdoyouinsurancecompaniescurrentlytakethoseintoaccountand
howarethosehandled.
CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:
I’llgiveitashot.
44
INSURANCECOMMISSIONERDAVEJONES:
Thanks.
CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:
Thosearetakenintoaccountthevehiclecharacteristicsandthosesortsofsemi‐
automatedfeaturesanditgoesbackto,asmanyofushassaid,lookingattheloss
experiencewedon’tsay,thiscarhasthistechnologythereforetherateshouldbe
adjustedinaparticulardirection.IthastobebornoutbyourlossexperienceandI
haven’tseenallthedetailsandMichaelmayknowinanaggregatefashionbutIdon’t
knowiftheyareallprovingtobeeffectivejustbecauseitexists,youknow.The
technologyisimproving;manydifferentautomakershavemanydifferentkindsof
technology.IthinkfromwhatI’veheardandyoumayknowthisbetter,therehavebeen
problemswiththelanekeeping.Itsoundslikeagreatidea,theblindspotdetection,butit
canbetoosensitiveandcausethedriverstoultimatelyignoreit.Thereisalotofhuman
machineinteractionthatplacearoundthistechnologybuttoansweryourfundamental
question,welookatourlawsuitexperience,welookatthedata,andifitsjustified,we
maketheadjustmentsthatwecanmakedependingonthestatelawsinanygivenstate.
INSURANCECOMMISSIONERDAVEJONES:Great.Nationwide.Mr.Gilbert.MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:IwouldechothesamecommentsthatCathyhasmade.Rightnowwewouldbebasing
thisonlossexperienceandhowthoselosses,whentheyoccur,howlongtheyoccur.I
thinkoneoftheissuesisthatthisissonew,thereisnotalotofexperienceoutthereyet,
45
therearealotoffactorswedon’tknowyetthataregoingtoinfluencethat.Mostinsurers
aregoingtheusingsomesortofVINidentifiertoratevehiclesandthetheorywouldbe
thatthosedifferenceswouldbepickedupinexperienceovertime,soiftherewasa
significantdifferenceinmodelAvs.modelBthatyouwouldseethatovertime.Wewould
accuratelybeabletoadjustourratesforthat,whichiswhyoneofmypointsit’svery
importantforustonotonlybeabletoidentifythevehicles,identifythefeaturesthatare
inthembecausethemarketcouldhavevehiclesatalldifferentstagesinthespectrumon
theroadatthesametime.
INSURANCECOMMISSIONERDAVEJONES:
Mr.Stienstra,doyouwanttoaddsomething?
1:31:58‐MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Thanks.So,acouplecommentsonthat.First,VINdoesn’tinclude,especiallywith
optionalfeatures,ifyoulookatBMW,Mercedes,sometheyhavesomeoftheseoptional
automatedbreak‐insystemsandtheVINwillnotincludethatinitsequation.HILDIhas
doneanumberofstudiesonthissemi‐autonomousandwhattheyhavehadtodoisgoto
themanufacturersandgivethemalistofVINSandgetthenwhattechnologyisonthat
vehicle.Thesecondisthat,whenyouareactuallycomingupwiththevehiclesymbol,
whichishowthesearemostlyrated.Whenyouthinkaboutanindividualvehicle,itis
verysmallcredibilitywise.So,howmanyS‐classesaresoldintheUnitedStatesandifthe
2014Sclassesisn’tlikethe2013,thenthatcausesanissue.Typically,insurersusetwo
factors:theyusethebodytypestyle,andthenthepreviousyear’ssymboltostart
estimatingwhatthatvehiclesymbol’srelativityshouldbe.Whenyoustartlookingat
46
automatedvehiclesandthistechnology,oneofthemajorissuesisthattheyarenotthe
same.So,Volvosautonomousbreak‐insystemwillbringyourcartoastopifyouare
travelling,Ithinkit’sunder19milesanhourwitha9milehourdifference,theymightbe
improvingonthat.FromwhatHILDIhasfoundthattheBMWs,atleasttheirolderones,
willnotstopyourcarifthevehicleinfrontofyouhasstopped.Itwillonlybringyourcar
toastopifyou’retravellingandthecarinfrontofyouistravelling.IthinkHondasystem
isnevermeanttostopthevehicle,buttoslowandreducetheseverity.Sounlessinsurers
getbetterdataintermsofwhatthetechnologyactuallyis,howtoidentify,andhowto
priceit,wemightbecomparingthecurrentday’smodelwithlastyear’smodel,whichis
nolongerapplicableortryingtogroupitwithothermodelsthathaveverydifferentgoals
inmind.Evenifyourollinfullyautonomousfeatures,it’sgoingtotakealongtime,even
iftheyareperfect,justbecauseofthewaythecredibilityisandthewayweactually
analyzethedata.Whilewearestillthisseparateentity,tryingtogetdatafrom
manufacturers,tryingtounderstandit,wehavetogothroughHILDEandIHSanddoall
thiscleanuptothedataandontopofthat,themostrecentstudythatHILDEcameup
waslanekeepingaboutayearagoandfoundthatitactuallyincreasedaccidents.I
thoughtthatitmightbesomenoiseinthesystem,buttheyjustdidafollowupandnow
theysay,combinedwithautonomousbraking,itactuallyreduces.Thereisgoingtobea
lotofnoiseinthesesystemstoo,especiallywithearlyseveritywhereIdon’twecanreally
saywhattheimpact’sgoingtobeorhowit’sgoingtoflowthroughtotheratesuntilwe
getbetteranswersontheliability,wegetbetterdataonwhatisactuallygoingonand
47
howitisimpactingchanges,andhowpeopleareactuallyusingit.That’stoanswersome
ofthoseissues.
INSURANCECOMMISSIONERDAVEJONES:
EachofyouIspokeittothecriticalneedformoredatainvariousways–onechallenge
wefaceisthatthedata,whichisgeneratedbythosethataredoingresearchand
developmentonfullyautonomousvehiclesorpartiallyautonomousvehiclesmaynotbe
somethingtheywanttoshareandtheymayhaveavarietyofreasonsfornotwantingto
shareandnotwantingtosharetoosoon.ThereisarequirementinstatelawnowthatI
guesswastestifiedtobytheDeputyDirectoroftheDMVthatthevehicleshavetheability
torecordatleast30secondspriortotheaccidentandthatwouldapparentlybe
reportabletoDMV,butthenanumberofyouhavespokentotheissuewhetherinfactit
wouldbereportabletoothers,likeinsurerssothattheycouldusetheinformationand
thencorrespondinglyinCaliforniawehaveregulationsthatlimittheabilitytocollect
informationfromindividualdriversaswelltoMr.Holobertestifiedtosomeoftheprivacy
reasonsbehindthat.It’sabitofapuzzle.Mr.Stienstra,youalsosaidthattherearesome
intermediatecollectorsofdata,whichIguessgooutandgetdatafromR&Dor
manufacturersaggregatesomewayanditcanbeusedbyinsurers,butthereissomelag
timeassociatedwiththat,thereisalotofnoise,credibilityissuesassociatedwiththat
too,ifIunderstoodyourtestimonycorrectly.
MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Yeah,forthemostpart.LotsofthedatacomesfromStateFarm,Nationwide,actually
supportHILDE,theyaremembersandtheyreportdataandthentheycandotheirown
48
studiesoffofthatbutitisbecausetheinsuranceindustry,somanymembersareof
HILDEandIHS,soitcomesthrough.
INSURANCECOMMISSIONERDAVEJONES:
Theyarecollectingdataaboutparticularvehiclesorinsomecase,particularfeatureson
vehiclesbecauseeachofyouhaveexplainedthecomplexityassociatedwiththefactthat
someofthesefeaturesarenotimmediatelyidentifiablebasedontheVINonthecar.It
causesmetowonderonaregulatorystandpoint,whetherit’smyDepartmentorDMVor
someentityoughttobethinkingaboutisthereawayforustogathermoredataupfront,
tomakethatinsomewayapreconditionofgettingapermit,alicense,andaggregatethat
datainsomeway,soitdoesnothavenecessarilyimpactsonthe,sortof,theproprietary
interestsoftheentitiesthataredoingtheR&Danddoingthemanufacturingthecars,
nonethelessisdatathatisavailableearliertoinsurancecompaniesforpurposesofrating.
I’mjustinterestedinfolk’sreactiontothatasaconcept.I’msurethatthereisaallsortsof
flawswithit,butI’mjustcurious,thatorotherwaystocollectmoredataearliertogive
insurancecompaniesabetterabilitytorate.MaybewecanstartwithMr.Petersonandgo
downtherow.Ifyoudon’thaveacommentonit,that’sfinetoo.
PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,UNIVERSITYOFSANTACLARA:Idon’tknowifthereisanotherwaytogetdata.Iwouldthinkthatinrespecttotheblack
box,those30secondsweshouldn’tbeoverlyconcernedaboutprivacyforexample,
becausetherehasbeenanaccident.Oncetherehasbeenanaccidentyourprivacy
interestgooutthewindow,youcouldbedeposed,youcouldbesenttointerrogatories,if
thereisacriminalinvestigationthatcouldbeseizedwithasearchwarrant,sothatisa
49
wholedifferentmatterformgatheringdatawhileyouaredrivingaroundgenerally.If
thereissomeimpedimenttousingthatlastdriving30secondsnow,Iwouldthinkit
wouldbegoodinyourbailiwick,togetridofit.
INSURANCECOMMISSIONERDAVEJONES:
I’mnottheLegislature.Ms.Rowen.
HILARYROWEN,PARTNER,SEDGWICKLLP:Idon’thavemuchtoaddbutIthinkitis,yourcommentshadtwocomponents,couldwe
getdataearlierandcanwegetcleanerdataandIthink,I’mskepticalabouttheearlier
becausepushcomestoshove,youhavetohavetheaccidents,youhavetohavethe
insuranceclaimsbasicallyinordertohavethedata.CleanerdataIthinkissomethingis
somethingthatIthinkalotofinteractivediscussionsbetweentheDepartmentandthe
DepartmentofMotorVehicles,automanufacturers,andinsurers,andmaybesomething
thatgetspickedupattheNAIClevel,wouldbeusefulbecauseyoureallyaren’tgoingto
beabletopriceinawaythatcapturesthestaplefeatureifinfact,youcan’tidentifywhich
carshavethem,evenifyouhavegottentothepointwheretheactuariesareatleast
willingtodoa,“I’mgoingtolickmyfingerandstickitintheairtoseewhichwaythe
windisblowing”estimateofwhattheratesare.
INSURANCECOMMISSIONERDAVEJONES:
Whattheycallactuarialjudgment.Thanks,Ms.Rowen.Youcanhaveequaltime.
MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Ihavetwocommentsonthedata.Thefirstisthatit’sgoingtotakeawhiletoevenknow
whatdataweneed.Peopletalkaboutaccidents,rightnowautoinsuranceisaveryhigh
50
frequencylineofbusiness,whichiswhyaccidentsiswhatyoulookat.Inthefutureyou
maybelookingatincidents,numbersfortesters,howoftendidtheyhavetotakeover,or
didthecaralmostgetintoanaccidentandwhileinsurersdon’thavegooddatainthe
aggregate,telematicsisleadingtowardsbetterunderstandingofhowdriversactually
driveandwhatisanaverageincidentrateatwhichthedriverhastoavoidortakeevasive
measures.Whateventhebenchmarkshouldbecomparingto,wedon’tknowyet,we
don’tknowhowweshouldbelookingatthedataandit’sgoingtotaketime.Specificto
California,youguyshavegonefurtherintermsofyourDMVregulationsbyrequiringall
incidents.I’mgoingtobetheactuaryandsaythatwhatyouarerequiringisnotenough,
knowingthenumberofincidentsandtypesofincidentsdoesnottellmeanythingabout
therisk.Ineedtoknowabaseline–Ineedtoknowhowmanymilesareyoudriving,
whattypeofmiles,whereareyoudriving,thefactthatonecompanyhas10,000
incidents,andanotheronehas100,doesn’tmeanthatCompanyAisriskierortheir
productisworsethancompanyB.Ineedtoknowmoreaboutittoactuallycomeupwith
acalculation.Thereareprivacyconcerns;therearetheseissues.Myhopewouldbethat
thesecompanieswouldwanttoprotectagainstanunsafecompanyrushingaproductto
market.Andifyoucanfindawayaroundtheprivacyissuesandprotecttheirknowledge
aboutworkingwiththeinsurerstosee,wecan’ttellanythingyet,thisdatalooksokor
doesn’t,it’ssortofaniterativeprocessthatmighthelpalleviate,whilestilldrivinghome
whatactuarieswouldliketoseeintermsofdataacquisition.
INSURANCECOMMISSIONERDAVEJONES:
51
Beforewegoon,Iwanttogiveeveryoneachance,butyoualsosuggestedthatweengage
withmanufacturersandotherstoengageinsometypeofrobusttesting.I’mwondering
youcouldfleshthatoutalittlebitaboutwhatyouhadinmindbeforewemoveontothe
othersabouttheissueofdata.
MICHAELSTIENSTRA,CHAIRMAN,CASUALTYACTUARIALSOCIETYTASKFORCEONAUTOMATEDVEHICLES&AVP,ACTUARY,QBETHEAMERICAS:Iguessitwouldbetwofoldagain.One,youhavecompaniescomingoutsayingthatthis
productissaferorit’snotassafe.Thequestioniswhereisthedata.Whatare
manufacturersdoing,whatarethesetests,Ithinkeveryoneworksinsomewhatofasilo,
andtheyunderstandtherisksandtheyknowwhattheyaretestingfor,butthereare
goingtobeahugeamountofmodelrisks,thechancethattheirmodelthattheyareusing,
whileitmightbetrueofhistoricalclaims,isnotgoingtobeaspredictivegoingforward
andasimpleincorrectassumptionoritcouldactuallychangebehaviorlikemortgage
backsecurities,themodelswereextremelysafe,andtheyweredefinitiveanditwasa
beneficialproduct,butappearanceofsafetychangedinthewaypeopleactuallywrotethe
product,thewayitwasappliedandhowitexpandedintowhatiteventuallybecame.In
termsofinsurers,thefolksonpersonalinsurers,whichIthinktheyhavethebestdata,
theyaregoingtohavethebestunderstandingbutitcantakeonesimpleaction–ifone
manufacturerdecidestoremovethesteeringwheel,removethebrake,andtheycan
provethatitissaferandthentheyrollitoutintothecityasaliveryvehicle,thereisno
questionthatitiscommercialinsurance.Theycangoaheadandtakealltheriskandwhat
doesthatmean.Thereisabalancebetweenpersonalandcommercialinsurersbuthaving
workedatboth,neitheroneisgoodatwhattheotheronedoes.Commercialinsurers
52
don’tcompeteverywellagainsttheStateFarms,theNationwides‐thebestpersonalauto
insurers.Andthepersonalautoinsurershaveverysmallmarketoftheoverall
commercialspaceandsoifyouwanttoshiftthebalanceandseewhereitisgoingtofall,
onewouldbenon‐admittedexcessliability.Manufacturerstypicallybuynon‐admitted
excessliability,whichmeanstheirfirstmillion,hundredmilliondollarsisself‐insured.
Thisisn’tgoingtoafirstdollarloss,thisisactuallygoingtothemanufacturerwhois
saying,youknowwhat,I’mnotgoingtosettlethisclaimquicklybecauseI’mnotpaidor
reimbursedtosettleclaimsI’mdowntomanufacturercars,thoughthecostoftherecallif
thatisgreaterthanthenumberofsettlementsandtheaveragesettlements‐it’sa
differenteconomicequationthaninsurerswhoactuallyreimbursedandtheirbusiness
modelisbuilton,settlingclaimsquicklyandfairly.So,thatfirstdollarthatcomesto
liabilityhasverydifferentimpacts,that’swhythereneedstobethisbalancebetween
whatdocommercialinsurersneedtogetcomfortable,whatdopersonalinsurers,and
whatarethemanufacturersdoingwiththeseteststoovercometherisksandapprove
theirsafety.
INSURANCECOMMISSIONERDAVEJONES
Thankyou.Letmegobacktotheearlier,moregeneralquestion:aretherewaysforusto
getdatasoonerandgetdatawithlessnoiseassociatedwithit.
1:44:40‐CATHYSCHWAMBERGER,ASSOCIATEGENERALCOUNSEL,STATEFARM:
IthinkyouroriginalquestionisanideaworthexploringtoseeifthroughtheDMVandin
cooperationwiththemanufacturers,itseemsliketheearliestbest,notperfect,couldbe
thedatathatisgatheredthroughthistestingandcertificationprocessandsoitseemto
53
beworththeconversationwithmanufacturerswhoareparticipatinginthetesting,with
theDMV,maybewithsomeactuarialpeopletoanticipatewhataresomeofthethings
thatshouldbegatheredinthetestingandcertificationprocessthatcouldpavetheway
forinsuringlaterandtoyourpoint–howdowebeproactive,soitdoesseemlikethatis
worththeconversation.AnotherthoughtIhadfromamarketplacestandpoint,itseems
likethedynamicsarethereforeverybodytowanttocooperateonthisbecausetothe
extentthesevehiclesaresafer,Ithinkwearegoingtobeworkingverytoinsurethese
vehiclesoverourcompetitorsandyouwantalloftheminsured,soIthinkthe
Departmentwillbeacollaborativepartnertobeasflexibleaspossiblewithinthe
constraintsofProposition103andallowtheactuariestomakesomereasonable
assumptionsbasedonthedatathatisthere.Soitfeelslikethepartieswouldbeproneto
collaborationbecausetheywanttosellit,wewanttoinsureit,youwanttoseeitinsured
‐thatcoulddrivethecooperation.
INSURANCECOMMISSIONERDAVEJONES:
Thankyou.Mr.Gilbert.
MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:
Yeah,Iagreethatoneofthebiggestconcernsisdataandhavingdataandknowingwhat
todowithit.Withthenotknowingofthefuture,anytimeanassumptionismadeabout
doingthis,willhavethisoutcome,therearealwayssomanydifferentvariablesthatplay
intothatthathowdoyouknowhindsightisalways20/20.Idothinkifweweregoinggo
acollaborativewaywhereweareallpoolingourdatatogetherandbeingabletolookat
other’sexperiences,andworkcloserwiththemanufacturers,Ithinkthatthatwouldat
54
leasthelp.Idounderstandthatisaconcern,whereatechnologydevelopermightnot
wanttoreleaseinformationaboutitssafetyfeaturesforfearofhavingacompetitorkind
ofcuttinginontheirbusinessthere,Idothinkatleastfromtheperspectiveofcollecting
thedata,Ithinkifthereisrelevantpointsofthetechnologydifferences,theycanfilter
intothedataandshouldavailabletobeused.
INSURANCECOMMISSIONERDAVEJONES:
Thankyou.Mr.Holober.
RICHARDHOLOBER,EXECUTIVEDIRECTOR,CONSUMERFEDERATIONOFCALIFORNIA:Iagreewiththelastfewcommentsregardingthevalueofgettingearlydatafrom
developers.Iimaginethattherearewaystosafeguardtradesecretkindsofissueswhen
thatdataisgatheredbutitdoesmakesensetocollaborate.Oncetheseproductsareon
theroad,datacollectioncontinuestobeveryimportantbutIthinkitcanbedoneinways
thatprotectpersonallyidentifiableinformationisaggregatedinmanyareasandcanbe
donehereaswell.
INSURANCECOMMISSIONERDAVEJONES:
LetmeseeifMr.ShultzorMs.Volkmerhaveanyquestions.
CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Thankyou,Commissioner.Idohaveonequestion.SomyiPhonehas20applicationsthat
arewaitingformetoupdatethembutIhaven’tgottenaroundtoityetbecauseIdon’t
haveagoodwificonnection.Whatifadriverfailstoupgradeordownloadthenewest
upgradefromthemanufacturers?Isthereananalogyinthefailuretomaintainthe
55
vehicleinaproperworkingcondition?Iwonder;Mr.Gilbertwouldyoumindtakingiton
andothersiftheyhavethoughts.
MATTHEWGILBERT,CAAUTOPRODUCTMANAGER,NATIONWIDEINSURANCE:
Yeah,IthinkIbroughtthatupasoneoftheunknowns,youdon’tknowwhatpeople’s
patternsaregoingtobe,therecouldbeasituationwhereoneortwovehiclesownersof
thesamevehicle.Oneofthemisgoingtobemuchmorediligentindoingthatandone
mightnotevenknowtheyneedtodoanupdateandmightassumesomething,Inthat
case,Icouldseeasignificantdifferencejustintheperson’s‐howtheownerofthat
vehicleismaintaining.Thenthatcomesalongwiththequestionofwhatismaintaining–
isdownloadinganduploadingmaintainingandautomobile?
CHRISSHULTZ,DEPUTYDIRECTOR,CALIFORNIADEPARTMENTOFINSURANCE:Anyoneelsehavestrongthoughtsaboutthat?PROFESSORROBERTPETERSON,DIRECTOR,CENTEROFINSURANCELAWANDREGULATION&PROFESSOROFLAW,UNIVERSITYOFSANTACLARA:Ithinktherearewaystohandleitwhereyoudon’trelyonthediligenceoftheowner.
Googlecarforexamplewillnotengage,asIunderstandit,inself‐drivingmodeuntilithas
receiveditsdailydownload.Youcandriveitaroundbutitwillsay‐masterIamnot
readytoengageinself‐drivingmode.Ithinkitwouldbeverydangeroustorelyonthe
diligenceofdriverstodownload.Youhaveacomputer,Ihaveacomputer,Inoticeitall
thetime,allthisstuffhastobedownloaded–I’mbusy,Idon’tdoitandIthinkdrivers
willbeexactlythesame.
HILARYROWEN,PARTNER,SEDGWICKLLP:
56
IthinkyouhaveraisedaninterestingquestionthatIhavenotyetseenmuchaddressed
becausewearesofocusedonwhenwilltheyenterthefleet,butthereisalsothequestion
ofwhenwilltheyexitthefleet.Inotherwords,asidefromthedownloadfeatures,thereis
alsothequestionofwhendothesensorshitthepointwhereyoustartgettingsporadic
failurejustbecauseparticularlysaytheyareinsaltyenvironments,winterydriving,
stressfulconditions.Youaregoingtohaveawholesetofissuesthataregoingtoariseas
youhaveafirstandsecondgenerationLevel2andLevel3andLevel2.3carsstartexiting
thefleetorstartreachingthepointwheretheygo–shouldIrepairitorreplaceit–and
youaregoingtohaveaccidentsandequipmentfailurenotthekindwearesortof
thinkingofthroughmostofthishearingtoday,butsortofasoftermalfunction.Gee,you
failedbecauseitstartedtorustout.Thatisfurtherdowntheroadquiteliterally,butis
somethingthatinsurers,DMV,theDepartmentofInsurance,automanufacturers,even
bodyshopsaregoingtohavetodealwithasthisnewgenerationofvehiclesstarttoage
out.
INSURANCECOMMISSIONERDAVEJONES:
Okay,well,youhavegivenusalotoffoodforthoughtandthatreallyisthepurposeof
thisistoreallyunderstandthecomplexityoftheissueswefaceandbeprepared.Weare
goingtohaveachancetohearformthemembersofthepublicbutbeforewedo,I’ll
probablyreiteratethis,wehaveauniqueopportunity,giventhatthedegreetowhich
thesetechnologieshaveenteredthemarketissomewhatlimitedrightnow,totrytodo
thebestwecantogetthepublicpolicyresponserightatthefrontasopposedtotryingto
reactatthebackendtothetechnologybeinginthemarketalreadyanditraisingahostof
57
insurancequestionsandonesthatfranklyhaven’tbeenansweredandtherehavebeen
examplesofothertechnologieswherethathasoccurredandtherehavebeenfatalities
evenandtheinsuranceandliabilityissueshavenotbeenworkedout.Wehavesometime
although,giventheexcellenceoftheengineers,scientists,andentrepreneursinSilicon
Valley,California,wedon’thavealotoftimetofigurethisout,butI’mconfidentthatwith
thepartnershipwiththeR&Dfolksandthemanufacturersandthecompaniesand
entrepreneursinterestedinthis,aswellastheinsuranceindustryitself,consumer
groups,theacademy,andveryablelawyerswecanhopefullyfigurethisout.Ireally
appreciateyoursharingofyourinsightsyou’vegivenmealottothinkabout,Imadevery
copiousnotesandIplantowatchthisseveraltimesbecausetherehavebeenalotof
complexityandnuanceinwhatyouhaveofferedandIhopeyouwillmakeyourself
availabletousifwehaveadditionalquestions–Iandmystaff,theDMV,orother
Californiaagenciesasweworkourwaythroughthis.Thankyouverymuch.Ithinkwe
areexcusingthispanelandallowmembersofthepublictocomeforwardiftheywishto
becenterstageandtestifyforamoment.Thankyouverymuch,weappreciateit.Idon’t
thinkwehaveasignupsheetformembersofthepublicwhowishtotestify,butIthinkif
therearemembersofthepublicwhowouldliketotestifythisisyourmomenttodoso
andperhapsyoucancomeuponebyoneandidentifyyourselfandyouraffiliationifyou
haveone.Intheinterestoftimewecanonlygiveyouaminute,weaskyoulimityourself
tothesubjectofthepublichearing,whichisalwaysagoodreminderatapublichearing.
Itisanopportunityforustohavepeoplewhoweren’tonthepaneltosharetheir
thoughtsorinsightssowewanttogivethosefolksachancedothatatthistimeandthey
58
candothatrighthere,ifyouaresoinclined.Youhaveanynumberofmikestochoose
fromsodon’tbeshy;Iknowthisisn’tashygroup.Yes,hi.
KATHLEENBISSELL,LIBERTYMUTUALINSURANCE:
ThankyouCommissioner,thisisagreathearing.IlearnedalotandIjustwantedto
sharewithyouthatmynameisKathleenBissellandIrepresentLibertyMutual
insurance.WeareaBoston‐basedcompanyandourfolksatthehomeofficearevery
interestedinthesubjectandI’vetakencopiousnotesthatIwillbereportingbackto
them.Myquestionisourteamofpeoplewhoarelookingatthisclosely,whotheycan
contactattheDepartmentforfurtherconversation.WouldthatbeChris?Wouldthatbe
you–whoeveryouassign.
INSURANCECOMMISSIONERDAVEJONES:
IthinkI’mgoingtoofferupChrisandChrisisgoingtoofferupSummer.
KATHLEENBISSELL,LIBERTYMUTUALINSURANCE:
Ijustwanttomakesurewehavethatoutthereforfurtherconversationbecauseweare
veryexcitedaboutthistopicaswell.
1:55:50‐INSURANCECOMMISSIONERDAVEJONES:
WeareveryappreciativethatLibertyMutualisparticipatingandthankyouforbeing
involvedinourpublicpolicyconversationsaswell–appreciateit.Others?Iwon’tcall
anyoneout–IdorecognizeafewfolksfromtheindustryherebutIwon’tcallanyoneout.
Iwanttogivefolksonemoreopportunitytotestifyiftheysowishoridentifythemselves
iftheysowish.Ok,Idon’tseeanyonerushingtothemike.Verygood.WellIwantto
thankourpanelistswhotooktimefromtheirbusyschedulesinSiliconValleyattheTech
59
Museum.IwanttothanktheTechMuseumforaffordingusthisbeautifulspaceand
opportunitytoholdthishearing.Iwanttothank,inparticular,mystaffwhoworkedso
veryhardandablytoputthistogether,inparticularIwouldliketothankKathySnell,
LisaStrange,PatrickStorm,MadisonVoss,ReginaWright,GilBelcher,KevinBrown,
FrankMorra,PraneetMaharaj,NimraSyed,andAlisonCastroandalsoDeputy
CommissionerShultzandMs.VolkmerforalloftheirhardworkandI’msureI’veleft
someoneelseoutfrommyteam,Iapologize.Alotofworkwentintopreparingthe
backgroundmaterials,makingsurewehadpanelsandorganizingthishearing.Iwantto
thankthepanelistsaswellagain,fortakingthetimetoshareyourviewsandinsights.I
thankourpartnersattheDepartmentofMotorVehiclestoo–theDirectorandthe
DeputyDirectorandstafffromDMVwhoareworkinginconcertwithus.I’mleftwith
thoughtsaboutthegreatpotentialofthistechnologyandwhatitbodesintermsof
potentiallyreducingtheincidentsofhumanerrorandtheoperationofvehiclesandthe
potentialtoreduceaccidents,fatalities,andinjuries–IthinkthatisveryexcitingandI
thinkhereinCalifornia,weareattheleadingedgeofthisasweareinsomanythings.We
havecompanies,entrepreneurs,engineers,scientistsworkingthistechnologyaswe
speakhere,perfectingit,hopingtomakeitavailabletoCaliforniaconsumers.Atthesame
time,wehaveveryrobustinsurancemarketsandveryableinsurancecompaniesthat
meettheinsuranceneedsofbothcommercialentitiesaswellasindividualsandfamilies
andasthestate’sinsuranceregulator,it’smyresponsibilityinconcertwithotherstate
agenciestomakesurethatasthistechnologyemergesandasitbecomesmoreavailable
toCaliforniansthatconsumersareprotectedandwehavethat.Iwasdelightedtohear
60
fromtheinsurersthatparticipatedthattheyareexcitedaboutthetechnologytoo,they
supportthetechnology,andareforwardtowaystheycanofferinsuranceproductsto
Californiaconsumersconsistentwiththeentryofautonomousvehiclesintoourmarket,
orpartiallyautonomousvehiclesinourmarketaswell.That’sgoodnews.Wehavealot
ofthingstofigureout,nottheleastofwhichishowmuchsaferdoesthisreallymake
driving?Whoultimatelyisandwillberesponsible?Howwillinsurancebepriced?What
datawillbeavailabletohelpusinidentifyingthatpricingifyouwill?Aswell,what
interpretationsormodificationsofregulationswillbeneededtoaccommodatethisnew
technology?That’sthetaskinfrontofus.Ididn’tsetoutinholdinganyexpectationthat
wewouldanswerallthequestionsbutIthinkthetaskofposingthosequestionshelpus
begintochartapathtobegintoanswerthemandIlookforwardtodoingthatinconcert
withallofyouwhoarestakeholdersinthisprocess.Thankyouverymuchforyour
participationandwelookforwardtoidentifyingtheappropriatepublicpolicyresponse
andsupportingthistechnologyandithopefullymakesCalifornia’sroadssaferandmakes
drivingsaferforCalifornians.Thankyou.Withthatweareadjourned.Thankyouagain.