[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE IMPACT OF AUTONOMOUS VEHICLES
.
ON THE FUTURE OF INSURANCE
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND INSURANCE
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
MAY 23, 2018
__________
Printed for the use of the Committee on Financial Services
Serial No. 115-96
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
31-460 PDF WASHINGTON : 2018
HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
STEVAN PEARCE, New Mexico GREGORY W. MEEKS, New York
BILL POSEY, Florida MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin DAVID SCOTT, Georgia
STEVE STIVERS, Ohio AL GREEN, Texas
RANDY HULTGREN, Illinois EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina KEITH ELLISON, Minnesota
ANN WAGNER, Missouri ED PERLMUTTER, Colorado
ANDY BARR, Kentucky JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania BILL FOSTER, Illinois
LUKE MESSER, Indiana DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine JOYCE BEATTY, Ohio
MIA LOVE, Utah DENNY HECK, Washington
FRENCH HILL, Arkansas JUAN VARGAS, California
TOM EMMER, Minnesota JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana
Shannon McGahn, Staff Director
Subcommittee on Housing and Insurance
SEAN P. DUFFY, Wisconsin, Chairman
DENNIS A. ROSS, Florida, Vice EMANUEL CLEAVER, Missouri, Ranking
Chairman Member
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico MICHAEL E. CAPUANO, Massachusetts
BILL POSEY, Florida WM. LACY CLAY, Missouri
BLAINE LUETKEMEYER, Missouri BRAD SHERMAN, California
STEVE STIVERS, Ohio STEPHEN F. LYNCH, Massachusetts
RANDY HULTGREN, Illinois JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DANIEL T. KILDEE, Michigan
LEE M. ZELDIN, New York JOHN K. DELANEY, Maryland
DAVID A. TROTT, Michigan RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
TED BUDD, North Carolina
C O N T E N T S
----------
Page
Hearing held on:
May 23, 2018................................................. 1
Appendix:
May 23, 2018................................................. 27
WITNESSES
Wednesday, May 23, 2018
Adams, Ian, Assistant Vice President, R Street Institute......... 9
Carlson, David T., U.S. Manufacturing & Automotive Practice
Leader, Marsh & McLennan....................................... 4
Gammelgard, Ryan D., Counsel, Public Policy Resource Group, State
Farm........................................................... 6
Geraci, Sam, Vice President, Strategy, American Family Mutual
Insurance Company.............................................. 8
Gillis, Jack, Consumer Federation of America..................... 10
APPENDIX
Prepared statements:
Adams, Ian................................................... 28
Carlson, David T............................................. 33
Gammelgard, Ryan D........................................... 42
Geraci, Sam.................................................. 48
Gillis, Jack................................................. 53
Additional Material Submitted for the Record
Duffy, Hon. Sean:
Statement for the record from the American Insurance
Association................................................ 61
Supplemental statement for the record from the American
Insurance Association...................................... 66
Statement for the record from the National Association of
Mutual Insurance Companies................................. 71
Statement for the record from the Property Casualty Insurers
Association of America..................................... 86
Cleaver, Hon. Emanuel:
Consumer Watchdog report entitled, ``Self Driving Vehicles:
The Threat to Consumers''.................................. 88
THE IMPACT OF AUTONOMOUS VEHICLES
.
ON THE FUTURE OF INSURANCE
----------
Wednesday, May 23, 2018
U.S. House of Representatives,
Subcommittee on Housing
and Insurance ,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 2:37 p.m., in
room 2128, Rayburn House Office Building, Hon. Sean Duffy
[chairman of the subcommittee] presiding.
Present: Representatives Duffy, Ross, Posey, Luetkemeyer,
Hultgren, Rothfus, Budd, Cleaver, Sherman, and Gonzalez.
Chairman Duffy. The Housing and Insurance Subcommittee will
come to order. Today's hearing is entitled, ``The Impact of
Autonomous Vehicles on the Future of Insurance.'' Without
objection, the Chair is authorized to declare a recess of the
subcommittee at any time.
Without objection, all members will have five legislative
days within which to submit extraneous materials to the Chair
for inclusion in the record. Without objection members of the
full committee who are not members the subcommittee will be
participating in today's hearing for the purpose of making an
opening statement and asking our witnesses questions.
The Chair now recognizes himself for a 5-minute opening
statement. I first want to thank our panel for being here
today. I apologize that we were late. We had a vote on the
floor and it takes a while to get people back to the hearing
room, but we are grateful for your presence and excited to hear
your testimony on autonomous vehicles as it has a cross-section
with insurance. Again, thank you for being here.
Now, while the focus of today's hearing will be on
insurance, other committees have already been looking at the
issue, and I suspect Judiciary may look at AVs from a product
liability perspective as opposed to our insurance perspective.
Reality is catching up with movies like Blade Runner,
Demolition Man, Minority Report. We have seen the capabilities
of fully autonomous vehicles being tested in cities like San
Francisco, Miami, Pittsburgh, and more.
Auto insurance policies have already been impacted by AVs.
For instance, we already have level two and level three AVs on
the road wherein vehicles assist the driver in accelerating,
decelerating, and steering.
Manufacturers like Tesla already employing adaptive cruise
control technology which lets you take your hands off the wheel
for a lengthened period of time. There are a lot of people out
there that are somewhat resistant to entrusting their lives
with autonomous vehicles. And there are others who just want to
drive. The freedom of shifting gears and being behind the wheel
has an American freedom to it. They want to keep that. But at
the end of the day, safety will be the top concern before the
public is ready to fully trust AVs.
We have seen the reaction from both industry and the public
to recent accidents and how it has altered views on how ready
this technology is from and for being deployed. There are
others ready for the change. Senior citizens are the perfect
demographic for AVs. The oldest among us are clamoring for this
new technology. They don't want to drive any more than we want
to be behind a Cadillac going 10 miles an hour under the speed
limit.
If you talk to millennials, their generation, they don't
even own cars. They like public transportation. They think of
Uber and Lyft also as public transportation. And in my D.C.
office here, I only have two staff members that have cars and
they are not millennials. They are older.
At the corporate level, UberSUVs and UberBLACK are how
executives get around town. These ride-sharing companies are
also looking at employing fleets of fully autonomous vehicles.
I have eight kids. I have gone through the pain of teaching two
of them how to drive. I think I got a lot of gray hair from
that process. So not only do you notice the increased cost of
insurance, especially after your daughter backs into your
campaign staffer's car, but also the stress of your kids
getting in an accident.
What does this technology do to keep our kids safe as they
are new to the road and new to driving? As a parent, and eight
kids, as many people know, you have fights in the back. What
happens when you turn around, taking your attention off the
road and trying to put out a fight? This technology can be
remarkable in keeping our families and our kids safe.
In Wisconsin, some of you might have heard, there is a big
investment from Foxconn. They are looking to work with
Wisconsin DOT to create AV dedicated lanes to drive over 4,000
employees to their jobs at the company's plant.
All of a sudden transportation to and from work could be a
perk of the job. Autonomous vehicles, they are coming. What we
hope to find out today is how insurers are looking at AVs in
terms of insurability.
Will auto manufacturers and tech companies developing the
driving systems, will they retain liability for damage? Will
specialized products be developed within the industry? How will
data be shared for risk assessment?
I look forward to the panel's insights and thoughts on this
topic. Again, this is the first time we have had a panel in our
committee on this topic in the ever-changing space with auto
insurance.
I am also interested in what role do you think the Congress
should play. Do we have a space? If we do, what should it look
like? Obviously, we don't want to crimp innovation. We want to
make sure that we don't have laws that are aging as technology
is racing forward. We welcome your insights on that as well.
My time is about to expire, so I now recognize the
gentleman from Missouri, Mr. Cleaver, the Ranking Member for 5
minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
And thank you for being here to provide testimony for us.
And I don't think this is something that has been scheduled too
far in advance of a reality. This hearing will address the
impact of autonomous vehicles on the future of insurance. This
is an exciting topic as well as the fact that we will explore
technology that very well may reshape our country and our
culture. However, as with any new technology, the benefits must
be carefully weighed and the relevant policies must be
addressed.
I happen to be one of those who believe that new technology
should be scrutinized. And I think we have that responsibility.
And I appreciate the fact that the Chair has scheduled this
hearing for that purpose.
These autonomous vehicles are characterized by different
levels, one through five where the car is fully automated, with
no role for the driver. Currently, a number of companies like
Google, Apple, Uber have begun to explore manufacturing these
vehicles with various levels of automation and various levels
of success.
I was stunned a few years ago to read that Captain Kirk and
Scotty actually laid the foundation for the flip phones that we
started using. And that quite often scientists will go to movie
makers and ask them about the future and to create something
that doesn't seem real that eventually becomes real.
I think the technology is going to evolve. And it is
important for the insurance sector to consider how it will be
impacted. Most States require drivers to have an auto insurance
that covers their private vehicle. A shift to autonomous
vehicles may change the type of insurance coverage to more
reliance on commercial coverage and product liability. This
hearing will give us a chance to hear from the insurance sector
on how they plan to address what could be a huge change in the
American insurance market. I would like to hear how
affordability will be addressed in this evolving insurance
market to make certain that all Americans of all economic
levels will have access.
And then finally, autonomous vehicles will collect huge
amounts of data regarding where passengers travel. There are
big questions, at least for me, that must be answered on who
owns the data. What level of access should insurance companies
have to it. And how will this data be protected. Thank you for
being here today and I look forward to you shedding light on
all of these knotty issues that we will have to deal with.
Thank you, Mr. Chairman. I yield back.
Chairman Duffy. The gentleman yields back.
We now welcome our panel of witnesses. First we have Mr.
Carlson, U.S. Manufacturing & Automotive Practice Leader at
Marsh & McLennan, welcome.
I now want to look to the gentleman from Illinois, Mr.
Hultgren, to introduce our next witness.
Mr. Hultgren. Thanks, Chairman. It is a privilege to be
able to recognize and welcome Ryan Gammelgard from State Farm
who traveled all the way from Illinois to D.C. to testify
before the subcommittee today.
Mr. Chairman, State Farm is a fixture in the Illinois
insurance marketplace and I actually just had the pleasure of
meeting with one of my State Farm agents, who serves my
district, Jeff Keicher earlier this afternoon.
Ryan works as Counsel in Public Policy Resource Group of
State Farm's law department in Bloomington, Illinois. And in
this role, he has coordinated Federal and State public policy
positions on automated driving systems including providing
testimony at the State level. Ryan, thanks for being here,
looking forward to hearing your testimony along with the rest
of our great panel today. And with that I yield back.
Thanks, Mr. Chairman.
Chairman Duffy. Thank you and not to be outdone by
Illinois, we welcome our third witness, Sam Geraci, the Vice
President of Strategy at American Family Mutual Insurance, a
great Wisconsin company. Welcome.
And our fourth witness, Mr. Ian Adams, Associate Vice
President of State Affairs at the R Street Institute and Mr.
Gillis, representing the Consumer Federation of America.
Welcome, all.
The witnesses will in a moment be recognized for 5 minutes
to give an oral presentation of their written testimony.
Without objection, the witnesses' written statements will be
made part of the record following their oral remarks.
Once the witnesses have finished presenting their
testimony, each member of the subcommittee will have 5 minutes
within which to ask the panel questions. Now, on your table you
will note that there are three lights. Green means go. Yellow
means you have 1 minute left and red means your time is up.
Your microphones are sensitive, only when they are on
though, please make sure they are on when you are giving your
statement and answering questions. Now, with that, Mr. Carlson,
you are now recognized for 5 minutes.
STATEMENT OF DAVID CARLSON
Mr. Carlson. Chairman Duffy, Ranking Member Cleaver, my
name is David Carlson and I am a Senior Vice President at Marsh
& McLennan. And I lead our U.S. Manufacturing and Automotive
Industry Practice.
Marsh is the globe's leader in insurance and brokerage and
is part of Marsh & McLennan Companies based in the United
States. The U.S. Manufacturing and Automotive Industry practice
is a network of global employees in over 100 countries
representing our clients.
I am honored to participate in today's hearing. And I will
use this opportunity to share initial observations on mobility
transformation and focus on the impact that autonomous vehicles
will have on risk management and insurance industry.
The future of AV is now. We are already driving highly
advanced vehicles and by 2025, we will probably be sharing the
road with autonomous vehicle technology. AV technology is
creating seismic shifts in the automotive industry and the
insurance sector alike, the trend raises questions about how
the insurance sector will incorporate AV risk and underwriting
and help consumers realize the anticipated insurance safety
benefits.
While AV risks are a shifting landscape for underwriters,
the development and solutions must be embraced to manage risk
effectively. Already, underwriting in principle of personal,
commercial, and trucking auto insurance is taking into
consideration the safety benefits of automated driving systems.
As trends in autonomous technology accelerate,
manufacturers, component suppliers and technology companies
will start to assume more liability for the performance of
their systems. The liability pendulum will shift from personal
auto to commercial product liability or a hybrid of some form
of coverage.
Another likely key question involves risk management. As
society becomes more dependent on various products, more
liability and it will become necessary to refocus current risk
management strategies to account for that shift.
Due to the anticipated positive societal and economic
impacts of autonomous vehicle technology, legislator, and
regulators must consider establishing a regulatory framework
for AV as a high priority.
But, Government is not alone in moving with caution. The
insurance industry is also in the early stages of adapting to
the disruptive forces at play. As with cybersecurity and
related insurance, there is value for public and private
partnership to develop the technology and markets.
Autonomous mobility companies are struggling to buy
competitively priced insurance for auto risks. Startups and
smaller companies are buying insufficient capacity in personal
line marketplace. And the traditional insurance marketplace is
struggling to address the needs of small and midsize fleets
looking to enter the AV market.
At Marsh & McLennan, we believe purposeful action is
required. We have challenged ourselves and our insurance
partners to develop scalable solutions that can address the
risks as they exist today and evolve with the technology.
Just the same, regulations cannot evolve into a barrier to
deploying autonomous vehicle technologies. Currently,
regulatory framework can limit the development of innovative
insurance products when there is insufficient loss data or case
law.
Without flexibility, it is hard to develop solutions that
address emerging technologies and changes in consumer demand.
As consumers and companies no longer own assets, they'd rather
buy them and use them as a service, insurance must respond
accordingly.
The ability to innovate and develop new ride-sharing
insurance solutions has been a catalyst to the growth of that
sector. Marsh has developed the first ride-sharing policy to
adapt to the fact that people are no longer using their
vehicles for 100 percent of personal or 100 percent of
commercial use.
The solution was pioneered leveraging the flexibility
offered by the surplus lines market and had been codified by
policymakers across the country. The solution provides
protections for the ride-sharing public as well as the ride-
share drivers.
Marsh has facilitated the creation of hundreds of insurance
products throughout the personal insurance marketplace that
have allowed broad consumer choice to purchase the insurance
that meets individual needs.
We envision a similar need for the innovation across the
autonomous mobility platform. Consumer preference is moving
away from the individual car ownership to mobility ecosystems.
The effect of this is nothing short of revolutionary.
To further enable the advancement of AV, policymakers
should embrace the significant social and economic benefits of
new technology. The insurance sector must be able to be nimble
and willing to change in a way to view risks.
Growing up, we were always reminded never to get into a car
with a stranger. I am willing to bet that nearly everyone in
this room got into a car with a complete stranger in the last
week. Who knows, in another decade, we may regulate getting
into a car with no driver at all. Thank you.
[The prepared statement of Mr. Carlson can be found on page
33 of the appendix.]
Chairman Duffy. Thank you, Mr. Carlson.
Mr. Gammelgard, you are recognized for 5 minutes.
STATEMENT OF RYAN GAMMELGARD
Mr. Gammelgard. Thank you, Chairman Duffy, Ranking Member
Cleaver, and other members of the committee. My name is Ryan
Gammelgard and I am counsel in the Public Policy Resource Group
of State Farm, where I work on public policy issues associated
with automated vehicles.
State Farm thanks you for providing this opportunity to
testify today on automated vehicle technology and its impact on
insurance. We have submitted written testimony to this
subcommittee which provides an overview of how we view this
technology in some of our main public policy positions. For
purposes of my testimony today, I will summarize some key
points.
State Farm's mission is to help people manage the risks of
everyday life and recover from the unexpected. State Farm has
been the Nation's largest auto insurer for over 75 years. And
we currently have over 45 million auto policies in place.
The majority of our $76 billion in annual revenue primarily
comes from auto insurance. So we do understand the potential
impact the automated vehicle will have on the insurance
industry.
We also understand that the insurance industry and State
Farm are going to be looking at a number of issues to make sure
that we can better protect our policyholders as they undergo
this transition with automated vehicles.
To this point, we want to underscore the following. To the
extent that automated vehicles enhance auto and highway safety,
State Farm is excited about and in support of these
technologies. At the same time, while automated vehicles may
reduce or eliminate some risks, as recent events show, there
will be crashes. And new risks are likely to emerge.
In order to learn more about automated vehicle technology,
State Farm takes an active role in collaboration, multi-
industry conversations, and research. One example is our
support of MCity at the University of Michigan.
In addition to gaining access to a 32-acre test track for
automated vehicles, we also work with other industry members
such as GM, Ford, Intel, Verizon, and LG to identify research
opportunities that need to be addressed in the automated
vehicle space.
In addition to that collaborative work, we also want to
make sure that we understand the technology for our own
purposes. So we have a vehicle research facility in our home
office in Bloomington, Illinois. And we also conduct our own
customer surveys to gauge how people are actually perceiving
this technology. More information on that is in our written
testimony.
Bottom line, it is important for us to help prepare our 45
million auto policyholders for what the future holds. In
regards to key public policy issues, I want to highlight the
following.
Data access is a key issue for the insurance industry.
Crash-related data is essential for developing proper pricing
and underwriting of these vehicles, for determining who is at
fault and who is liable for crashes that do occur and then also
for the public.
Data access is important to determine the safety and
reliability of this technology. Vehicle data access is also key
for other key stakeholders as well. NHTSA (National Highway
Traffic Safety Administration) in their most recent automated
vehicle policy guidance referenced the importance of data
access for third parties. And the American Association of Motor
Vehicle Administrators (AAMVA), just within the past week
issued guidance for States, outlining the importance for data
access for law enforcement and other parties.
Liability issues are also key for State Farm and the
insurance industry. State Farm's current policy position is
that existing State liability and tort laws are sufficient to
address the emerging risks associated with this technology.
However, we do recognize that more research and more work
needs to be done in that area. There is a growing perception
with the move to higher levels of automation and more of a move
toward commercial fleet policy or more of a commercial fleet,
there will be a shift toward more commercial and product
liability issues.
However, we do want to make sure that we let the system
evolve before we decide to define and create new systems of
liability that may not actually be to the benefit of the
public.
The final key point that we want to make is that as we look
at legislation that is designed to help auto manufacturers,
tech companies and suppliers innovate, the insurance industry
needs to be able to innovate as well.
We are faced with situations where we might have to create,
develop, and underwrite products that by law we are required to
match price to risk. In this future State there might not even
be any data to show whether or not these vehicles are safe.
And so I think we all need to work together as stakeholders
in this conversation to make sure that we are allowed to
innovate as well, to encourage the safe development of this
technology.
Thank you.
[The prepared statement of Mr. Gammelgard can be found on
page 42 of the appendix.]
Chairman Duffy. Thank you.
Mr. Geraci, you are recognized for 5 minutes.
STATEMENT OF SAM GERACI
Mr. Geraci. Thank you, Chairman Duffy, Ranking Member
Cleaver, and members of the subcommittee. Thank you for
inviting me to testify at today's important hearing. My name is
Sam Geraci, and I am the Vice President of Strategy at American
Family Insurance.
I look forward to testifying today about a topic that is of
great importance to so many Americans and to American Family
insurance policyholders. American Family Insurance is the
Nation's thirteenth largest property casualty insurance group
and is owned solely by our policyholders.
Supporting them is our only priority in business. American
Family fully supports the development of automated driving
systems or ADS. And we are among the organizations supporting
ADS work at the University of Wisconsin-Madison College of
Engineering and the Wisconsin Automated Vehicle Proving
Grounds.
This work will benefit our policyholders, our community,
and our environment. The development of ADS technology may be
the most consequential transportation development of our time.
This new technology promises better mobility and greater
safety for everyone on our roads. The development and
deployment of proven, safe, autonomous vehicles will require
significant technological advances, regulatory changes and an
active partnership between technology companies, vehicle
makers, insurance companies, and the Government.
Critical issues related to passenger safety, liability, and
compensation require that insurance companies are included in
the regulation of autonomous vehicles. Consumers will continue
to look to property casualty insurers to provide them with the
protections they have come to expect as this new frontier of
automotive products evolves.
For decades, insurers have compiled data and analysis on
human drivers in order to provide actuarially valid information
to measure a human driver's risk. Unfortunately, there is no
comparable data or analysis regarding the risk levels of
autonomous vehicles. Each auto manufacturer may have data on
their vehicles, but neither regulators, agencies like the
National Highway Traffic Safety Administration, nor the
insurance industry have consistent access to that information.
ADS vehicles are already producing enormous amounts of data
as they are tested on public roads and it will be important to
establish access to this data for insurers. At American Family,
we believe that customers should have unrestricted access to
their vehicles' operating data and the ability to share that
data with third parties such as their insurers.
Vehicle operating data will play an essential role in
developing rates and underwriting policies. In the event of an
accident, insurers will also require access to crash data. This
is the vital data insurers use to determine relative liability
for the inevitable crashes and to compensate crash victims.
Detailed reviews of rates and coverages by State regulators
requires insurers to provide extensive levels of actuarially
valid data on crashes, on frequency and severity, and the type
of operator that was in control of the vehicle. But we cannot
provide that without data.
Of course, this data would contain neither the ADS users'
personal identifiable information (PII), nor any confidential
business data of the vehicle manufacturer. We believe that
State and Federal Governments should each continue to play a
central role in ensuring the emergence of ADS technology while
protecting consumers in the event of a crash.
The Federal Government through NHTSA should continue to
make determinations on vehicle performance and safety, as well
as data integrity of autonomous vehicles. At the same time,
States and localities should retain their traditional authority
to make the determinations of the registration, licensing, and
operation of vehicles.
States should define and address personal liability issues
in State law. Perhaps most importantly to American Family,
States should retain the regulation of automobile insurance for
the vehicle or operator.
Unfortunately, we all know about the terrible impact of
auto accidents. It doesn't have to be this way. And automated
vehicles have the potential to make lives safer and mobility
more accessible for millions of Americans.
But in the meantime, we need to ensure that those involved
in accidents continue to receive prompt and efficient help when
they need it most. When crashes involving automated vehicles
occur, insurers can help allocate responsibility among ADS,
non-ADS, and other entities involved.
Existing State liability and tort laws can evolve to
address responsibility and liability in the same way that tort
law has evolved with other technological and social
developments. Ultimately, the insurance industry supports the
development of ADS technology and should be a partner to
technology companies, vehicle manufacturers, and regulators to
promote safety on our roads.
We look forward to continuing to be a central part of the
discussion. And thank you for listening and look forward to
answering any questions you may have.
[The prepared statement of Mr. Geraci can be found on page
48 of the appendix.]
Chairman Duffy. Thank you.
Mr. Adams is recognized for 5 minutes.
STATEMENT OF IAN ADAMS
Mr. Adams. Thank you, Chairman Duffy, Ranking Member
Cleaver, and members of the subcommittee. My name is Ian Adams,
and I am the Associate Vice President of State affairs at the R
Street Institute. For those of you not familiar with us, we are
a free market think tank that is situated here in Washington,
DC, though we have offices throughout the country. I am
actually in from Sacramento, California.
Our motto is free markets, real solutions. And that means
we are often focused on issues that are of high complexity but
low salience. And so in concrete terms that has meant we have
spent a lot of time looking at property and casualty insurance
regulation.
In fact, our signature research project on an annual basis
is an insurance regulatory report card that examines the 50
States and their approaches to insurance regulation. And as a
result of that research, we have come to some conclusions about
the role that insurance plays as a social good.
It allows consumers to evaluate, manage, and mitigate their
risks. And we believe that when consumers are informed, they
are best positioned to protect their interest. Risk-based rates
and market competition have made U.S. roads safer places,
because they have allowed consumers and automakers alike to
understand both operational and design choices and how they
impact risk.
And it is with that understanding in the prospect of lower
rates and competitive advantages that safety has, until very
recently, steadily improved on U.S. roads. And that is why I am
so excited to be here today, because autonomous vehicles really
do present a potentially transformational moment in road safety
here in the United States.
Tens of thousands of people, as I am sure you are aware,
are killed on U.S. roads every year and many more are injured.
And yet the leading cause of death is not the failure of
infrastructure and it is certainly not the failure of the
operation of those vehicles. It is often the choices of the
operator of those vehicles. Because we know that the leading
cause of those injuries and deaths is human operator error, AVs
present us an opportunity. They can offer us a safer approach
to transportation.
However, even though AVs promise hitherto unimaginable
safety improvements, much uncertainty remains about if, when,
and how the technology will ultimately be deployed and adopted.
At R Street, we believe that risk-based insurance prices
can actually help resolve some of that uncertainty. And we
believe that those insurance products can help hasten the place
of deployment by providing consumers not only a safety
rationale but a bottom line, dollars and cents rational for
embracing the technology.
Now, if history is any indicator, safer vehicles will, over
time, mean lower cost of operation provided consumers receive
those price signals. However, today in some States, regulatory
hurdles exist that undermine that process. For instance, in my
home State in California, the law currently requires
consideration of rating factors which will lead to the use of
rates that are fundamentally irrational in the context of
autonomous vehicles.
Now, the arrival of this promising technology underscores
the importance of ensuring that there is no lag between
regulatory capacity and product necessity. And with that, I
look forward to having the discussion that we will undertake
today.
Thanks for having me.
[The prepared statement of Mr. Adams can be found on page
28 of the appendix.]
Chairman Duffy. Thank you.
Mr. Gillis, you are recognized for 5 minutes.
STATEMENT OF JACK GILLIS
Mr. Gillis. Thank you very much. Good afternoon, Chairman
Duffy and Ranking Member Cleaver. My name is Jack Gillis. I am
the incoming Executive Director of the Consumer Federation of
America.
CFA is an association of 275 State, local, and national
organizations working to protect consumer interests. And we
greatly appreciate the opportunity to be here today. We
appreciate the subcommittee holding this hearing today, because
frankly, we have more questions than we have answers.
By raising these questions well before the AV is
introduced, you are providing the time needed to resolve the
intricacies associated with insuring these extraordinarily
complex products. As the AV becomes the primary mode of
transportation, we expect that insurance costs associated with
personal injury will be significantly minimized. But the
electronic sophistication needed to operate these vehicles
could make them enormously expensive to repair.
We also need to consider the role of the Federal
Government. Right now, Congress is considering the AV START
Act, a bill with some serious shortcomings that would
dramatically affect auto insurance. The bill allows millions of
vehicles to be exempt from safety standards, has no provisions
to maintain occupant protection, no performance standards for
safety features, no cybersecurity protections, and accident
data is not being made available to the public, including these
insurers. Without these requirements, insurers will have to
guess at AV risk levels or be solely dependent on the
manufacturers' performance claims.
While there are many difficult questions related to
insuring AVs, let me paint the picture of just one. With an
autonomous vehicle, I will be able to program my vehicle to
stop at my favorite coffee shop on the way to work. In my case,
being from Massachusetts, I am going to choose Dunkin Doughnuts
over Starbucks.
While, in the Bay State that may be considered a moral
decision, for most of us it is clearly a matter of preference.
But what about the moral decision. On that same trip to work my
AV detected a stalled semi-trailer truck in front of me and has
determined with mathematical precision that there is physically
no way that my vehicle will stop in time.
However, it can move me out of that lane to avoid the
truck. So imagine two choices. It can go left into a bike lane
where a young, recently married couple, expecting their first
child is riding to work. Or it can go right where on the
sidewalk there is an elderly man in his early 90's hobbling
along in a walker.
Which way will the autonomous vehicle go? More importantly,
who will program that decision? Like my choice of Dunkin
Doughnuts over Starbucks, will I be responsible for programming
the moral decisions of the vehicle? Or will the manufacturer or
the software provider? Or will the insurance company have a
hand in the decision, or even underwrite policies based on
which choice is embedded?
More importantly, where will the liability for that
decision lie? And wherever that liability lies, who will insure
it and what requirements will the insurer place on those being
insured?
As I mentioned, we have many more questions than answers.
And I have submitted a series of questions in my written
testimony which I hope to work with this committee on over the
next year or two to resolve.
But there are a wide variety of issues that will make
assessing liability extremely complex. Responsibility for
accidents, once determined by witness and police reports, will
now include sophisticated computer data.
The search for true fault in accidents will require the
full power of the civil justice system. The right to challenge
corporate mistakes and reckless conduct in a judicial forum
will continue to be essential.
And what about accident repair costs? Today, the sensing
devices placed in plastic bumpers have significantly increased
the cost of a fender bender. What will happen when the entire
vehicle is covered with sensing devices? Will the manufacturers
use proprietary technology in order to prevent a competitive
marketplace for repair parts? If so, insurers will be forced to
increase their prices while monopolistic manufacturers line
their pockets selling overpriced repair parts that we need.
And what about the potential for redlining? Favoring those
who can afford more expensive technology and discriminating
against those who cannot? For insurance to work, it must be
available to all.
So finally, we do have more questions than we have answers
for. But thank you for beginning the process that will help
ensure that the autonomous vehicle will live up to its enormous
life-saving potential.
[The prepared statement of Mr. Gillis can be found on page
53 of the appendix.]
Chairman Duffy. Thank you, Mr. Gillis and that was only 2
seconds over. That was fantastic. Thank you, panel, for your
testimony. The Chair now recognizes himself for 5 minutes. And
like I said, Mr. Gillis, it is a fascinating scenario that you
lay out.
We as humans might make split second decisions in the
scenario that you gave us, but this would be thought out and
programmed into your vehicle what decision the car makes. And
so here we are in a situation where you look at our age, our
sex, our tickets, our accident record, put up a risk profile
and determine rates.
With autonomous vehicles and the data conversation we are
having, how do you assess risk, decisions that will be made
when you don't have great access to data? And Mr. Carlson, I
think you were indicating that you are writing policies in this
space, was that correct?
Mr. Carlson. Yes, we have worked with certain companies to
collect data.
Chairman Duffy. Are they providing you the data?
Mr. Carlson. Yes.
Chairman Duffy. OK. Is everyone else having trouble getting
data, do you feel like there is not going to be cooperation?
Do you want to take this, Mr. Gammelgard?
Mr. Gammelgard. From a State Farm perspective, our primary
insurance business is personal line automobiles. We have
noticed a trend as we have been working on these issues with
the States over the past couple of years, that any attempt to
get into a State law any type of data access provision that
merely seeks to sync up with existing event data recorder laws
has been met with some significant resistance from some of the
manufacturers and tech companies.
So when I say existing laws, the EDR laws that talk about
collecting data 30 seconds before a crash and 5 seconds after,
things that on their face, we see and think are pretty innocent
and straightforward and just mirror what is currently law, has
been met with great resistance.
And typically what we have heard in that advocacy is it is
impossible to detangle the proprietary information that makes
automated vehicles work from the crash-related information that
people typically have had access to, whether it is insurance
companies or law enforcement.
As we look to the future state, that is a high priority for
us. That's why it is one of our main public policy concerns,
because we do anticipate this world where it is going to be a
little bit more difficult to gain access to that information.
Chairman Duffy. Mr. Geraci?
Mr. Geraci. If I may, the data we are looking for here is
not proprietary information from the automaker. We are looking
for the same data we would ask people today, so if you or I
were in an auto crash, the police might ask us how fast were
you going, were you stopped at the stoplight.
The data we are looking for would be things like just that.
How fast was the vehicle going? Was it accelerating or
decelerating? Were hands on the wheel? Was it stopped when it
was supposed to be? This is not proprietary data nor
confidential data that is personally identifiable.
Chairman Duffy. If we look at Waymo, and Uber, and Lyft and
Tesla, and Ford, GM, Volvo, are they going to self-insure or
how do they ask you to ensure them without providing the data?
How does this gridlock break?
Mr. Gammelgard?
Mr. Gammelgard. Yes. Short answer to that is you are
starting to see some collaboration in this space. Tesla, for
example, is partnering with Liberty Mutual on an insurance
product. And there have been some other startups that have
looked to partner with tech companies and auto manufacturers
for the specific purpose of getting some of that information.
I think the difference between what we are thinking about
with our public policy considerations is how do you really move
that out to address all of the public policy, all the public
concerns. So to American Family's point, when we talk about
data access, it is data related to the crash, data that's not
proprietary. How do we make sure that there is an ecosystem
that makes that information available to the benefit again of
not just the insurance industry, but others as well.
Chairman Duffy. Mr. Gillis?
Mr. Gillis. Mr. Chairman, this is really where you come in.
We are going to need your help to ensure that everyone has
access to this data. It is our data. We are the consumer. This
is our vehicle. This is our accident. This is our experience.
That is one set of data that needs to be made publicly
available.
The second set of data, something the insurance industry is
going to need desperately, is how does all this technology
work? What are the success levels of the automatic braking
system created by Ford versus the one created by Tesla versus
the one created by Chrysler? There are so many different
variables and data is the only way we are going to be able to
assess which ones work and which ones don't.
Chairman Duffy. Do you see the tech companies trying to
self-insure?
Mr. Gillis. We heard that originally they said they would
like to self-insure.
Chairman Duffy. They would.
Mr. Gillis. They would. However, now, we are seeing them
back off a little bit and say, ``We are only going to insure
for technological problems that can be attributed to
ourselves.'' Now, we get back to assigning liability. Was it a
technological problem that created the failure or did the
driver make a mistake, or did I fail to download the software
when I was notified to download new software, or did I not know
that I was supposed to download new software?
There are going to be huge liability issues associated with
these AVs.
Chairman Duffy. My time is up, but one quick last question.
Do you guys factor in driver assist technology on your rates?
Mr. Geraci. Right now, we have discounts or rather it is
really in the early stages of this. The vehicle identification
number, the VIN number has a lot of information in it around
cars. It might tell us for example whether you have antilock
brakes. But it doesn't have the presence of ADS technology in
there or the type of ADS technology that is in there.
For example, antilock brakes are antilock brakes. But
artificial intelligence is as varied as human intelligence. The
quality of that might vary from vehicle to vehicle.
Chairman Duffy. OK. My time is expired.
I now recognize the Ranking Member, Mr. Cleaver for 5
minutes.
Mr. Cleaver. Thanks, Mr. Chairman.
Mr. Adams, I am trying not to be troglodytic in my views.
In the 21st century, my own children criticize me for only
calling on the cellphone, that is a waste of money. I am very
interested in this technology. But frankly, I have some fears
and one of them is--maybe you can give me information to calm
myself down.
Do you believe travel in vehicles or vehicular travel in
the years to come will reduce the number of automobile deaths
in the country?
Mr. Adams. Thank you, Congressman. Yes, I absolutely do.
This technology is going to remove the single greatest
factor in the casualties we see on our roads to date. And early
returns on the testing and limited deployment of this
technology has been remarkably positive. I am very optimistic
about it.
Now, I agree with you as well. It is important that we
exercise caution. When I think about what unfolded in Tempe and
I think about the response of Governor Ducey to focus on one
player in the environment, in the jurisdiction, and to tailor a
solution based on their behavior, I think that's how we are
going to have to move forward. We can't be putting the brakes
on this technology across the board because its promise is so
enormous.
To answer your question, yes, I believe that we are going
to see fewer deaths on the road.
Mr. Cleaver. If you are right and I think you probably are,
how do you figure out the insurance market--how do you price
insurance in the years to come if the number of accidents are
decreasing. Does that put a burden on the insurance industry to
figure out new ways to assess those who use these vehicles?
How are you going to survive if it is so safe that people
don't even need insurance.
Mr. Adams. Sir, that's also an excellent question. It is
going to be incumbent upon insurers and tech companies and just
developers at large to be working together, because I think it
is the case that we will continue to see crashes. Their
frequency I believe will go down dramatically, but our early
returns our experiences with level two vehicles is that these
systems are more expensive.
And while over time the cost curve will be bent down I
believe as a result of mass production and probably some design
changes, moving some of those sensors from the front of the car
to other places in the car where they are less vulnerable, you
will ultimately see products that are going to be priced in
such a way that there will be serious consumer side savings.
That is going to redound to everyone's benefit.
Mr. Cleaver. Mr. Carlson, I talked about affordability in
my opening statement and I used the example, I moved here 14
years ago and I stupidly didn't buy a house not too far from
here because it was considered to be a bad neighborhood. Now, I
can't afford to live there.
The gentrification is happening everywhere. What happens
with this new technology in terms of affordability? Is it
just--and will only insurance agents be able to use the
technology? The billionaires that you are.
Mr. Carlson. Now, I think if anything, it is going to level
the playing field. Having that much data accessible and as we
have all said, making sure that it is accessible in the right
ways and the right data, utilizing it to the consumer's end.
Consumer preferences change and we have more informed consumers
than ever before.
The models of buying cars in general online is changing.
You can look online and certain auto manufacturers are actually
offering up insurance products beyond what the traditional was
like glass and wheels and other things. I think it is actually
going to introduce competition into the marketplace. And if it
does the right thing, it should actually open the door for more
people to have more affordable insurance and it should be based
on actual real world data of your driving.
Sudden starts, sudden accelerations, I am a bad driver,
people can collect that information and understand that I am
not the safest person in the world. Years ago, decades ago,
that type of information wasn't going to be available to a
police officer who shows up at the scene. Maybe there are some
skid marks. Maybe there is somebody who was local that saw it,
there was a witness, but outside of that, you were stymied by
that.
Mr. Cleaver. Thank you. My time is up.
Chairman Duffy. The gentleman yields back.
The Chair recognizes the gentleman from Illinois, Mr.
Hultgren, for 5 minutes.
Mr. Hultgren. I thank the chairman again. Thank you all for
being here. This is very interesting and I think it is
important for us to have these conversations.
Mr. Gammelgard, if I can start with you, I want to begin by
asking you about, some of this has already been discussed, but
maybe just get a little bit more specific. The shift in
liability that is expected to occur if an individual is using
an autonomous vehicle instead of operating it him or herself,
according to a report from the RAND Corporation, they said and
I quote, ``Liability could shift to the companies that created
the software and technologies in the vehicle or the
manufacturer that integrated those technologies into the car,''
end quote.
Do you believe State Farm or other insurance providers will
have to reconsider the policies that they make available? And
how are you working with auto manufacturers and their
technology suppliers to understand the risks or lack thereof
from autonomous vehicles and how to underwrite new policies?
Mr. Gammelgard. Yes. Definitely as the technology changes,
as you see higher levels of automated vehicles on the road,
that more than likely is going to necessitate a change in how
policies are written in the different products and coverages
that insurance companies offer.
That is something that I know from a State Farm perspective
and I think for most other insurers, they are examining what is
the potential impacts on insurance and what new products can
you create. One thing that I do want to highlight that State
Farm has explored and I know some other insurance companies,
and I think this might address some of Representative Cleaver's
questions as well is the introduction of personal mobility
policies.
Instead of ensuring the vehicle, ensuring the passenger of
the vehicle, ensuring the person every step on their journey
during the day, and that could open up product opportunities
for people who never would have ever thought about buying auto
insurance. From a State Farm perspective, we do view it as what
are the opportunities afforded in this space. In regards to
working with other companies, I can't disclose some of the
specific opportunities that we are looking at with some of the
auto manufacturers, the suppliers, but I can offer this up.
Through our research partnerships at MCity for example and
others, we do work closely with manufacturers and tech
companies to get a better understanding of what this technology
looks like, because we want to make sure that we understand the
real world implications of this technology.
Going forward, I think it is important to realize that as
we develop these new products, as we look for these new
opportunities, there are going to be new stakeholders and new
participants in this whole automated vehicle ecosystem and we
are always on the lookout for who that is.
Mr. Hultgren. One last quick question for you if I could. I
don't know if it is quick or not. But I don't know if you or
State Farm have an opinion or thought of where liability should
fall if we are talking about a fully autonomous vehicle, what
personal liability might be there. Go to the manufacturer,
which manufacturer would you go to?
Mr. Gammelgard. Yes. Our main public policy position
regarding liability is, would you think the existing tort
system is adequate to examine things as they currently exist?
But I think there is a perception again and an understanding
that as this does really go toward the operating system being
in control, then, does it shift to more of a product liability
system? I think that is a fair assumption.
At the same time, some of the things that we are working
with and working against in some cases are attempts to carve
out liability exceptions. For example, one thing that we see
quite a bit around the States are attempts to carve out
liability for manufacturers or tech companies if there has been
a modification to the operating system that was not approved by
the manufacturer. Without really defining what modification is
that is a huge red flag for us.
To help address that, we do try to work with standards-
setting organizations like SAE to make sure that we do have a
better understanding of how they are developing some of those
standards so that we can offer our input as well. Because
again, we want to make sure we know as much about this
technology as possible.
Mr. Hultgren. Great.
In my last minute, Mr. Carlson, if I could address a couple
off questions to you about current underwriting practices and
how these may evolve with the technologies for autonomous
vehicles. Currently, how do you factor in the autonomous
driving characteristics of a vehicle? And I do understand that
some vehicles have things that operate more like a driver
assist such emergency braking features while others are very
close to being fully automated. How do you all factor that in,
the differences?
Mr. Carlson. From a risk based perspective, looking at the
data, we are going to have to take a nontraditional approach
because a traditional approach will yield just that. I think it
is collecting the data in a way that looks at what are the most
at-risk opportunities in the vehicles themselves, what type of
characteristics--the chairman was talking earlier about where
is the moral compass going to happen and where would the data
be most critical.
I think using that information with some of the actuarial
services as well, again, without data and without enough loss
or case law, it is very difficult for many of the colleagues in
the panel to come up with something that says, ``Hey, this is
solid. We know this is going to work.'' We have had to look at
very different things.
I would say that artificial intelligence is going to come
into play here at some point in time. With the millions of data
points that are going to be collected, you are going to need
very powerful tools, analytical tools, algorithms that are
going to be able to come up with something and then really
smart people are going to say, ``This is where we should be
now'' and we are going to probably change in 5, 10 years. It is
just going to continuously change and improve on that as far as
getting the data in the car and the rest.
Mr. Hultgren. Thank you.
My time is expired. I yield back.
Chairman Duffy. The gentleman yields back.
The Chair now recognizes the gentleman from Pennsylvania,
Mr. Rothfus, for 5 minutes.
Mr. Rothfus. Thank you, Mr. Chairman. I want to thank you
for calling today's hearing. Autonomous vehicles represent a
great opportunity for our economy and their potential impact on
automotive safety could be profound.
KPMG estimates that autonomous vehicles could help reduce
accident frequency by 80 percent by 2040. Considering that
nearly 40,000 people died in motor vehicle crashes in 2016
alone, that means that this technology could save thousands of
lives every single year. I am proud that much of the research
in autonomous vehicles is being conducted in Pittsburgh by
companies like Uber and Argo.
I actually had the opportunity to take my first ride in one
of these vehicles to the streets of Pittsburgh last summer. I
can see the promise of autonomous vehicles and I want to ensure
that Washington and State level regulators create a fertile
environment for the further development of this industry. I am
looking forward to hearing from today's witnesses and what you
have been testifying about.
First, I want to talk to Mr. Gammergard or Mr. Geraci.
While this industry is new in developing products and testing
in city streets, I am wondering how they are looking at the
insurance aspects of it. Have you or others worked with the
technology companies or auto manufacturers to develop insurance
products?
Mr. Gammelgard. Thank you for the question. Without being
able to speak to specific work that we may be exploring, I can
say that State Farm does have a long history in relationship
with a number of different auto manufacturers in relation to
examining data that we have access to that we are analyzing as
we are adjusting claims. We do expect that relationship to
continue going forward.
I do think from my own observation having worked on this
for the past few years, if you go back 2 or 3 years ago, there
was this perception amongst those in the auto industry that
self-insurance might be the way forward. I think that has
changed a little bit. It seems, to me at least, there is a
little bit more willingness to explore opportunities, and I
think you are seeing that, for example, in Liberty Mutual
partnering with Tesla. And I mentioned that earlier, but they
were very, very public about that partnership.
And I think it is fair to say that in this world, when you
look at all the different stakeholders that are in the mix
here, it is only natural that the insurance industry would
start to be brought more into that conversation.
Mr. Rothfus. Mr. Geraci.
Mr. Geraci. Yes. And American Family also has a history of
partnerships with different groups. But as an industry, we do
as well with the automakers. The Insurance Institute for
Highway Safety (IIHS) has a long history of working with auto
manufacturers. The companies that partner with them often do
crash test data. You have seen the crash test dummies. A lot of
that takes place with IIHS.
Mr. Rothfus. If we could talk a little bit about the State
aspect of it, Mr. Adams, in your testimony, you discussed the
importance of an accommodating regulatory framework that
enables flexible product development, deployment, and pricing.
Can you elaborate on what States are doing to allow for more
flexibility?
Mr. Adams. Thank you for the question. It is a mixed bag
and that is part of the challenge with the laboratory of
democracy approach that you have some States that had incumbent
systems where you have to get prior approval for rates, and in
some of those States, the timelines are really quite dramatic.
And then, you have other States that require you to take
factors like years driving, right, take driver experience into
account.
And as we see these new technologies come onto the scene
and be deployed in larger numbers, what we are going to be
observing is scenarios where we are asking how effective a
driver has been over the last several years, and that data
really doesn't have a lot to do with the actual risk being
presented. It is something that the National Association of
Insurance Commissioners, I know that this is on their radar,
the National Council of Insurance Legislators, I know that this
is something that they are looking at.
But I think that the immediate answer to your question is
we haven't seen any rapid regulatory changes being contemplated
across the country yet.
Mr. Carlson. If I may?
Mr. Rothfus. Yes.
Mr. Carlson. I think it is accretive to this conversation
that several States have put arbitrary $5 million liability
limits out and part of our solution was to actually build an
insurance facility with several insurance companies that met a
primary and a secondary layer that allowed risk to be managed.
That is a business advantage and not a barrier.
I think that is part of what has to occur is the ability
and the willingness to create the sandbox where we can all get
in and say ``OK. What must you have and what must the customer
or the company testing these vehicles in order to meet and get
some progress here'', but in a very methodical and very
thoughtful way.
Mr. Rothfus. Thank you.
I yield back, Mr. Chairman.
Mr. Hultgren [presiding] .The gentleman yields back.
The gentleman from North Carolina is recognized for 5
minutes.
Mr. Budd. Thank you, Mr. Chairman. And thank you again to
all of our witnesses. I look forward to hearing your thoughts
this afternoon on what is an interesting and very important
topic and even more so in the future.
The National Association of Mutual Insurance Companies or
NAMIC recently released a policy paper on AVs. The author, Tom
Karol, points out that the single most important reason to
support the development of AVs is the potential to enhance
safety and to save lives.
Karol notes that the enhanced safety must always be the
primary focus of AV development and this brings a question to
mind. How safe must an AV be before is allowed on the roads,
Mr. Geraci and then Mr. Gammelgard if you could weigh in on
that?
Mr. Geraci. Sure. To be clear, the technology is really on
version 1.0. They are still really evolving. It is in the
testing phase. The relevant hurdle if you will is making the
technology safer than a human driver. Right now, it is 40,000
deaths per year because humans aren't perfect drivers as well.
What we really need though is to get the data to understand how
safe those vehicles are, which ones are at what level of
safety.
The Senate's Start AV Bill had a good amendment, the Inhofe
amendment that would establish the Data Access Advisory
Committee wherein the manufacturers and insurance companies and
other interested parties would work together to determine
access and ownership of data.
With that, help from Congress that could assist in
establishing some of the data that we--
Mr. Budd. Good. Thank you.
Mr. Gammelgard.
Mr. Gammelgard. Yes. And to echo those comments and not to
sound like a broken record, but data access is key and we can't
stress that enough. When we look at current, I will just call
them semi-automotive components that are on vehicles, Insurance
Institute for Highway Safety does a number of testings, so does
State Farm where we can actually get in and look to see how
these components were working on a vehicle and that has led to
some pretty good outcomes, right?
We are seeing some real-world information that shows that
some of these components actually work as advertised, but it is
not a one-size-fits-all approach and everything really is
contingent on being able to analyze that data. State Farm much
like others and American Family are supportive of the
amendment, the AV Start Act that talks about that Data Advisory
Committee.
The important thing there is, I think, it talks about a
multi-stakeholder approach. It is the insurance industry. It is
law enforcement. It is other organizations or other parties
that are looking for the best way to go forward on this while
understanding that data access is a key issue.
And the final thing I will point out is as NHTSA is
updating its automated vehicle policy guidance, we have filed
comments with NHTSA and I know Insurance Institute for Highway
Safety has as well, that starts to outline what different data
variables do we think are relevant in this future state.
We have definitely evolved, from this position of just
broad general data access, to starting to get more refined so
that we can respect that interplay between proprietary
information and what is needed to appropriately determine
whether or not this technology works.
Mr. Budd. Good. Thank you for that.
NAMIC, and this is also you too as well, so NAMIC's policy
paper also points out that the critical issues related to
passenger safety, liability, and compensation after a crash
require that insurance companies are included in the
development of AVs. There have been legislative proposals that
would preempt State and local authorities from regulating and
enforcing performance standards for AVs.
But in terms of insurance, do you believe that the State
should maintain their traditional authority in regulating
matters of liability and insurance surrounding these AVs? There
was a little bit of thoughts on that earlier, but I would
appreciate your comments on that.
Mr. Geraci. At American Family and I think this is true
with State Farm as well is, yes, we believe that States should
retain their traditional role. It is a little bit of a case of
if it is not broke, don't fix it. And particularly as
autonomous vehicles come out, they work better in different
environments. In dry, flat environments, they tend to work
best. You might want different rules there. We really do
believe that now and in the future, you are going to want to
see States controlling this.
Mr. Gammelgard. Yes, and from a State Farm perspective, and
we are also involved with NAMIC AV Council that has helped
craft those policy positions. Very supportive of the States
continuing to be able to regulate the business of insurance, it
is something that is very important to us and also something
that I would argue in this State as the technologies develop,
is actually much needed.
Mr. Budd. Very good. Thank you both for your time.
Chairman Duffy. The gentleman yields back.
The Chair now recognizes the gentleman from California, Mr.
Sherman, for 5 minutes.
Mr. Sherman. As we move to self-driving vehicles, I hope
things get safer. That is a good thing for society as a whole.
It will of course affect insurance companies, attorneys, body
shops, et cetera. There will still be some accidents and a
question will arise as to whether we focus on a product
liability model or on a driving negligence model and this will
come up most in the area of what I would call failure to drive
defensively.
If I am in the right and I drive through and some idiot
hits me, the fact that if I was a better driver, might have
been able to avoid the accident notwithstanding his mistake. I
was in the vehicle code. I have no liability. On the other
hand, in the product liability area, if you could design a car
that can avoid an accident even if an idiot does this or that,
even if a road has this or that flaw, and you fail to do so,
the fact that the vehicle operates consistent with the vehicle
code may not be sufficient.
And it will be interesting to see how the law develops and
it will develop through case law and it will be unknown what
the situation is. It would be better if we as a country could
wrestle with these issues while the engineers are developing
autonomous vehicles and have a national standard, and maybe you
folks can give us some suggestions, the idea that we could keep
up with the engineers here in Congress and--I don't know if we
can do it. But at least we would have a try if we can.
OK. Mr. Gillis, we are approaching a world where it may not
be inconceivable that cars won't be owned by individuals. The
ride hailing services will control the market. And when Uber
sends you the picture of the driver who is driving the car that
picks you up, it may just be a round circle or maybe--in any
case, not a human being driving that car. And obviously, large
companies would have more leverage in negotiating with
insurance companies.
Could you discuss how the dominance of a few large
insurance purchasers instead of tens of millions of insurance
purchasers would affect the industry?
Mr. Gillis. The good news is that many of the companies
right here are financially dependent on those hundreds and
thousands of consumers that need automobile insurance. We would
not be able to own automobiles if there was no insurance. We
just can't--simply can't absorb the risk.
As consumers move into not owning vehicles, they will not
need personal auto insurance. What they will move into is what
we have heard a little bit about today is personal mobility
insurance. They will likely have to buy some type of insurance
that covers themselves when--rather than get into a battle with
one of the big technology companies who reportedly is going to
take on the liability for failure. But still, there has to be
fault. The fault will have to be determined.
Mr. Sherman. Right now, there are plenty of people who have
absolutely no insurance and absolutely no car. They call Uber
and nobody is selling them a policy, an Uber-user policy. I
wonder whether if I give up my car and start hailing the Uber
that has no driver, whether I will need any insurance at all.
Mr. Gammelgard, there are two types of autonomous vehicles,
those where there is a driver in them now and then the
autonomous vehicle assist, but the human has some
responsibility versus situations where there is no human in the
driver's seat, just in the back seat.
Can you expand on the insurance implications of fully self-
driving cars as opposed to self-driving cars where you are
behind the wheel and you are supposed to take the wheel when
necessary?
Mr. Gammelgard. Yes. And I think currently on the road, you
have levels zero through two vehicles. We definitely insure
some of those on the higher end of that scale. And then, the
big question will be that transition to level four and five
where theoretically, you don't have to have a driver. There
might not even be a steering wheel in the vehicle.
I think the challenge is going to be in that level three
space. And if you look at some of the research that has
occurred, it is this big question about whether or not a
vehicle that has an operating system driving the car can push
control back to a human operator. There is a safety critical
situation. How long does a person need to get re-acclimated
into driving a vehicle. I think those are going to be the
challenges that the insurance industry faces as you see that
transition from level two into level four.
And those are the things that we need additional research,
we need additional data access in order to be able to better
judge how do we create and craft policies to help cover those
risks.
Mr. Sherman. I wonder if I can sneak in one more. OK.
Mr. Geraci, the autonomous vehicles are not required to
submit safety assessment letters to the National Highway
Traffic Safety Administration before they are deployed for
testing. At least that is what I am told. What steps are you
taking to validate the safety of autonomous vehicles before
they go out on the road?
Mr. Geraci. We need to be able to get data to understand
the safety of those vehicles. In order to understand the safety
of the autonomous vehicles, we really need to get the data that
would underlie the performance of those cars, so what is their
record, what is their safety record, what is their performance.
And getting access to that data would be foundational in order
to help assess the risk that those cars pose or don't pose.
Mr. Sherman. Maybe Congress ought to help with requirements
that you get that data.
Mr. Geraci. You could help with that. Yes.
Chairman Duffy. The gentleman yields back.
The Chair now recognizes the gentleman from Missouri, the
Chair of the Subcommittee on Financial Institutions, Mr.
Luetkemeyer for 5 minutes.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Welcome, gentlemen. I apologize for stepping out a while
ago. If I ask some questions that are duplicative, please say
so and I will move on. I am just curious. We are talking about
the liability exposure of the company. How does this work
whenever you have an autonomous vehicle, it is driving down the
street, a pedestrian steps out in front of them and there is a
car coming the other way.
Does the car hit the pedestrian? Does the car hit the other
car coming on? Like, who decides which decision is the right
one that minimizes liability? How does that work?
There are five of you, anybody want to take a try?
Mr. Carlson. Yes. Yes. Without divulging client names, many
of the conversations have been around the morality of your
question. It is a great question. The ultimate is the
responsibility to the current passenger as I understand it is
right now, we are going to protect the passenger.
The ability for the car to--
Mr. Luetkemeyer. When you say protect the passenger, you
are saying that the car will make a decision on which one is
going to be least harmful to the passenger. If it is to hit the
pedestrian versus the other car, he will hit the pedestrian.
Mr. Carlson. If it can make that decision. I can't give you
an answer on whether it is going to hit a tree, a pedestrian, a
dog, or a squirrel. What they are trying to do is utilize
vehicle-to-vehicle data, vehicle-to-environment or what they
call v-to-x and that technology is going to take time to
development because not everything is interconnected.
Right now, you have vehicles out there that can't
communicate with other vehicles that are 30 yards ahead, 40
yards ahead. Vehicle-to-X environment would be a situation
where the vehicle is actually able to collect data off of
infrastructure in other places. That should help with the
morality issue where the vehicle is able to start making
decisions and discriminate, if you will, between what is an
object and something that can't be.
I know it is a great question that many companies are
trying to solve for, because that morality issue is something
that from a risk management perspective, they do want to
address to ensure that the vehicles are as safe as possible,
but then also pedestrians and others. I would add that I ride a
road bike and I would love for them to know that I am an object
that shouldn't be hit while I am riding on the road.
And earlier, one of the conversations was about how does
this make a decision? What if a young athlete or a driver is
driving along, makes a decision to scoot over and scare me off
the road? That could be really bad for me. An autonomous
vehicle won't make that decision.
Mr. Luetkemeyer. OK. Thank you.
You guys got into some discussions, I listened to some of
those discussions with regards to State laws being--we want to
make sure the States continue to enforce insurance laws. Is
there an effort to work with the different State jurisdictions
and say, ``Hey, we have this going on. Can you give us some
direction?'' They have some ideas. Do they have any studies
going on to help them with how they need to manage the
oversight of this at all, or is it wait until you guys do
something and then come back and see if it works.
Mr. Gammelgard. From a State Farm perspective, I know we
have been very engaged with AAMVA, American Association of
Motor Vehicle Administrators, basically all the State
department of transportations and administrators have been able
to participate in a number of different events that they have
had and spoken and provided input.
And they recently just in the past week issued some
guidance and guidelines for what they think the States should
follow. We have been very engaged with the National Conference
of State Legislatures. That is basically a nonprofit that helps
collect different information that State policymakers then look
at and review.
Mr. Luetkemeyer. Are they helping facilitate between the
manufacturer and insurance companies to be able to see you guys
get the information you need to be able to make good decisions
on insurance?
Mr. Gammelgard. They are helping facilitate those
conversations to the degree that they can, right?
Mr. Luetkemeyer. Yes.
Mr. Gammelgard. When they do have meetings and when they
have different public partner, private partnerships, they are
trying to make sure to reach out to a number of different
stakeholders, so not just the manufacturers and the insurance
industry, but other people and other groups that may be
impacted by this technology as well.
Those are the attempts that are going on that come most to
mind. At the same time, I think there probably needs to be
continued work to make sure that everybody tries to work
together going forward on these issues.
Mr. Luetkemeyer. Very good.
I see my time is about to expire, Mr. Chairman. I will
yield back the balance. Thank you.
Chairman Duffy. The gentleman yields back.
Mr. Cleaver. Mr. Chairman, I would like to enter into the
record this article from Consumer Watchdog entitled, ``Self-
Driving Vehicles: The Threat to Consumers.''
Chairman Duffy. Without objection.
Chairman Duffy. If I could take the liberty to ask two
questions, cyber hacking on these autonomous vehicles concerns,
threats? Mr. Carlson?
Mr. Carlson. Yes. I think it is a great question. I think
it got a lot of fanfare when people were able to hack into a
vehicle and without knowing all the knowledge actually, they
had to remove the entire dash, they had to have a laptop. This
was not just--and then, the second time they did it, they got a
little smarter.
My position and the thought is, is getting into that
vehicle is maybe not the endgame for a malicious person. The
end game may be getting into the financial services group of
one of these large lenders where you are buying your cars.
Personally identifiable information, I am pretty sure nobody
really cares about me, but I am pretty sure that they would
love to get into one of the large OEMs' global networks and
make some type deleterious attack and do something that would
stop production, industrial control systems, something of that
nature.
It is a possibility and it is not outside the realm.
Chairman Duffy. Anyone else?
Mr. Adams?
Mr. Adams. We think it is a very serious problem and it is
a very personally serious problem. There is absolutely no
question. We have seen attacks on schools. We have seen attacks
on shopping centers. It is inevitable that a vehicle will be
attacked, and that's why we are begging Congress to set up
cyber security requirements as part of the AV Start Act, very,
very important.
Chairman Duffy. Anyone else?
Mr. Geraci. At American Family, we believe it is the
Federal Government's role to help with that. Manufacturers are
taking steps, so, there are only periodic uploads and downloads
of data so that someone who is of malicious intent can't always
access a vehicle, only at certain brief periods of time. But it
would be good if Congress could include that in the
legislation.
Mr. Adams. Sir, if I may, I think it is important to
recognize that the manufacturers are actually doing a fair
amount in this space. They realize that one of the most
important elements for the adoption of this technology is the
trust of the consumer. They have a clearinghouse of information
for vulnerabilities, they work together. This is something that
is at the top of their mind.
Chairman Duffy. OK.
I want to thank the panel for their testimony today. I
would just ask that you continue to advise and provide your
insights and intelligence on what we in Congress should be
doing specifically on our subcommittee and committee as a
whole. We look forward to your wisdom and continued dialog.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
Without objection, the hearing is now adjourned.
[Whereupon, at 3:54 p.m., the subcommittee was adjourned.]
A P P E N D I X
May 23, 2018
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]