A Contrarian View on Self-Driving Cars – Beware the Unintended Consequences

Rob McIsaac

While I embrace many (most?) things with a technology flair, I have to admit to being a bit amused with all the recent breathless excitement exuded over the idea of self-driving cars. To be sure, technology is making them ever safer and more fuel efficient. It is also augmenting the driving experience so that paper maps are going the way of LP recordings and being “lost” is now something of a personal choice rather than a state of condition, but I suspect that the rush to sell ad space may have people overlooking a few practical realities that could lead to surprising, if not dire, unanticipated, consequences.

I’m quick to point out, by the way, that driving my vintage BMW has a completely different set of experiences than driving a new one. No airbags, crash avoidance alarms, proximity radar or backup cameras. Driving it requires real and significant concentration and the consequences of an error can be real and immediate. While I’d never want to retrofit a blind spot warning system, I can appreciate the value. Heck, from the dark ages back in 1984, the vintage ride doesn’t even have a single cup holder.

I can appreciate ABS brakes and traction control too. These technology dependent devices can make drivers feel invincible … or at least support the idea that training and engagement are less important than they once were, since mistakes can much more easily be recovered from. Further, I can also appreciate that under “normal” conditions while cruising down the Interstate and experiencing the commuter equivalent of the “Talladega Draft”, where any open space on the road is an invitation for someone to dive in for advantage, advanced computer control can stay on top of following distances and emergency braking procedures better than the average distracted commuter trying to manage the car, the coffee cup, the kids and the cell phone concurrently.

No, my real concern will come about when we get to the point of auto-driver being a real possibility. At that point, under normal conditions, the onboard systems could handle all the easy stuff with a minimal amount of drama or trauma. Parking between 2 stationary objects? No sweat. Maintaining following distances at 70mph? Again, not much of an issue. The concern will emerge when bad or unexpected or unusual things happen and the computer control gives up and hands it back to the now, even more woefully unprepared occupant, under the tag line of “I don’t know what to do, you take it!”. A failed sensor, a set of road conditions that are unexpected, and a wide range of other factors could create scenarios where the on-board systems decide that they have reached max capacity. Or there’s just the Help Desk Rule #1 for electronic devices: when all else fails, reboot, and start clean.

In other forms of transport, such as high-speed trains and airliners, there is significant control automation even for such dicey maneuvers as station stops and landings. In the main, it works great. But when it goes wrong, it can go spectacularly wrong.

As a backup, these devices have alternative systems, called engineers or pilots, who are well trained and capable of taking over navigation in mid-transaction. They have a full training and testing regimen that they need to follow in order to maintain their certifications. When the training kicks in, the auto pilot comes off, and the results are generally good. Even at that, however, they aren’t perfect as some recent plane crashes have suggested. Training really does matter. A lot.

Which gets back to the driverless car concept. If the occupants are going to be expected to “take over” at any point in the journey, where is the training and experience going to come from? How will they practice dicey moments to build an experience base rather than becoming unwitting guidance systems for land-locked missiles that run amok?

Renting a car today can provide an interesting view if the future. Mastering such simple tasks as turning cruise control on and off varies so much between brands and model years that the first few miles out of the lot are like a training mission of their own.

So, one consequence of increasingly automated vehicles could be fewer, but sadly more spectacular, crashes that are hard to pinpoint “blame” for. The conversation around who is liable in such circumstances could be both long and full of rich legal entanglements. Breathlessly talking about self-driving cars and the end of accidents as we know them may be both significantly premature and a preview to different and more nuanced or complex dialogue.

Of course, on a weekend that required a surprisingly large number of re-boots to both my real world laptop and tablet devices at unfortunate moments, I find myself a little less concerned. If the technology crashes on an Excel problem, how can it possible handle a Jersey Jug-handle first time, every time? Or, maybe I should be more concerned. Time will tell. And that could be the actuarial nightmare scenario.

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  • 2015 Vendor Selection Best Practice for Insurance Carriers: Simplified vs Extensive RFI

    Martina Conlon

    In my last vendor selection blog post I highlighted a few best practices, one of which included using a simplified Request for Information (RFI) that was easy for the vendor to complete and for you to score. I’d like to delve into this topic more and explain why a simplified RFI can make or break the vendor selection process. A simplified RFI will get you through the vendor selection process much faster, and will help your selection team focus on what really matters – your unique requirements.

    From a functionality perspective, don’t inventory the ordinary; instead focus on areas that are specific to your business. We know that any insurance application that is in production with several insurers will support basic transactions. For example, all policy systems have a new business, policy change and cancellation transactions so there is no need to spend time and focus on them. Instead, dig into features that matter to your business. Perhaps you need robust premium audit features to support your workers comp business, or you need advanced reinsurance capabilities to support your middle market commercial business. Ask questions in the areas where you may be stretching the capabilities of a vended solution.

    Having been involved in over 50 vendor selection projects (rating, policy administration systems, claims, billing, agent portals, business intelligence, etc.), Novarica recommends that during the RFI phase the focus should be on discovering reasons not to consider a particular vendor (the “deal-killers”). Novarica’s experience has shown deal killers generally fall into one of four areas: Staff, Organization,Functionality, and Technology, easily remembered by the acronym SOFT.


    • Do the staff have the right skills and experience?
    • How well are they likely to understand your needs?
    • What resources are available for implementation and support?
    • What assurances will you have that the staff you meet during the sales process will really be the staff that you work with?


    • How stable is the organization?
    • Is it big enough for your company to do business with?
    • Is there a conflict in the company’s ownership (i.e., are they owned by a competitor)?
    • Who are their other clients?
    • How much of a role do clients have in product development?


    • Does the solution support the lines of business, states, and high-level functionality that you need?
    • Which functions are actually live at reference clients?


    • Is the solution’s technical architecture compatible with your enterprise standards?
    • Does your IT staff have the skills to support it?

    The typical Novarica RFI includes 100-150 questions. The typical response for 30-50 pages takes 2-4 hours to score. Your time is valuable – don’t waste days reading and scoring complex RFI responses full of information you probably already know. This simplified approach will typically allow you to narrow the range of potential suppliers in any particular solution category to 2-3 candidates much more quickly and effectively than with a large dense RFP.

    For more information about vendor selection best practices, make sure to register for our upcoming Vendor Selection Best Practices webinar taking place Thursday, January 29th at 2 p.m. (ET) or send me a note at email.

    Lessons from Peter Drucker

    Paul Ptashnick

    As I was reading our latest report: Benchmarking the “New Normal” 50 Advanced Capabilities for Property & Casualty insurers, it reminded me of a few famous quotes from management consultant, author and educator Peter Drucker. Below I have highlighted a few of his quotes and how they relate to the insurance industry.

    “The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.”

    As technology evolves it’s going to have a revolutionary impact on the insurance industry over the next few years. Some of these areas include the “Internet of Things,” Social Media, Big Data, Cloud, Mobile, Security and Digital. With the rapid changes in technology-enabled capabilities, it’s imperative for organizations to have access to the latest research and subject matter experts to stay on top of the latest trends.

    “The best way to predict your future is to create it”.

    We’re seeing larger insurers creating their own future by widening their lead in advanced capabilities in analytics, data, digital channels, modern applications and innovative business practices. In addition, some midsize insurers are also creating their own future by deploying more advanced capabilities than their peers.

    “What gets measured gets improved”

    As saavy insurers start deploying new capabilities in underwriting, product, distribution, analytics, etc., it’s vital for them to be able to track their own progress. Novarica is helping insurers to “measure and improve” their own initiatives with our new benchmarking tool.

    “The purpose of business is to create and keep a customer.”

    Technology is playing a vital role for Property & Casualty insurers in creating and keeping customers. Below are a few advanced capabilities being deployed by insurers in 2015 to help with these efforts.

    • Customer: Mobile app to view customer relationship details, balances, key documents, etc.
    • Distribution: Mobile app/mobile optimized web for producers to provide access to customer, book of business, or sales materials
    • Product: Analytics-driven product design
    • Product: Products designed to optimize buying/selling experience through one or more of the following: (a) use of pre-fill data, (b) elimination of unnecessary questions, (c) streamlined underwriting process matched to control of risk/coverage levels
    • Distribution: E-Signature
    • Underwriting: Predictive scoring based on models leveraging internal and third-party data
    • Marketing: CRM-driven campaign management that shares information across distribution, underwriting and service channels
    • Billing: Electronic bill presentment and payment
    • Analytics: Self-Service analytics based on verified and accessible enterprise data
    • Analytics: Use of Big Data tools to mine enterprise data effectively (Hadoop, NoSQL, etc.)
    • Claims: Mobile FNOL with video/GPS data capture and pre-fill

    “If you want something new, you have to stop doing something old”

    The capabilities listed in our Benchmarking the “New Normal” 50 Advanced Capabilities for P&C Insurers are widely available to insurers and are deployed more or less widely by them today. These advanced capabilities are being driven by a combination of five elements: analytics, data, digital channels, modern applications and innovate business practices. Successful organizations in the future will re-imagine and re-conceptualize their product, service and operation strategies in light of technological changes.

    As always I welcome your feedback. Send me a message at email or to learn more about Novarica’s Benchmarking the “New Normal” 50 Advanced Capabilities for P&C insurers, download a preview

    Related Reports

    Leading Capabilities In Claims Drives Loss Ratio Improvements

    Karlyn Carnahan

    The claims process is not standardized across the industry. A wide variety of processes and new technologies are being used in the claims area, such as predictive analytics, automated straight-through processing of simplex claims, or automated reserving. Whether or not a carrier uses these techniques varies by size of carrier, by industry sector, and by the strategy, culture, and technical capability of the carrier. And there is always the question of whether these techniques actually impact the financial results and outcomes of the claims process.

    I’ve just published a new report that introduces the Novarica Claims Capability Maturity Model (NCCMM). I asked 92 property/casualty insurers complete a self-diagnosis using the NCCMM. The report details what property/casualty insurers are really doing in claims today, and what effect it is having on loss ratio.

    In general, personal lines companies are more likely to use sophisticated techniques to manage the claims process, with Workers Compensation carriers a close follower. Personal lines carrier results are also highly correlated with improved loss ratios – likely due to the high level of homogeneity across claims. Commercial lines and specialty carriers lag behind the leaders in terms of the technical capabilities they provide.

    Correlating capability levels to loss ratio is an inexact science. Loss ratios are affected by underwriting decisions and cat losses as well as claims capabilities. But it is clear is that regardless of the sector, size of carrier, or age of claims admin system, leading capabilities in areas such as workflow, document creation, utilization of software to support investigations, and multiple channels for FNOL all are associated with lower loss ratios – and significantly so for some sectors.

    Read a free preview of the report at www.novarica.com/novarica-claims-capability-maturity-model-benchmark-finds-wide-variations-in-claims-processes/

    New Report Profiles 34 P&C Claims Solutions Vendors

    Karlyn Carnahan

    Our latest report in the Novarica Market Navigator series examines Property/Casualty Claims Solutions, which play a critical role in a carrier’s success. Accordingly, we found that 41% of large carriers we surveyed and 23% of midsize carriers rank upgrades to their claims systems among their top three projects for 2012.

    This comes as no surprise. For many carriers, claims solutions were installed twenty years ago or more, making them hard to maintain and rendering the claims handling process a labor-intensive one. Whereas carriers had a limited number of choices for modern systems a few years ago, there is now a broad range of claims solutions available. These solutions include features that support automated processing and management of claims functions, and provide integrated workflow management and task or process management.

    P/C carriers see claims as an area to invest in to drive growth and improve operational efficiency, and with a surge in the number of feature-rich solutions, carriers are acting to modernize. Indeed, we estimate in our report that P/C carriers completed between 50-60 claims systems new sales last year, and that 65-75 will be selected in 2012.

    Like Novarica’s other Market Navigator reports, this one includes a survey of the current solution provider marketplace and profiles 34 vendor solutions. A free preview of the survey is available online.

    Growth of IT-Enabled Capabilities and Impact on Claims

    Matthew Josefowicz

    Just wanted to share a slide from this week’s webinar on claims and customer experience. While modern and flexible core claims systems are at the root of improving claims experience and financial results, insurers are also benefiting from other IT-enabled capabilities when it comes to claims.

    On the webinar, I presented a version of this chart from our report on the Growth of IT-Enabled Capabilities, with call-outs highlighting the impact of each of these areas on claims and customer claims experience (click the image to enlarge).

    While claims systems are the critical element of improving the claims process, other data and communications investments are critical assets as well.


    2011 Claims Market Navigator posted – over 30 solutions included

    Karlyn Carnahan

    Claims technology continues to play a crucial role in a carrier’s ability to differentiate, control costs, and deliver a consistent level of high service. Carriers continue to replace claims systems at a heavy pace. In fact, over 30% of carriers surveyed by Novarica say that claims is one of the top three projects they are focusing on for 2011. With over 30 solutions out there, making a choice of which software to consider can be a daunting task. As a first step, take a look at the market navigator I just published. It provides an over view of key features typically found in claims admin systems – and highlights those that are more unusual. You will also find a profile on each of over 30 stand-alone claims solutions. If you’re considering replacing your claims system, this is a good place to start doing your research.

    Mobile Claims: Volumes Growing, Capabilities Widespread by 2013

    Matthew Josefowicz

    While mobile still accounts for a small subset of communications with policyholders, Travelers recently reported in INN that the number of mobile claims have tripled between 2010 and 2011.

    In reviewing claims data comparing the first four months of 2010 versus the same time period in 2011, the number of claims filed via mobile devices more than tripled. As part of the claim study, Travelers found that 70% of claims filed through mobile devices related to personal auto insurance, 28% were personal insurance property claims and the remaining two percent were business insurance property claims (.5%) and business insurance auto claims (1.5%)

    Insurance Networking News

    Our recent report, Paper, Phone, Email, Web, Mobile, finds that close to 10% of P&C insurers will have FNOL mobile capabilities within 6 months, and more than 20% will have them within 24 months.


    P/C Claims Systems

    With the insurance industry facing the slowest growth rate since the 1930’s, P&C carriers are looking for ways to improve operational effectiveness and to drive growth, and claims is one of the key areas they’re investing in. In fact, over 30% of carriers in our latest surveys  say that claims is one of the top three projects they’re focusing on for 2010. And while we estimate that 30-40 new claims systems were purchased by US insurers in the last 12 months, P&C insurers now have more than 20 active solutions to choose from.

    My latest report, Novarica Market Navigator: US P/C Claims Systems 2010 (Q2), published today, is designed to help insurers rapidly understand their options and prioritize their evaluations. The report is summarized online at http://www.novarica.com/report_pcclaims2010_nmn/

    The quality of a carrier’s claims service heavily impacts the customers’ view of the carrier because other than the bill, claims are typically the only contact a customer has with a carrier. And a bad claim experience is one of the top reasons for non-renewal. In today’s competitive environment, where retention is a critical imperative for carriers, claims handling is a major source of competitive advantage for property-casualty companies. Claims administration systems are being replaced at an increasing pace in the insurance industry. While many carriers have already upgraded and others are in the middle of a claim replacement project, a majority of carriers are in the planning phase for a core claims system replacement.

    Vendor solutions profiled in the report include: Accenture, Aon eSolutions, BlueWave Technology, Brightwork, CSC Advanced Claims, CSC Exceed Claims, DAVID Corporation, Decision Research Corporation, Exigen, FINEOS, Guidewire, Innovation Group, ISCS, LexisNexis, MajescoMastek, Oracle, Paradox Technology Solutions, P&C Insurance, Ravello Solutions, SAP, StoneRiver Claims Workstation, StoneRiver PowerSuite, Tropics Software Technologies.