Automotive & transport

Taking the gender out of insurance

Many of us have got used to the idea that insurance costs more for young men than young women because – well – it’s obvious, isn’t it? Now, not so obvious. The European Court of Justice has ruled that sex should not be used to set insurance premiums. This will take effect from 21 December 2012. It’s not just cars – the ruling includes pensions or annuities, which are heavily used in Britain.

The thinking is that we have developed socially to a point where gender matters much less. It was once a simple proxy for all kinds of habits or behaviours, but it no longer suffices. Actuaries are being challenged to consider other factors, such as eating habits, or location, or education. This is not such a shock in Belgium where, since 2007, insurance premiums have been based on the car, not the driver. Good drivers are then rewarded with no claims bonuses, rather than punishing young, male drivers for being young and male.

Germany has had a gender-neutral pensions scheme since 2006 but the British are up in arms about their pensions, given the new ruling. Yet, is it fair to make someone pay for a characteristic they can do nothing about? Insurance companies argue that removing sex as a consideration will add an uncertainty premium – and they’ll have to ask a lot more questions. This will take time and cost everyone money. So much for political correctness when the next teenager roars by in his souped up car.

Reward young drivers, don’t punish them

The above story, Take the sex out of insurance, addresses the difficulty of punishing young drivers with high premiums. Another option is to watch them while they drive. Black box technology, otherwise known as telematics, can be installed in a car to observe braking and acceleration, speed, and times of day spent driving. While it seems invasive, it allows the insurance company to reward good drivers, every 90 days, with lower premiums.

This is the thinking behind Co-operative Insurances’ Young Driver policy, which could be 328 pounds cheaper than competitor quotes for 82% of 17-25 year olds. It will also reduce the rate of crashes: currently a typical 18 year old is three times more likely to crash than someone 30 years older. The idea has been floated before by then Norwich Union (now Aviva) in 2006. But in those days, the technology was more expensive, and young driver insurance was cheaper.

Other insurance companies in this market are Insurethebox, which insures based on mileage, and Young Marmalade, which will launch a telematics policy, Intelligent Marmalade. All these ideas reward the driver for good driving, rather than punishing them for something they can’t do anything about: sex or age. It seems intelligent and non-discriminatory. But it’s still up to young drivers to agree to be watched while they drive.

Driving is just a distraction

What if driving were just a distraction from what people really want to do? Maybe all we want to do is get where we’re going in the fastest possible time in the safest way. All the new trends in driving seem to suggest this is true – we want the car to do it for us. So are people really ready for the self-driving car?

General Motors thinks we are. It plans to be selling so-called GPS cars by 2018 – only 9 years from now. Much of the technology needed for driverless cars already exists, such as radar cruise control, motion sensors, lane-change warnings, electronic stability control, and digital mapping. The main obstacle now is regulation, liability laws, privacy concerns – surprise – and how we feel about letting the car drive us.The argument is that bad driving causes 95% of 42,000 deaths in the US each year, so it’s worth it just to save some lives. But it will have much, much wider ramifications. One commentator believes it will change society as much as the transition from the horse to the car.

The transition to driverless cars may end up being less shocking than it first appears, simply because many new cars are already fitted with these technologies. Drivers are slowly becoming used to driving less. In fact, one writer asked, “When cars can know where they are, where they need to go, can steer and brake, can see lane markers, and can instantly alert another to their actions… what are drivers for?”Since much of the driving today is “distracted” by mobile phones, texting, entertainment, and even old fashioned conversation, it seems to make sense to take the driving away from the driver. But can you take the driver out of their car?

Leading the charge to electric cars

In America, the home of the automobile, there are plans to produce more than 1.2 million electric vehicles by 2015. This will be a mere 1.7% of sales, but it’s the beginning of a new way of moving around. The government has three visions to achieve this: make them more affordable with a rebate up to $US7,500 at point of sale; make more R&D investments in electric drive, batteries and energy storage; and reward communities that invest in electric car infrastructure, such as charging stations.

Ironically, the first electric charging stations for cars emerged in 1923 in America. So this is not a new idea. The biggest challenge is to make electric cars palatable for buyers, which include individuals and fleet owners. For fleet owners, the total cost of ownership is more important than the initial price. Boston Consulting claims fleet owners will achieve lower cost of ownership within 3-5 years. Individuals tend to look at initial cost carefully, because it’s the second most important purchase after a house. They tend to be risk averse and don’t factor in future fuel purchases.

Electric cars offer quiet operation, good acceleration, low cost of ownership, and take away the burden of constant refuelling. However, they do need recharging. The reason petrol-powered costs persist, in part, is because the infrastructure is too well established. Look to Google for guidance on this. They have already teamed up with the Department of Energy to help drivers in America find the nearest recharging station. Innovations such as these will encourage the trend towards electric cars; rebates will only reward bargain hunters.

Newer cars for older people

If you want to know the future of driving, you need to look at the future of drivers. After all, with rapidly aging populations in Australia, Britain and America, not to mention Japan and China, drivers will need cars that actually suit them. It’s been a while since Nissan’s “aging suit”, an outfit that designers could wear to simulate the awkwardness of climbing in and out of a car, or the difficulty of seeing where controls are. But when you see many old people today struggling to get in and out of cars, we wonder if manufacturers are getting the message.

In 2030, the youngest baby boomers in Australia will be almost 65, joining the cohort of 29% of the population 65 or older. This will make an enormous different to road safety, the design of cars, and use of public transport. Both licensing authorities and manufacturers should be preparing for these changes.

Already there are technologies in cars that can help older drivers. These include: quick stop protection from bumping into the car in front (Volvo), back-up cameras to show what is behind, audio warnings about hitting an object, lane assist, smart airbags that can tell the size weight of the occupant (Ford), navigation systems, electronic stability control and even seat belts that adjust to your height (about time).

According to one commentator, the ultimate feature is on the Ford C-Max van – a rear hatch that lifts when you wave your foot under the rear bumper! It only works if you have your car keys in your pocket of course. Assuming you have remembered where they were. Of course, the driverless car may one day take care of all these problems, then the older driver need no longer be distracted by driving. (See Driving is just a distraction.)