Auto insurance rates have been on the rise and one question we are often asked is, “Why aren’t new cars less expensive to insure if they are so much safer?” Vehicles are now equipped with more safety features than ever before which are helping to prevent collisions, vehicle fatalities and vehicle thefts. When consumers buy a new car with Advanced Driver-Assist Technology (ADAS), more than half the people in one survey conducted believed they would be rewarded by their insurer. The insurance industry isn’t responding the way many people think they should. The agents at Kasmann Insurance have done our research and we want to explain why.
The auto industry has advanced their safety technology quite a bit in the last few years. You can now buy vehicles with the following options:
Electronic Stability Control
Collision Preparation System (Automatic Emergency Braking)
Blind Spot Monitoring
Lane Departure Warning
Driver Alertness Monitoring
Rear View Camera
Heads Up Display
Passive Disabling Device
Active Disabling Device
These safety features can reduce the number of vehicle accidents, as well as the damage and injuries that result. The anti-theft features make it harder for someone to steal your car and if it is stolen, these features can provide a faster location and recovery process. It seems logical that they would in turn reduce your auto insurance premium either through lower rate factors or increased discounts. What has happened so far has been the exact opposite.
In the past, the introduction of new safety features in vehicles equated to modest insurance savings, but only to applicable coverages. Once things like automatic seat belts and air bags became standard features for vehicle manufacturers, insurance companies responded by adding discounts to the medical coverage premium in response. Vehicle theft is covered under comprehensive coverage, so discounts for anti-theft technology are only applied to comprehensive premiums. Medical and comprehensive coverages are relatively inexpensive as compared to liability and collision coverages, so the savings don’t amount to much overall.
The insurance industry cites one reason why new discounts aren’t being added is due to insufficient data about Advanced Driver-Assist Technology. Vehicle manufacturing is a highly competitive industry and manufacturers are not willing to provide detailed information about their safety designs and improved technology. We all know that technology evolves, so a feature installed this year could be redesigned or updated for the next year, and that proprietary information is not going to be released for general knowledge. As of right now, a lot of this information is being considered “trade secret” and there are no consistent standards across the industry.
Another factor to consider in rating is that while this new technology is relatively inexpensive for car manufactures to install, it is expensive to have a mechanic or body shop repair or replace. In order to monitor things like blind spots or driver alertness, cars have to be outfitted with a whole suite of computers and sensors. There are now sensors in windshields, headlights, bumpers, side mirrors. These sensors make previously inexpensive parts much more expensive to replace now. A headlight that used to be $200 is now $2000; or a bumper that used to be $300 is now closer to $1500 to replace; and a windshield that used to be $350 is now $800 after necessary calibration.
Today, most ADAS features can be disabled which still leaves a lot of room for driver error. Many of the features are also still optional on vehicles, making it impossible for insurance companies to validate which features are on a specific car. Once features are standard and coded into the Vehicle Identification Number (VIN), and more statistics are available to verify the reduction of damage or injury in accidents, insurance companies will respond by adjusting their rates and/or discounts.
As technology evolves, it typically becomes less expensive. This will most likely be the case for ADAS, as well. As soon as industry standards are put into place and there is more consistency across manufacturers and data reporting, auto insurers will be more likely to adjust their rating. You may not necessarily see an increase in your discounts, it may just be reflected in the overall rating. Kasmann Insurance Agency is dedicated to providing our customers with the best product at the best price possible, so we will continue to monitor these industry changes and your rates. In the meantime, if you feel like your rates have been on the rise, don’t hesitate to contact us to make sure we have paired you with the best company to fit your needs.