by Alain L. Kornhauser, PhD Professor, Operations Research & Financial Engineering Director, Program in Transportation Faculty Chair, PAVE (Princeton Autonomous Vehicle Engineering) Princeton University Presented at Insurance Council of New Jersey’s 37th Annual Meeting & Conference Hamilton, NJ October 17, 2014 Future Vehicle Technologies (aka SmartDrivingCars) and the Insurance Industry Why the Insurance Industry should be Investing in SmartDrivingCars

Quality of Life 101: Important Elements Environment – Clean air, water, … Employment – “High Quality” Jobs – Correlated with Crime/Personal Safety Mobility – Safety, Efficiency, Equity, Comfort, Convenience, … Main Premise: – Facilitating the Adoption of Smart Driving Technology: Creates “High Quality” Jobs, Improves Personal Safety Improves Safety, Efficiency, Equity, Comfort, Convenience, … Improves the Environment All for FREE!

The Problem…. We Love the Freedom & Mobility But…Continuous Vigilance is an unrealistic requirement for drivers Y_SING-A-LONG_%20BuildMeUpButtercup.mp4

Early Estimate of Motor Vehicle Traffic Fatalities in 2012

2011 Nationwide Bus Casualty and Liability Expense Source FTA NTD Casualty and Liability Amount Vehicle- related $483,076,010. Total Buses 59,871 Sub-Total Casualty and Liability Amount Per Bus $8,069/Bus/Year

NOT: Future Vehicle Technologies

More Likely: Future Vehicle Technologies gCars/Videos/Subaru%20EyeSight_Commercial 60secCrashTest.mp4 ght_Commercial60secCrashTest.mp4

More Likely: Future Vehicle Technologies

Preliminary Statement of Policy Concerning Automated Vehicles Level 0 (No automation) The human is in complete and sole control of safety-critical functions (brake, throttle, steering) at all times. Level 1 (Function-specific automation) The human has complete authority, but cedes limited control of certain functions to the vehicle in certain normal driving or crash imminent situations. Example: electronic stability control Level 2 (Combined function automation) Automation of at least two control functions designed to work in harmony (e.g., adaptive cruise control and lane centering) in certain driving situations. Enables hands-off-wheel and foot-off-pedal operation. Driver still responsible for monitoring and safe operation and expected to be available at all times to resume control of the vehicle. Example: adaptive cruise control in conjunction with lane centering Level 3 (Limited self-driving) Vehicle controls all safety functions under certain traffic and environmental conditions. Human can cede monitoring authority to vehicle, which must alert driver if conditions require transition to driver control. Driver expected to be available for occasional control. Example: Google car Level 4 (Full self-driving automation) Vehicle controls all safety functions and monitors conditions for the entire trip. The human provides destination or navigation input but is not expected to be available for control during the trip. Vehicle may operate while unoccupied. Responsibility for safe operation rests solely on the automated system SmartDrivingCars & Trucks What is a SmartDrivingCar?

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap 0+ “Crash Mitigation” (air bags, seat belts, energy absorbing) Many Accidents, High Claims DisdainPublic sector; Law enforcement Fewer deaths

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap 0+ “Crash Mitigation” (air bags, seat belts, energy absorbing) Many Accidents, High Claims DisdainPublic sector; Law enforcement Fewer deaths 1 “1 st generation automated systems” : (Cruise Control & Anti-lock Brakes) Slightly reduced claims Some ComfortPublic sectorSlightly fewer accidents

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap 0+ “Crash Mitigation” (air bags, seat belts, energy absorbing) Many Accidents, High Claims DisdainPublic sector; Law enforcement Fewer deaths 1 “1 st generation automated systems” : (Cruise Control & Anti-lock Brakes) Slightly reduced claims Some ComfortPublic sectorSlightly fewer accidents 2 Attentive Automated Driving: (Collision Avoidance & Lane Centering) 50% less $ liabilit y; ++ profits More ComfortWill need help from “Flo & the Gecko” (Insurance incentivizes adoption) “50%” fewer accidents; less severity->

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap 0+ “Crash Mitigation” (air bags, seat belts, energy absorbing) Many Accidents, High Claims DisdainPublic sector; Law enforcement Fewer deaths 1 “1 st generation automated systems” : (Cruise Control & Anti-lock Brakes) Slightly reduced claims Some ComfortPublic sectorSlightly fewer accidents 2 Attentive Automated Driving: (Collision Avoidance & Lane Centering) 50% less $ liabilit y; ++ profits More ComfortWill need help from “Flo & the Gecko” (Insurance incentivizes adoption) “50%” fewer accidents; less severity-> 3 Un-Attentive Automated Driving : “Texting Machine” (Collision Avoidance, Lane Changing & Centering, Intersection Control) Even less $ liabilit y (~Product liability) ++ profits Liberation (some of the time/places) ; more Safety Consumers Pull, TravelTainment Industry Push ++ Car sales, -- insurance claims, + VMT

What the Levels Deliver: Levels 1 -> 2: (Driverless Repositioning) Safety, Comfort & Convenience Level 4 (Driverless Repositioning) : Pleasure, Mobility, Efficiency, Equity Elimination of cost of Labor Revolutionizes “Mass Transit” by Enabling Low-cost to even single riders “zero” Level 4 (Driverless Repositioning) : Pleasure, Mobility, Efficiency, Equity Elimination of cost of Labor Revolutionizes “Mass Transit” by Enabling Low-cost to even single riders “zero” An Insurance Discount Play A Corporate Utility/Fleet Play Levels 3: Pleasure, Safety, Comfort & Convenience Levels 3: Pleasure, Safety, Comfort & Convenience An Enormous Consumer Play What is a SmartDrivingCar?

Preliminary Statement of Policy Concerning Automated Vehicles What is a SmartDrivingCar? LevelInsurance Implications Value Proposition (driver/buyer) Market Force (who/what) Societal Implications 0 “55 Chevy” Many Accidents, High Claims Freedom Life Style Market Dominance (Madison Avenue) Death trap 0+ “Crash Mitigation” (air bags, seat belts, energy absorbing) Many Accidents, High Claims DisdainPublic sector; Law enforcement Fewer deaths 1 “1 st generation automated systems” : (Cruise Control & Anti-lock Brakes) Slightly reduced claims Some ComfortPublic sectorSlightly fewer accidents 2 Attentive Automated Driving: (Collision Avoidance & Lane Centering) 50% less $ liabilit y; ++ profits More ComfortWill need help from “Flo & the Gecko” (Insurance incentivizes adoption) “50%” fewer accidents; less severity-> 3 Un-Attentive Automated Driving : “Texting Machine” (Collision Avoidance, Lane Changing & Centering, Intersection Control) Even less $ liabilit y (~Product liability) ++ profits Liberation (some of the time/places) ; more Safety Consumers Pull, TravelTainment Industry Push ++ Car sales, -- insurance claims, + VMT 4 Driverless: “aTaxi “ Able to Fleet coverage; (~Product liability) Chauffeured, Mobility Bought “by the Drink” rather than “by the Bottle” Profitable Business Opportunity for Utilities/Transit Companies Personal Car = “Bling” not instrument of personal mobility, Comm. Design ++; PMT ?; VMT - -, Energy - -, Congestion - -, Environment ++

Thank You Discussion!