Cars are driving themselves. Drivers are using their personal cars as impromptu "taxis". Homeowners are renting out their residences to strangers. And the Chicago Cubs are World Series winners.
It was a whirlwind year, and you can be excused for losing track of all the major emerging insurance issues out there. But the ISO Emerging Issues team has you covered. We're dedicated to identifying, researching, and tracking trends that could potentially affect the property/casualty industry today and in the future. You can check out our findings on the ISO Emerging Issues Portal (ISOnet login required).
This is the second installment of our 2016 emerging issues retrospective, where we'll highlight a few hot-button emerging issues from the past 12 months.
In Part I, we discussed drones, marijuana, and blockchain technology. In Part II, we discuss the following questions related to autonomous and connected vehicles, ridesharing, and home sharing: What's happened with these issues since last January? How have governments and stakeholders reacted? What has ISO been doing to address these issues?
Autonomous Vehicles and Connected Cars
2016 was a momentous year for autonomous vehicle (AV) development. Google's Self-Driving Car Project logged more than 2 million milesi driven in autonomous mode. Ridesharing company Uber debutedii self-driving ridesharing service vehicles in Pittsburgh. The first commercial delivery completed in autonomous mode successfully transportediii an intra-state beer shipment in Colorado from Fort Collins to Colorado Springs.
But 2016 also witnessed growing concerns over the technology's safety. In June, a Tesla vehicle operating in Autopilot mode hit a truckiv, killing the Tesla's driver. Subsequent nonfatal accidents and an additional fatal accidentv in China have been reported, raising further safety concerns related to autonomous vehicle technology.
Cybersecurity has also continued to be a hot-button issue in the autonomous and connected vehicle space—particularly after researchers last year demonstratedvi that they could remotely hack into a Jeep. This year, researchers in China demonstratedvii that they could hack into a Tesla vehicle subject to specific conditions, including the proximity of this vehicle to a malicious Wi-Fi hot spot.
The federal government has also begun to take notice of the cyber risks facing autonomous and connected vehicles.
- In March, the FBI released a public service announcementviii warning consumers about the potential cyber vulnerabilities in their connected vehicles.
- The Government Accountability Office published a reportix in April recommending that the Department of Transportation (DOT) define its role and responsibilities in how it plans to respond to vehicle hacks.
- The DOT's National Highway Traffic Safety Administration (NHTSA) publishedx some proposed guidance for motor vehicle cybersecurity, recommending cybersecurity best practices.
The government's attention hasn't been limited to vehicle cybersecurity. In September, NHTSA released its Federal Automated Vehicles Policyxi , which included guidance on vehicle performance, a model state policy, and a proposal for potential new agency authorities. The FAV policy is designed to help "speed the delivery of an initial regulatory framework and best practices to guide manufacturers and other entities in safe design, development, testing and deployment of HAVs (highly automated vehicles)."
Regulation of Autonomous Vehicles
On the state level, as this nascent technology continues to develop on test sites and public roads, policy across state legislatures continues to provide guidance for innovators, manufacturers, and private citizens. Since Nevada first authorized the use of autonomous vehicles in 2011, seven other states and the District of Columbiaxii have enacted legislation providing requirements related to operating autonomous vehicles in their jurisdictions. Governors in an additional two states have issued executive orders addressing autonomous vehicles.
Based on research from the National Conference of State Legislatures (NCSL) and Stanford Law School's Center for Internet and Society (CIS)xiii , more than 30 pieces of legislation and regulation across 18 states were introduced in 2016, addressing various topics of AV technology, including:
- immunity for manufacturers whose vehicles are modified with autonomous systems
- proof-of-insurance requirements for entities studying and testing the technology
- amendments to motor vehicle codes to usher in further use of autonomous technologies on public roadways
Regulation of Connected-Car Data
As car technology evolves and grows more sophisticated, privacy concerns regarding data ownership and usage continue to be hotly debated by various entities, including federal agencies and consumer advocate groups.
The federal law under the 2015 Driver Privacy Actxiv states in part, that information generated by event data recorders (EDR) belongs to the vehicle's owner/lessee and also placed limitations on data retrieval and usage of EDR data. Currently, 17 statesxv have enacted legislation specifically regarding EDRs and privacy. Unlike telematics devices that record data for a long period of time, EDRs are typically designed to record temporarily in a continuous loop until a crash event occurs, much like the "black boxes" embedded in airplanes.
In 2016, the most recent wave of legislation regarding vehicle-generated data began to address, in part, not only data from EDRs but also telematics data collected from embedded sensors and modules that are more sophisticated than the early EDRs.
This year, ISO continued its monitoring of and research into autonomous and semiautonomous vehicles and how they could potentially affect property/casualty insurance. To that end, ISO launched a research study in mid-2016, the findings of which can be found on ISO's Autonomous Vehicles Resource Center.
Ridesharing and Home Sharing
Book a cleaning service, borrow a neighbor's ladder, request a car ride, rent out an apartment—all from your smartphone. The so-called "sharing economy" has made headline-grabbing incursions into industries from taxi cabs to hotels. The sharing economy is made possible because of digital platforms such as Airbnb, Uber, and TaskRabbit that connect providers of goods and services directly with consumers. These providers are often private individuals, not businesses.
The potential liability exposures connected to such platforms have posed unique challenges for the property/casualty industry. Topping the list among sharing-economy businesses that pose new liability concerns are ridesharing and home sharing.
Chances are, you've taken a ridesharing trip at least once. And even if you haven't, you've probably heard about ridesharing services like Uber and Lyft. By late 2015, about 15 percent of Americansxvi reported using a ridesharing service at least once and about half the country has heard about them.
Ridesharing service providers, also known as transportation network companies (TNCs), connect drivers with people seeking livery services through a smartphone application. The passenger requests a ride, and the app dispatches the request to a nearby available driver, who can be operating a personal vehicle.
Ever since their inception, such services have raised a number of potential liability issues. One reported concern has been the so-called "insurance coverage gap," in which there may be a lack of coverage when TNC drivers operate their personal vehicles for commercial use. This lack of coverage is most likely due to the public or livery conveyance exclusion common in a personal auto policy. There are also concerns when a driver might use a commercial vehicle to provide taxi or delivery services through a TNC, the latter being types of services which may not have been contemplated in such vehicle's use.
Before addressing this potential gap, it was necessary to determine exactly when a driver may be operating during the gap—that is, to determine when the vehicle is operating for hire. To help with this process, it's now generally understood there are three distinct ridesharing "phases": Phase 1: Driver logged in to the TNC app; no passenger and no match with a potential passenger. Phase 2: Driver and passenger matched, but passenger not yet in the vehicle. Phase 3: Driver has picked up the passenger. Each phase is generally associated with unique liability and coverage implications.
Governments, ridesharing services, and insurers have begun addressing those and related concerns.
In 2015, TNC legislation gained momentum when TNCs, several personal lines insurers, and trade associations contributed in developing a model law, establishing a number of requirements, including TNC insurance requirements from the time the ridesharing app is turned on until it's turned off. The National Conference of Insurance Legislators adopted the model lawxvii with minor modifications in 2015. The model law also provided many safeguards for consumers and insurance companies, including mandatory liability limits for all three phases.
As of 2016, 41 states and the District of Columbia have enacted legislation addressing TNCs—often including insurance requirements. In 2016, there continued to be a spate of activity in state legislatures on the topic: 21 states had pending TNC legislation or regulations, and 13 states successfully added TNC measures to their statutes to date.
ISO's commercial and personal auto lines have affirmatively addressed such emerging ridesharing risks. In 2015, we introduced personal auto ridesharing coverage and exclusion options. In 2016, we introduced two multistate public or livery passenger conveyance exclusion options (ISOnet login required) for our Commercial Auto and Commercial Liability Umbrella Programs. The first option generally addresses the exposure during any period of time an insured driver is logged in to a transportation network platform as a driver, regardless of whether a passenger is occupying the vehicle. The second option is similar to the first but also addresses on-demand "delivery services" performed through a "delivery services platform" or "transportation network platform."
In conjunction, commercial lines multistate rule revisions have been filed.
More information can be found by visiting the ISO Ridesharing Insurance Resource Center.
Home-sharing services have also increased their footprint over the course of 2016.
As with ridesharing services, home-sharing services like Airbnb typically connect guests looking for short-term rentals with homeowners or renters seeking to rent out their homes, spare rooms in their homes, or apartments for compensation. This kind of "sharing" may occur in both owner-occupied and nonowner-occupied residences.
And also like ridesharing, home-sharing comes with potential liability questions. Are guests and hosts covered under typical homeowners, dwelling, or renters policies when a residence is effectively turned into what could be construed by some as a commercial space? How do guests and hosts ensure that both they and their property are protected in this kind of arrangement?
Governments, home-sharing services, and insurers have begun addressing the potential issues raised by home sharing. Some state and local governments have certain laws in place that limit or prevent short-term rentals of single-family homes, apartments, or rooms. Many insurers have begun to make their customers aware of potential gaps in their insurance coverage and now offer optional endorsements. And home-sharing services such as Airbnb include host protection coverage for third-party bodily injury or property damage claims, subject to specific terms.
ISO has also taken action to address the potential risks of home-sharing. This year, ISO introduced several new and revised endorsements to reinforce the scope of coverage currently contemplated under its Homeowners Policy Program and to make optional enhanced coverages available to home-sharing hosts. More information can be found by visiting the ISO Home-Sharing Insurance Resource Center.
You can learn more about the issues discussed in both Parts I and II of our year-end review on the ISO Emerging Issues Portal (ISOnet login required).
Lucian McMahon is a Product Development Analyst for ISO's Emerging Issues team and Austin Bailey is a National Affairs Analyst in ISO's Government Relations division.
i Marco della Cava, "Google's self-driving cars hit 2 million miles," USA Today, October 5, 2016. Retrieved from http://www.usatoday.com/story/tech/news/2016/10/05/googles-self-driving-cars-hit-2-million-miles/91566136.
ii "Pittsburgh, your Self-Driving Uber is arriving now," Uber, September 14, 2016. Retrieved from https://newsroom.uber.com/pittsburgh-self-driving-uber/.
iii Alex Davies, "Uber's Self-Driving Truck Makes Its First Delivery: 50,000 Beers," Wired, October 25, 2016. Retrieved from https://www.wired.com/2016/10/ubers-self-driving-truck-makes-first-delivery-50000-beers/
iV "A Tragic Loss," Tesla Motors, June 30, 2016. Retrieved from https://www.tesla.com/blog/tragic-loss
v Rose Yu, "Family of Driver Killed in Tesla Crash in China Seeks Court Investigation," Wall Street Journal, September 20, 2016. Retrieved from http://www.wsj.com/articles/family-of-driver-killed-in-tesla-crash-in-china-seeks-court-investigation-1474351855
vi Andy Greenberg, "Hackers Remotely Kill a Jeep on the Highway - With Me In It," Wired, July 21, 2015. Retrieved from https://www.wired.com/2015/07/hackers-remotely-kill-jeep-highway/
vii Olivia Solon, "Team of hackers take remote control of Tesla Model S from 12 miles away," Guardian, September 20, 2016. Retrieved from https://www.theguardian.com/technology/2016/sep/20/tesla-model-s-chinese-hack-remote-control-brakes
viii US Federal Bureau of Investigation. (2016) Motor Vehicles Increasingly Vulnerable to Remote Exploits. Retrieved from https://www.ic3.gov/media/2016/160317.aspx
ix US Government Accountability Office. (2016) DOT and Industry Have Efforts Under Way, but DOT Needs to Define Its Role in Responding to a Real-world Attack. Retrieved from http://www.gao.gov/products/GAO-16-350
x US Department of Transportation. (2016) U.S. DOT issues Federal guidance to the automotive industry for improving motor vehicle cybersecurity. Retrieved from https://www.nhtsa.gov/press-releases/us-dot-issues-federal-guidance-automotive-industry-improving-motor-vehicle
xi National Highway Traffic Safety Administration. (2016) Federal Automated Vehicles Policy. Retrieved from https://www.transportation.gov/sites/dot.gov/files/docs/AV%20policy%20guidance%20PDF.pdf
xii National Conference of State Legislatures. (2016) Retrieved from http://www.ncsl.org/research/transportation/autonomous-vehicles-legislation.aspx#Enacted Autonomous Vehicle Legislation
xiii Center for Internet and Society. (2016) Retrieved from https://cyberlaw.stanford.edu/wiki/index.php/Automated_Driving:_Legislative_and_Regulatory_Action
xiv FAST Act, H.R. 22, 114th Cong. (2015).
xv National Conference of State Legislatures. (2016) Retrieved from http://www.ncsl.org/research/telecommunications-and-information-technology/privacy-of-data-from-event-data-recorders.aspx
xvi Aaron Smith, "On-Demand: Ride-Hailing Apps," Pew Research Center, May 19, 2016. Retrieved from http://www.pewinternet.org/2016/05/19/on-demand-ride-hailing-apps/
xvii National Conference of Insurance Legislatures. (2015) Model Act to Regulate Insurance Requirements for Transportation Network Companies and Transportation Network Drivers. Retrieved from http://ncoil.org/wp-content/uploads/2016/04/07232015TNCModelAct.pdf