Is car safety technology going to lead to cheaper auto insurance rates?

Why are auto insurance rates so high? Ask around and you’re likely to hear the blame fall on everything from public insurance models to luxury cars.

While that debate rages on, though, one auto trend is starting to look more and more like it might be the antidote to high rates: safe driving technologies.

These technologies — automatically installed in newer car models and embraced by insurance companies —  are engineered to help drivers better navigate roads, meaning they also help prevent accidents. If more people have access to safer driving technologies, the logic goes, then fewer drivers will get into accidents, fewer people will make auto insurance claims, insurance companies will need less money to stay afloat, and those companies will slash their rates as a result.

But will new technologies actually make auto insurance cheaper? We spoke to two auto industry insiders to find out.
 

Safety features that come with the car

Back in March, Subaru announced that one of its new cars would be outfitted with DriverFocus, a safety feature that uses facial recognition technology to detect — and warn drivers of — distracted driving. While the use of facial recognition technology in cars is not new — both Tesla and BMW equip their cars with a similar feature — Subaru represents one of the first automobile companies to install it in “mainstream non-luxury vehicles,” according to a spokesperson from the company.

Subaru is not the only auto manufacturer that has extended advanced safety features to non-luxury vehicles. In 2017, Consumer Reports found 24 cars, all of which cost less than US$35,000, with four safety features that had previously been reserved for more upscale vehicles. These features included forward collision warning (which scans the road and alerts the driver if they’re too close to the car ahead), automatic emergency braking (which brakes the car when the software senses a potential collision), blind-spot warning (which alerts the drivers to vehicles in their blind spots) and, finally, rear-cross traffic warning (which lets the driver know when someone — or something — is in their way as they are backing out).

Since 2017, these features have only become more common. But for David Waserman, a broker and founder of DMW Insurance in Toronto, some of them still aren’t common enough.

“...the thing that I love is the blind spot detection warning that some cars have,” he says. “It’s a great safety feature I think every new car should come with, and some car companies only provide it in their mid- to higher upgraded level vehicles.

“But it’s a safety feature that should be included even on entry-level vehicles.”

While Waserman believes that collisions will probably decrease as safety features become more mainstream, he is less confident about whether these features will bring about lower insurance rates.

“Some insurance companies are giving a discount for having these items installed, so that’s already happening,” he explains.

“On the other hand,” he adds, “This technology is expensive and it goes to increase the value of the vehicles.”

In other words, says Waserman, while the frequency of collisions — and therefore claims — may decrease, if you do get into an accident, your claim will cost the insurance company more if your car is equipped with advanced safety features.  Even if there are fewer claims in total, the fact that each claim is more expensive would make it hard to make the argument that safety features will definitely bring rates down.
 

Safety features that are offered by insurance companies 

Not all advanced safety features have to be expensive, though. In recent years, a handful of Canadian insurance companies — including the Canadian Automobile Association, Allstate, Intact, Desjardins and the Co-operators — have started giving drivers discounts when they download tracking apps right on their smartphones — no fancy equipment required.

Take Automerit, an app that’s available to drivers insured by belairdirect. The insurance company describes the app as a telematics tool that essentially tracks how safely a driver well, drives. “Are people using their smartphones while driving?” asks Jeremy Green, belairdirect’s vice president of sales and operations for Western Canada. “Are they texting? Are they tapping? Are they swiping? ...This app monitors that.”

In addition to tracking distracted driving habits, Automerit also collects data on how many kilometers a customer has driven, how many times they’ve braked hard and whether they’ve taken hard turns. The company considers this data in combination with what Green calls contextual information — what type of road was the driver driving on? At what time of day? How quickly were they driving?

“We’re looking at longer term trends,” he says. “These events that occur are compiled over a long period of time, and using machine learning and new technology we come up with an individualized customized rate for that driver based on their own driving experiences.”

Depending on how they score as a safe driver, Green says customers can earn discounts that are up to 30% lower than their average insurance rates.

What about discounts for installing safety features that aren’t an app on your phone, like the ones we previously mentioned? For now, it’s not exactly common — but, as Waserman mentioned, they do exist. In 2016, for instance, Aviva started offering a 15% discount to drivers who had installed automatic emergency braking in their cars, which was applied upon renewal or their purchase of a new policy.

As advanced safety features become more common, it’s possible that they will eventually become cheaper to install and repair, so some time in the future, their benefits to the auto insurance industry (preventing accidents, and therefore lowering the volume of claims) may outweigh their cost.

For now, though, anyone who is hoping to significantly slash their auto insurance rates by buying a car with lane departure warnings or rear-view cameras may be disappointed. But the future holds promise.