Autonomous Semi-Trucks and How It Relates To Trucking Insurance

Autonomous Semi-Trucks and How It Relates To Trucking Insurance

Jun 17, 2022 - Back to Blog

Self-driving vehicles are becoming a reality after years of development. Uber, Waymo, and other technology startups are leading the charge, and even established auto manufacturers like GM and Ford are exploring self-driving technologies.

The appeal of self-driving technology extends beyond passenger vehicles. Some in the trucking sector are looking into the possibility of autonomous semi-trucks. Freight companies are eager to improve their efficiency and transfer more cargo between destinations at a lower cost.

Trucks that are taking amazing leaps toward self-driving are being developed by technology companies to meet the demand. Embark, a self-driving semi-truck technology firm, recently outfitted a vehicle with its self-driving technology. That truck traveled 2,400 miles without stopping between Los Angeles and Jacksonville.

Firm like Embark plan to offer self-driving truck technology to shipping companies soon. Typically, the trucks would drive themselves on the highway and hire a professional driver for the start and end of the route, when driving is the most challenging. The technology has the potential to transform the shipping business as well as road safety.

Are you prepared to drive alongside a self-driving 18-wheeler? In this daring, nearly post-Covid world, we have managed to adjust to scarcity. This includes a previous shortage of truck drivers that existed before the arrival of Covid. Fortunately, the truck driver shortage in the United States is not as severe as it is in the United Kingdom.

In response to the rising shortage of truck drivers in the United States, many trucking organizations have moved out of their way to attract new drivers. Many people hoped that self-driving trucks would arrive in time to avoid catastrophic shortages, but it is still uncertain whether autonomous trucks will arrive in time.

Many shipping executives see automated trucking, especially for long-distance trips, as a massive step toward greater efficiency. Truck drivers are only allowed to work for eight hours before taking a break and a total of 11 hours per day. Nonetheless, according to Wiley Deck, a former administrator in the United States Department of Transportation, truckers spend six hours per day physically driving a truck. With self-driving trucks, businesses could nearly triple that time to 17 hours per day.

The Possible Impact of Autonomous Trucks

Autonomous trucking has the potential to increase efficiency in the transportation industry. In a future where businesses need to carry more goods every day, autonomous trucking would allow them to move more freight with the same or fewer drivers. Autonomous trucks might drive more readily during off-peak hours, reducing traffic congestion during the busiest periods of the day. They also do not need to take pauses to rest like human truck drivers, eliminating problems such as sleepy driving truck accidents.

Autonomous trucks may potentially provide significant benefits in terms of safety. Trucks are engaged in hundreds of thousands of accidents each year, resulting in thousands of deaths and tens of thousands of injuries. Autonomous cars may lower the number of accidents. They never tire. They might travel during the least congested periods of the day. They'd have data from advanced sensors onboard, alerting them to problems ahead of time. Although autonomous truck technology is not currently available, it offers a lot of promise in terms of making roads safer.

As per the American Trucking Association, there are approximately 3.5 million expert truck drivers in the United States. In all, the freight sector and trucking employ around 8.7 million people. This figure does not include gas station owners, hotel managers, family members, rest stop workers, or those who take a job in the transportation industry. According to American Trucking Trends, trucking gross revenue exceeded $725 billion in 2016. The freight industry is at its strongest in years.

The widespread deployment of self-driving trucks would generate huge disruption in many people's lives, enraging the economy in ways that the United States has not seen in decades. The deployment of autonomous technology, according to Morgan Stanley, would save the freight sector $168 billion each year. This means that autonomous vehicles will significantly increase the freight industry's net revenue. A total of $70 billion is expected to come from labor cost changes. This means that autonomous trucking would cost drivers and their families $70 billion.

Apart from that, significant economic turmoil piques the interest of politicians. Trucks that drive themselves would very probably bring politics into the transportation industry. The Transportation Department has already created a 15-point safety assessment for all driverless trucks, but this is just the start. The dispute about the economic impact of technology commenced with Uber. They will only develop as the vital trucking industry is impacted.

These concepts about self-driving trucks are popular, but they should be approached with caution. Because technology is always evolving, we are all anxious about the future of autonomous vehicles. Self-driving trucks have the potential to replace professional drivers. Will they, though?

Not That Autonomous

In reality, the vast majority of these "autonomous trucks" will be driver-assisted. Despite significant technological advances, the safety and versatility of these trucks remain highly uncertain. Transporting goods from one port to another requires more than just the ability to avoid a traffic accident on the highway. These vehicles must be capable of navigating a wide range of highways, terrains, weather situations, and even hubs and ports.

For the time being, such "autonomous" vehicles will function similarly to auto-pilot; a driver will always be nearby, ready to take control in specified scenarios such as driving in and out of a hub surrounded by several trucks.

Social Reaction

Furthermore, other drivers on the road are opposing these self-driving trucks even more vehemently than truckers are. People are already nervous when driving next to large trucks. Looking up to see no one in the driver's seat of such a massive chunk of metal and cargo is unsettling. This can and will cause technological panic on highways.

It is uncertain if this will lead to more collisions. More consumer protests are almost certain to follow. If customers protest autonomous trucking because they are concerned about job loss, businesses will be forced to reconsider their technological models.

Companies are eager to adopt the least expensive option, such as autonomous trucks over trucker compensation packages, but this may cost them their customer base. As a result, it will be critical for transportation executives to assess consumer reactions to each new technology decision.

Unexpected Costs and Security

Even though self-driving trucks are less costly than human drivers are, insurance premiums are expected to rise. Insurance providers might not have to deal with these dangers on a large scale yet since this new tech is still in its early stages. Transportation and shipping insurance may become prohibitively expensive due to the unpredictable risks of technology. Furthermore, it would almost certainly influence the entire auto insurance system not just for companies, but for the average driver as well. As more automated vehicles hit the road, insurance providers will have to reassess risk and cost.

What is the reason for this? The safety of self-driving trucks is still unknown. Many buyers are hesitant to put their safety on the line in the same manner that the Titanic seemed unstoppable until it sank. Until the first accident happens, autonomous trucks will be regarded to be safer than human drivers. In general, there is a lot of risk and cost unpredictability.

Why Is Trucking an Appropriate Match for Automation?

Composition of the industry

As per Armstrong & Associates, the global logistics market is valued at $9.6 trillion in 2018, accounting for about 12% of global GDP. Even so, supply-chain inefficiencies are thought to be exaggerating the market's current size; as technology continues to create new efficiencies in the way goods are moved from point A to point B, predicting the logistics market's future size becomes incredibly hard.

The trucking industry contributes for 43% of worldwide logistics spending and is expected to grow to $5.5 trillion by 2027, with a combined worth of $4.1 trillion. Trucking has been the most dominant mode of inland freight transportation in the United States, according to the American Trucking Association (ATA), accounting for 67.7% of the industry (equivalent to 11.8 billion tons of transported freight in 2019) and is projected to stay that way for the near future. In 2019, the industry generated $791.7 billion in revenue in the United States, and it is expected to grow by 40% over the next 30 years.

Vehicle categorization

Trucks are available in a range of sizes to satisfy the needs of a wide range of buyers with different ratings and applications. The most popular methodology is based on the maximum overall weight of the vehicle, also known as the Gross Vehicle Weight Rating (GVWR). Because different markets have distinct safety requirements, the weight-based classification can be used in a variety of ways. Heavy-duty trucks regarded as "Class 8" vehicles are the top focus for the commercialization of autonomous vehicle technology due to their high freight capacity and simpler operating environments.

Increased trucking prices are causing inconvenience.

According to the American Transportation Research Institute (ATRI), the trucking industry's operating costs have increased 18% in the United States since 2010. This shift is due to an overall upward trend in per-mile costs in a variety of industries. Trucks, like passenger vehicles, are increasingly offering new technological features to improve driver safety and comfort, ranging from telematics (monitoring, remote vehicle services, and location data) to advanced driver assistance systems (ADAS).

Truck/Trailer Payments (a statistic for the per-mile cost of road haulage) grew by 44% between 2010 and 2018, rising from $0.184 to $0.265 per mile ($0.30 to $0.43 per kilometer). The entire complexity of trucks and their systems has constantly expanded, resulting in an increase in maintenance and repair expenditures of approximately 38 percent in less than a decade. Despite decreasing fuel prices, vehicle-related costs increased by 11% during the same period. When comparing 2018 to 2010, driver earnings and perks increased by 28%, from $0.608 per mile to $0.776 per mile.

Driver shortages are increasing

In the U. S. alone, the trucking sector employed 7.95 million people, with over 3.5 million of them working as truck drivers, a vocation dominated by men, who constitute more than 90% of truck-driving positions. In addition, according to American Trucking Association (ATA), the US trucking sector faced a 60,800-driver shortfall in 2018, up 20% from the prior year. The US driver shortage is anticipated to expand by 160,000 by 2028, excluding the impact of the COVID-19 pandemic. Driver shortages exist in many industrialized and rich countries, including Australia, Saudi Arabia, New Zealand, Northern Europe, the United Arab Emirates, Qatar, and Oman.

Drivers’ mistakes are expensive

Driving a Class 8 truck requires a high degree of experience. Because the repercussions of an accident are very severe, with high mortality rates, due to the sheer size and weight of these vehicles, drivers require considerable training. Truck accidents have huge financial repercussions as well: when one occurs, fleet owners must pay not only for vehicle repairs, but also for missed cargo, driver downtime, and vehicle depreciation.

As a result, new safety measures and driver-alert systems are being installed on trucks to lessen the danger of a collision. In 2018, more than 150,000 people were wounded and 4,951 have died in heavy truck accidents in the United States, an increase from 2009.

The Advantages of Automated Trucking Technologies

Experience
  • In-vehicle infotainment and connected interactive systems
  • Non-driving tasks such as office work, sleeping, and eating are possible.
Maintenance and repair
  • Increased diagnostic data can enable preventative and more efficient maintenance
  • New revenue opportunities related to software handling
Fleet logistics
  • Improved productivity, asset utilization, and profitability
  • Increased data for fleet performance analytic
Comfort and convenience
  • Offers a user-centric approach to comfort
  • Driver-assisted technology makes the work less stressful and exhausting.
Environment
  • Reduces fuel consumption and therefore emissions
  • Minimizes the carbon footprint of vehicle journey
Productivity
  • Prognostics and diagnostics help reduce vehicle downtime
  • Leverage the potential of network operations and accessibility
Driver benefits
  • Increased safety
  • More efficient use of operator hours
Manufacturer opportunities
  • Increased revenue from service-based business models
Supplier opportunities
  • Newmarket opportunities for software-based solutions
  • Deeper knowledge of a customer's car usage and lifestyle can lead to additional sales opportunities.

Autonomous Semi-Trucks And Trucking Insurance

Because self-driving trucks are projected to join America's fleets over the next two to five years, insurers should reconsider how they should be insured. Drew Groth, an associate actuary at Milliman, Inc., made this argument during his presentation at the CAS Spring Meeting on May 13 titled "The Road Ahead: Autonomous Trucking and Its Impact on Insurance."

Groth observes that providers and manufacturers of autonomous vehicles have few insurance choices after discussing several successful testing and uses of autonomous trucks in the United States and Europe. As a result, businesses are taking full liability for accidents caused by technical failure.

"However, when you think about it," he says, "this is essentially a confidence move" by manufacturers to demonstrate their readiness to invest their brand and financial resources behind autonomous trucking technology. Tesla, for example, established its own insurance company in the hopes of insuring its technology for 20% to 30% less "simply because most insurers do not apply any form of safety discount for Tesla technology."

He believes that most manufacturers of autonomous vehicle technology prefer to develop fronting arrangements with insurers rather than establish their own insurance companies. However, insurers have been hesitant to provide coverage. AXA XL is one insurer that provides coverage for self-driving trucks. Their policies cover liability, property damage, theft, cyber coverage, and care, as well as custody and control, which is essential when transporting goods.

One popular approach for covering self-driving cars is to switch from auto to product liability coverage. Groth explains that this is problematic because product liability cases can take months, if not years, to settle, and people typically require immediate post-accident reparations. According to him, the more likely scenario is that auto insurers will provide gap or status quo coverage and then subrogate the claim to product liability insurers.

Because autonomous trucks can both reduce and introduce new risks, insurers may be able to influence changes in the structure of coverage by providing commercial auto coverage for autonomous trucks. At a minimum, insurers will need to modify policy language to explicitly include or exclude autonomous trucks.

Driverless vehicles should reduce the number of collisions and total liability costs in the long run. However, there will be some growing pains before we get there. More collisions are likely in the near future as autonomous vehicles become more viable and human drivers adjust to sharing the road with automated vehicles.

As drivers assume less responsibility for road safety, manufacturers, component suppliers, and technology companies involved in developing autonomous vehicles and the software that controls them will assume more liability risk. According to a National Highway Traffic Safety Administration study conducted from 2005 to 2007, the overwhelming majority — 94 percent of auto claims were caused by drivers, with only a small number of collisions attributed to equipment malfunctions. This equation will almost certainly change over the next two decades, raising questions for insurers about how to quantify risk and price insurance coverage.

A New Approach To Insurance

Traditional car liability coverage will eventually have to make way for greater product-related liability coverage or hybrid coverage. The issue of who is responsible in the case of an accident with an autonomous vehicle remains a barrier for traditional car coverage of autonomous cars. If a driver is in control of a vehicle, personal car coverage will apply. When autonomous technology is utilized, however, liability passes to the product liability coverage of the original equipment manufacturer (OEM).

There will be a strong case for highly autonomous vehicles that drivers cannot be held responsible and that any incidents that occur are the fault of product defects. The absence of significant case law and claim data for events involving autonomous vehicles limits insurers' ability to adopt this viewpoint fast.

Furthermore, insurers dispute access to enormous quantities of data produced by automobiles, which might aid in determining crash conditions. OEMs and insurers must establish common ground in order to use the data to construct hybrid insurance plans and guarantee that responsibility is defined fairly and adequately while preserving car owners' personal information.

Conclusion

Society is transitioning from driving individually owned cars to sharing human-driven cars to sharing self-driving vehicles. However, in order for that future to become a reality, the automotive and insurance industries must be ready and willing to change their perspectives on risk.

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