ADAS Reduces Loss Costs For Auto Insurers Despite Increased Repair Costs, LexisNexis Says

Advanced driver assistance systems result in fewer claims and reduce insurers loss costs by up to 23%, according to a paper by LexisNexis Risk Solutions.

John Kanet, director of auto insurance for LexisNexis, said the research shows ADAS has “a distinct loss cost benefit,” which may surprise to some who thought that the increased cost of repairing ADAS-equipped vehicles would offset any savings from a reduction in claim frequency.

“Insurance companies can use this new ADAS data as part of their rating segmentation to better meet the expectations of insurers’ customers, who often purchase vehicles with advanced safety features with the expectation that it will help lower their insurance rates,” Kanet said in a press release.

The data analytics firm analyzed information from 11 million vehicles, with model years ranging from 2014 to 2019, and compared industry-wide loss data to the claim frequency and severity for vehicles equipped with each of 648 possible combinations of the 11 “core” ADAS features. Some of the data was extracted from LexisNexis’ Vehicle Build product, which can identify the specific ADAS features in each vehicle and whether they are optional add-ons or standard equipment.

LexisNexis found that in general, ADAS systems led to minor reductions in claim severity, but greatly reduced claim frequency. Vehicles with any ADAS feature had a 23% reduction in bodily injury loss cost, a 14% reduction in property damage loss cost and an 8% reduction in collision claims cost, when compared to vehicles with no ADAS features.

“We find it interesting from an actuarial perspective that all coverages resulted in a decrease in severity in ADAS-equipped vehicles,” stated Gabe Hinton, a senior data scientist, insurance, for LexisNexis. “An educated guess is that the decrease in severity for liability coverages can be justified by the idea that vehicles with ADAS may collide with less force, resulting in less damage to another vehicle (property damage claim) or injury to a third party (bodily injury claim).”

The degree of loss-cost reduction varied depending on the combinations of ADAS features, the report says. Most combinations resulted in reductions ranging from 0-5%, but some reduced collision loss costs by 20-25%.

LexisNexis said insurers can use its data to determine the price of coverage for ADAS-equipped vehicles. The report says 52% of consumers surveyed said getting a lower insurance rates was an important benefit of ADAS, second only to safety, which was cited by 82% of respondents.

The report says “it is important to understand the impact of each combination of ADAS features for rating purposes.”

Susanna Gostch, a data analyst for CCC Intelligent Solutions, said her company has also observed reductions in claim frequency for vehicles equipped with ADAS. However, she said, risk-benefit ratios may have changed in the past year because of the impact on traffic patterns caused by the COVID-19 pandemic.

“Speeding has been reported as a major concern,” she said. “Those ADAS systems don’t help to avoid those crashes altogether.”