Episode 153 - Calculating the Risk of New Mobility

Have you ever wondered if AVs and EVs are covered differently than traditional vehicles? What about rideshare services like Uber? Can the data from an intelligent vehicle be used in court? As mobility advances, so too must our understanding of coverage and protection in a shifting landscape.

To understand the risk factors associated with new mobility, we sat down with Edward Walker, Vice President & Shared Economy Practice Leader at HUB International Insurance Services. Edward shares his insight on multi-state exposure in rideshare services, the risk perspectives of AVs and EVs, privacy concerns around telematics in vehicles, and much more.

Since 2017, Edward has built a book of business that serves gig economy and on-demand service-based clients throughout the United States and abroad. Whether it’s the state of the gig economy or the AV and EV market, this conversation touches on a wide variety of factors impacting insurance coverage in a changing world.

Meet Our Guest

Vice President & Shared Economy Practice Leader, HUB International Insurance Services, Inc.

At HUB, Edward is responsible for leading the strategic initiatives around growing and supporting this specialized niche of the Transportation segment.

Since 2017, he has built a book of business that serves new mobility clients throughout the United States and abroad. These clients are predominately in the on-demand service and passenger transportation segments of the industry. Clients in Edward’s portfolio include Transportation Network Companies (TNC), Delivery Network Companies (DNC), Shared Scooter Operators, Rideshare enabled and/or Leisure Rentals, Shared Service Providers, Micro transit services, and various other Gig Economy enabled offerings. These clients rely on Edward to provide highly specialized industry guidance, enterprise risk management solutions, and cost containment strategies that parallel their business goals and priorities.

Within the Gig Economy at large, he has participated on various Board and Trade Organizations including CoMotion, Marketplace Risk, MOVE America, and Micromobility.io. Edward has also been a recurrent panelist on “The Rideshare Guy,” a popular podcast focused on providing real solutions to operators within the industry.

Edward holds the following Industry Designations: Registered Professional Liability Underwriter (RPLU). Prior to insurance, Edward graduated from the University of Michigan in Ann Arbor with a BA in Economics and Psychology.


Grayson Brulte:

Hello, I'm your host, Grayson Brulte. Welcome to another episode of SAE Tomorrow Today, a show about immersion technology and trends and mobility with leaders and innovators who make it all happen. On today's episode, we're absolutely honored to be joined by Edward Walker, Vice President and Shared Economy Practice leader at HUB International Insurance Services.

On today's episode, Ed will discuss how the company's facilitating a new air mobility by providing comprehensive insurance. We hope you enjoy this episode. Ed, welcome to the podcast.

Edward Walker:

Hey, Grayson. Good morning or good afternoon on your side of the country. Good to see ya. 

Grayson Brulte:

We wish you were on the east coast and not the west coast, but that's a story for offline we're gonna talk about today, one of the most important topics that I geek out on insurance because without insurance there are no autonomous vehicles. Without insurance, there are no ride share vehicles without insurance, frankly, there's no economy cuz it would collapse under its own weight. Ed, how's the insurance industry currently impacting the mobility markets? 

Edward Walker:

I would say Grayson, it's a great question. Just generally speaking, it's the cause of or solution to most operators problems nowadays. And why you get that is, is a variety of different factors. The market itself is in a very troublesome state, so you're not just finding that rates are difficult, but you're also finding it at the various products.

From the insurance community towards the ride share ecosystem, vary by state, vary by carrier. There's a whole bunch of scalability issues that can be posed with a, know, multi-state exposure. There are a handful of considerations to take as an operator depending on your geographical exposure, depending on your ownership of vehicles.

It's a critical and deep piece of your success as an operation to really get your hands on the insurance and understand why you're making the choices you are and what opportunities you have elsewhere to really improve, not just your price and your premiums, but really your day-to-day, quality of life managing the program.

Grayson Brulte:

It's interesting you say multi-state exposure. You're based in LA and I've heard stories, read stories where an Uber driver picks an individual up and say LA and drives into Vegas. Does that Uber driver or Lyft driver, do they have to have a policy in either state since they're quote unquote doing interstate commerce or what does that look like from an insurance perspective?

Edward Walker:

It's an interesting, cuz you have to look at that from the company side. So if it's on the Uber and Lyft side, and you also have to look at it from the driver's side. I would say routinely from a personal lines standpoint, they're also to a couple different ways to look at this as, let's say you're the Uber driver and for example, are you routinely making these trips?

Are you routinely traveling to Las Vegas then absolutely. It's something you need to be addressing with your own personal lines carrier. From the corporate side on the commercial fleet policy, very strong likelihood that there is interconnectivity, at least between California and Las Vegas, and Nevada.

However, on the personal side, it, you gotta understand is it more of a one-off, or is this a habitual trip that you're making? May, and maybe it is, maybe you have a profitable way to find yourself to Las Vegas. Maybe you love the city, but there are a lot of considerations to take, and I'd say mostly on the driver's side, at least with operators like Uber or Lyft who have gotten their risk management profiles a little bit more ironed out than most.

Grayson Brulte:

Ironed out, more than most. So what happened with Lyft in the markets this week when they had to take that insurance at. They got crushed. Uber seems to have a better, now Uber seems to be running a better business.

They're selling off their real estate for cloud services. They cut the deal with Oracle and Google Cloud. They're cutting costs. Think Dara Khosrowshahi is doing a wonderful job there. But I wanna stay on the driver's theme here for a moment. I'm a rideshare driver. I drive for Uber and Lyft.

What type of insurance do I have to have? Can I go to Geico, Allstate, Farmers and said, buy insurance. Do I have to get a special amendment to it. What does that look like? 

Edward Walker:

Again, not to make state specifics a big highlight of what we're doing today, depending on where you are as an Uber and Lyft driver, if you're in Illinois, if you're in Florida, if you're in California, or if you're in, say Ohio, your opportunities to really seek a competitive and aggressively and well worded policy, with broad coverage towards you as a business, are going to be limited depending on where you are.

For example, in California right now, I'd say there are less than five carriers that are entertaining the ride share space for drivers alone and that market's actually shrinking. And a big piece for that is very recently, you actually, I'll take a step back and say, whenever you add in a ride share exposure, and this is both for the commercial side and the personal side you're dealing with insurance carriers that, depending on who you're speaking to, have a very limited bandwidth of understanding of what you do for a business. And so you have to build that into your understanding of who you're talking to and just how much risk they think they're taking versus how much risk you think you're taking as a driver.

So this is an insurance community that's not necessarily always well set up from an actuarial standpoint to price out these models. And what you get from that is a lot of variance between different carriers and what they charge for ride share endorsements and the like. A nd when you pair that with a state like California, where actually the director of insurance very recently rejected many insurance companies, you have to file your rates with the insurance commissioner if you would like to change them.

A lot of these carriers in the state of California, including, your bigger Cadillac brands such as Allstate, they reported I believe 45% of their 2 billion underwriting loss last year came from the state of California alone. Okay. And I bring that up, not just, not to scrutinize Allstate, cuz hey, they took a chance, they wanted to make it.

But at the end of the day you have a constricting market in California where the regulators themselves are also not giving the insurance companies an incentive to stay. 

Grayson Brulte:

This is a recipe for disaster. You currently have five carriers. You mentioned some carriers are leaving a shrinking market that's gonna lead to increased prices, and on the backside of that, we have a 6.5% headline inflation rate.

The first thing to go, you look at any auto data, Bank of America publishes a lot of really good data on this. The first thing to go is auto insurance, what can I cut back on? How are they gonna enforce it? If drivers say, oh, I'm not gonna get the endorsement. I'm just gonna get the cheapest policy. Or for a matter of fact, just, what is it, one in, one in three Californians don't have insurance and they drive without insurance, then what happens?

Edward Walker:

It's a great question. It's it could be pandemonium. It's really a situation where right now, more Americans are driving. California, that, that's one piece of the pie. But most Americans right now are, sorry. The highest percentage of Americans currently in the history of automobile insurance are not carrying insurance, and that now this means your exposure is just a personal driver going to the grocery store or a ride share driver is enhanced because when other individuals do not carry insurance, It actually presents a complication to the system where you can no longer rely on another individual should they even be at fault for an accident.

If they don't carry any insurance and you have a $60,000 car and you have to go to the hospital for medical bills, you're gonna have to take that person to small claims court before you see a dime of money that they're gonna give you towards making you whole. And, again, we're seeing a trend of this increasing.

So what I've been doing with a lot of my own clients is making sure that they up their, on the fleet side, is making sure that they increase their limits on uninsured and underinsured motorist coverage to make sure that they can account for this rising exposure. 

Grayson Brulte:

That's scary. You've got a, an economic time bomb ticking here.

Let's go down this even further. Let's say we got Bob or Mary, the ride share driver and they're driving around on the cheapest insurance. No demand. Let's call. The state minimum legal, and they don't have a ride share endorsement. They get into a crash or hit somebody on a bicycle. What happens? Do they have any protection?

Edward Walker:

Yes, but again it depends on the severity of the claim. So in, in a lot of instances, and I get this question a lot, so in a lot of instances, if you have a fender bender as an Uber or Lyft driver, and let's say we're using your example of someone purchasing statement, minimum coverages. Okay? If you have a fender bender and you're delivering a passenger, in, in a lot of situations, if it's a smaller claim, adjusters a re trying to use their time as efficiently as possible. If we're dealing with a fender bender, less than $5,000- $7,500 for a repair, they're gonna wanna fix it as quickly as possible, especially if there's no bodily injury involved. And really in a situation where you have not purchased a ride share endorsement as a driver.

For smaller fender benders and the like you're usually not going to see much of a pushback from the insurance world. Now, again, I want to caveat that by saying they could push back at any time, should an adjuster come in and have the incentive to figure out truly what happened?

Where was the accident? Who are we talking about? What were you doing at the time of the accident? And you don't have your story ironed out perfectly to, to omit the concept that you were with an Uber or a Lyft or a DoorDash at the time. That adjuster will have every possible legal grounds to deny that claim.

So it could a situation occur where those claims get paid on the smaller end? Yeah. You're gonna see a high percentage of those likely paid just due to time constraints and people trying to be efficient. However, if you have a total loss, if you injure under third parties, if you have any sort of significant damage involved in this accident or collateral damage, you're gonna have a high level a adjuster coming in there asking a whole bunch of questions, and they're gonna get to the bottom of the fact that you were driving for business use.

And they're gonna have every right in the world to deny that claim. And so that's why you see Uber and Lyfts so strongly recommend that drivers do help themselves by purchasing this ride share endorsement. Because in most situations it will cover you for the gray areas which still exist within the ride share model.

Even for the most, scrutinous of drivers, somebody just being as thorough as possible. There, there are new holes that come through with coverage every day. The legal precedents in this space have yet to be set. So all you can do as a driver is your best to try to make sure that you can make up for the downfalls of any of the insurance sorry, any of the operator based insurance you're partnering with.

Grayson Brulte:

The claim's denied, what happens? 

Edward Walker:

So if the claim is denied you, you essentially have yourself to help you help yourself out of the accident. So if you, if your claim is denied, the insurance company no longer has any right to defend you or any duty to defend you. Sorry. So in that situation, I've heard a lot of horror stories from drivers about situations where they were sent to the hospital, they were out of work for months on end and had no means of remediation outside of their own insurance. Which again, we're talking, if we're talking about state minimum, Or, and or a situation where it's denied. You can be facing a pretty pesky situation. 

Grayson Brulte:

Me personally, and I know you personally, my, my wife has this great saying. Buy really good insurance cuz you sleep well at night. You might pay more for it now, but you sleep well at night because you want to have it in case a catastrophe happens here.

I wanna add some financial context to this here, Ed, what's the average cost for a ride share endorsement? How much does it vary from state to state and is there a competitive market from insurance company to insurance company? 

Edward Walker:

Typically ride share insurance can cost anywhere between, and it depends on if you're talking about a six month or 12 months policy, it can be anywhere.

And, And I also need to caveat this by saying the market has just recently constricted. These numbers might be somewhat outdated, but on a general basis, across the states, you're probably dealing with, anywhere from $25 to $50 additional per month anywhere to, sometimes on the high end, between a hundred and $200 a month.

Again, it's going to matter very particularly on you as a driver. Is this your only car? Are you working with a carrier with your homeowner's insurance, with your life insurance? Are you cross-selling? Do you have other individuals in your household? How much do use your vehicle costs?

There are a lot of factors that go into this. I'll also throw in the fast fact that, electric vehicles, in the trends we're seeing these days, I couldn't actually give you an ironclad reason outside of maybe repair costs and, time of repair. But EVs right now on the personal lines market are generally 28% more expensive than their former counterparts. Sorry their ICE - internal combustion engine counterparts. 

Grayson Brulte:

But yet, if you use the Uber app, I'm an Uber customer. Sometimes they're cheaper than the UberX, but yet if I'm the driver, I have to pay more to insure it. You got an upside down market. How does this scale, cuz you're saying, okay, on the low end you got $300 a year to $2,400 a year, that's a big hit, especially with going into a global downturn and the Feds gonna have to raise rates again. They're gonna have to sink the economy. A soft landing, J. Powell, hope you can do it, but it's not looking good. Looking more like we're getting into a hard landing and we're gonna have mass unemployment, then what happens?

Edward Walker:

It's a great question. It's a situation that I run into a lot with speaking to my customers and that we're continuously moving into a difficult rate environment for both their drivers and their platform. And they're being very extremely limited as to what they can do.

Now there's a lot of solutions to combat claims activity and making sure we're paying the right claims that are being brought forth to us. But the market itself, I would say the amount of fraud, especially with regards to automobile liability, social inflation, a claim that cost $5,000 10 years ago, the exact same circumstance now will cost $50,000.

There, there are numerous factors that are all playing into this, all of which do not bode well for the overall community.

Grayson Brulte:

I'm touching a hot iron here. We need tort reform. I repeat, we need tort reform. It, it's tort. We need it because it's cost the American people as we go into, especially to an economic recession, potentially.
Their hard-earned money. We need tort reform, ambulance chasers need to go bye-bye. So I wanna give some context. There's a great report that came out this week from Bank of America on a potential economic downturn in the ride share industry. The Bank of America analysts estimate that as many as 450,000, I repeat, 450,000 new drivers could flock to Uber and Lyft this year, and additional 600,000 new carriers could give DoorDash Inc. and Uber. If Bank of America's correct. What's the impact on the insurance markets? You said that we've got a shrinking market, we've got increased prices. All these new individuals are coming outta drive. Is there enough capacity? 

Edward Walker:

I certainly think capacity could be an issue. I think right now in the insurance world, there are a lot of very bright minds, that have caught the attention of the space and the issues that we're dealing with.

I think the insurance community, while we do generally move at a glacial pace, we have the charge ahead of us as to what we need to accomplish. But, Grayson, one of the interesting things I think about that article is it didn't actually, I didn't see any details about age demographics about who's leaving the workforce, cuz I did also see another article the other day that was, Insightful on Generation Z in, in particular, not purchasing cars.

And actually the ex, the exploration goes even further into, they're not even getting their licenses anymore. Now, whether this is because of environmental reasons, cultural reasons, doesn't really matter for the purposes of our conversation, but, perhaps they're, the study I was reading actually went into, they might be the new generation that's moving into scooters, that's moving into Vespas, smaller transportation units in order to get around town. So this is actually a different sliver of the insurance community that would be covering this is, in other words, a different line of insurance, technically, depending on it's Vespa or Scooter that might be impacted.

So maybe we have an additional capacity, ability, or efficiency here that we can draw upon. And being that it's not just all focused on automobile liability, but in general, yeah. It's gonna be a complicated space with all these influx of drivers. I'd say the one piece of solace I have in this is that generally speaking in insurance, the bigger of a group you have to ensure the more predictable it becomes.

So I think a nice sliver of, silver lining within this is that the, I mentioned it before, the actuarial tables, the understanding from the insurance community of truly how to capture the risk, okay. And make money off of it. Let's not all forget that if insurance companies make money on this is good for everybody. That's why we have brokers like myself in the ring to make sure they're not making too much money. 

Grayson Brulte:

You need data to how to understand the risk. There's historical elements throughout the society of insurance markets that's collapsed. Divorce insurance, that market collapsed. The pet insurance collapsed. Unemployment insurance collapsed. And the private sector not the government social aspect because people rigging game the system. Oh, okay, let's figure out how to cut cost. You start throwing in scooters. You throw Vespas into this equation. They're dangerous. You get hit, you die, you fall off, you go to the hospital.

What does that figure into the underwriting algorithms? How are you getting data from those types of vehicles and says, oh, I swear Mr. and Mrs. Insurance, I only drive 20 miles an hour on my Vespa, I don't cut through traffic. There, there's a famous where this, that starts with a B and has an S in the middle of it.

That's what I would say to that. If I'm an insurance person how do you ensure for that? 

Edward Walker:

A lot of carriers have revised their approaches over time and getting to know, especially say this, the shared scooter industry itself. Especially with e-bikes and, smaller electric vehicles that don't necessarily classify as a private passenger vehicle, which would mean the shift to say a general liability policy to an automobile liability policy.

A lot of protective measures are in place. They have speed limiters that they like to propose. They like to a lot of carriers won't even entertain some of these risks, especially e-bikes which quite frankly tend to be a little bit higher focus these days than shared scooters just because of the associated loss trends they've seen between the two different categories of micro mobility.
But various carriers have different approach, a lot of which comes down to limiting speed. But I think there are a lot of, extra factors here. Grayson, especially with regards to infrastructure that make this situation even more complicated because what do you see when you're in Santa Monica or Florida or Miami?

What do you see most people, where do you see most people riding their shared scooters on the sidewalk and where do 98% of all bodily injury claims happen with shared scooters on the sidewalk. And why are they on the sidewalk? They are on the sidewalk because they don't feel safe on the road.

Because we do, we have not yet invested in the infrastructure to support this business. I've had colleagues from European countries come to Santa Monica. I live here in Culver City, and look around the roads and say, Ed, why would anyone use an e-bike or a shared scooter here? This is dangerous. So it's a two-pronged issue.

I wouldn't necessarily say it all lies on underwriting. I would say a lot of this is the general support of this new means of transportation as a culture and as a country.

Grayson Brulte:

How to get people to buy into it. I'm gonna give a very public example here, Revel. They did the shared scooters.

They had to leave Miami because nobody wore the helmet. And there was a few fatalities that were publicly reported in the Miami Herald. There was incidents zooming in and out around traffic, not wearing helmets. They couldn't enforce it. So if you're trying to get a cultural change, let's a cultural change towards safety, they're not listening to it.

Do you as the underwriter have to increase the rates because your risk is so much higher? And does that risk live with the individual that's running the scooter, or does that risk live with the fleet operator? 

Edward Walker:

That's a perfect example of when you talk about sharing economy models in general, scooters, cars, you name it, a lot of the issues that present themselves are as a result of the autonomy the operator themselves are seeking.

So for example, like in your example of helmet, What, I know I've worked with many of these operators. It's a really difficult chore getting these helmets to people and even more difficult to get them to wear it. There have been many different means tried in order to make this happen. They've been trying they've, they I believe in the early days, Lime had a website you could go to where you could click and have a helmet shipped you immediately. And while these are good, insightful ideas, this does not pair well with the on-demand nature of these models.

So you've have a push pull here between how long do you want someone to take in getting or picking up this Vespa scooter and the like. How long does that process want to take in the competitive environment, is my competitor gonna do this? Because if their scooter's right next to mine and I say, Hey, you gotta wait here for someone to show up, or, you gotta go to this storefront here and pick up, even if it's free.

That's a friction in the system and something that customers, don't necessarily support. So it, this is a push pull between the general, philosophy of the on-demand, sharing economy, which is, I want it fast and I want it now. And when you trickle in something like safety or helmets, it can be a really difficult piece to deploy.

And if you try to do it the right way, you might be putting yourself out of the competitive ring with an individual that you know, Hey, I just wanna use this one. I wanna use the whatever I can get to as quick as possible. So it's a complicated solve. 

Grayson Brulte:

When you factor in the realities of societal requirements, safety requirements, insurance requirements, municipality requirements, where's the sharing economy going?

It just seems the faster this grows, the more restrictions, especially on the local level that are coming down this industry. We've seen the scooter market, I'll just say point blank in my opinion, has collapsed. We can look to the public markets, look at the revenue from bird, and then I talk to some individuals that say, oh, you should see the private data at Lime. They're growing. That's private data, but the bird data is very public. It just seems like that market collapsing, where's the sharing economy going? 

Edward Walker:

So I would hope that at some point we reached some level of standardization, at least on the regulatory level because again, talking about our earlier comments of scalability, you know what, I can't tell you Grayson, at how many, 300-400 vehicle fleets of scooters or e-bikes that I, I used to work with and have now been either put out of business by the permit regulations of the city that they're, that they launched in, or, taken over by one of the big names in the shared scooter space because they can't make ends meet because they're expected, from an insurance perspective, let's talk about Miami for a second. Which by the way, is not too different than Santa Monica. At least with regards to the limits of insurance required for shared scooter operators. You're asking, it's sometimes a mom and pop kind of young scooter operation, maybe 100 to 300 scooters to purchase a $10 million limit of insurance.

Which could cost upwards of, in the seven figures, even with the most competitive rates, we're talking about likely a seven figure policy for that level of insurance capacity. Capacity again is supply of insurance limit that's being provided. So in a 10 mill mark, at one of the most high risk and unknown verticals, that insurers are providing coverage for, you've got a very overpriced policy or underpriced, we have yet to determine if that's, wh where that's going. Cuz again, we have a data shortage on this front. However, we don't see any scalable assistance for these smaller operators. It almost lends itself to only to their only being 2, 3, 4 big brands. And that's it. 

Grayson Brulte:

A small brand can't survive. A seven figure policy spent as fast as you raise it you're paying it to the insurance company as fast as you raise it, you're paying it to the insurance company. So that leads to the consolidation. We're seeing it, we're seeing tier mobility. They were consolidating individual law, but now they're facing economic headwinds.

So we just get to the point where there's say a handful of shared operators that just run through a platform. Perhaps Uber does some more acquisitions or. Or they just determined that this market's not here, or Lyft decides to continue to be Lyft and they just trying to consolidate the market. Was that what's gonna happen? 

Edward Walker:

I see there being no choice. Because unless there are, one of the things I've suggested a lot on the municipal level is scale. Is revenue based limit requirements. If you're dealing with a smaller company, if you're dealing with, someone who's got an employee staff of less than 10, they've been operating a scooter share since 2017 or the beginning, and you're now forcing them to jump from what was, maybe a million dollars of limit to 10 million because the permit requirement says, I don't see any reason why there shouldn't be some sort of a variance between what, say a bird, a lime or a tier, I was gonna say spin, but that's tier, what they have to purchase is a global scooter sharing company versus just your local Florida, California operator that's just trying to make money and provide a good service. I think that there needs to be attention drawn to that. 

Grayson Brulte:

You're thinking like a capitalist and an entrepreneur. You're not thinking like a politician . That's the big disconnect there.

Edward Walker:

Yeah, that might be true. And honestly you, you could lend credence to the fact that there, there are safety concerns.

One of the big things that, that is a true factor here is that a lot of the older generations, especially in Santa Monica and Miami, were not pleased with the, call it, scooter revolution. They didn't like everything on the sidewalks or in their way. And a lot of that comes down to what the legislators have to deal with from their con constituents.

Not to mention safety. Again, we're, we've talked about data a lot here today. The data on safety. Yes. The figures I gave you on, incidents involving sidewalks, scooters, e-bikes is accurate. But again we're, you're comparing what, maybe seven years, five years of data.

Your typical underwriting process and insurance that has 40, 50 years of proven underwriting data. Let take, throw out the industry vertical itself. If you want the ironclad, status quo of what insurance companies use to make predictive modeling. They need at least five years.

We're like maybe at five years. I say that because a lot of models have changed their telematics, their data. They might have been around for more than five years, but their ability to give you that data might not be that strong or at least continuous for the entirety of their operation.

Grayson Brulte:

And then you can't properly underwrite the risk and then you have a collapsing failing market. And then the whole thing goes because without insurance it doesn't go. So in addition the sharing economy, you're, you also play the autonomous vehicle space. You're ensuring autonomous vehicle companies.

I also wanna mention you're also ensuring autonomous trucking companies, that market has been tight for a long time. Munich really stepped out years ago to try and explore and incubate it. There was some stuff done through Lloyd's and Zurich. How's that market currently looking today from an underwriting perspective? Is there more capacity in the market than there was years ago? I know Chubb is starting to look into it as well. 

Edward Walker:

There's definitely more capacity in that marketplace than there was and it seems to be that insurers are more willing to lend the. To these, to the right exposures in this space, because they see it as the future.

They see it as a much more, as a safer bet in getting, a lot of this is how are we using our time and when it comes to autonomous vehicles, there's many reports that would validate the fact that they, that, autonomous. Level of driving is going to be a part of our lives in the next 10 years.

And so for carriers to stay ahead of the curve, they do have to invest in this. So yes, you've seen, an uptick in carriers willing to write the risks, in, in my opinion, they're still playing it extremely conservative. Many carriers, quite frankly to still see an engineer and a , an employee slash engineer.

Many times they're the same of the actual AI in the vehicle at all. Because it does ensure a certain level of continuity with the technology, cuz of course it's always not going, there's gonna be issues, it's not going to work. An interesting complication I do wanna bring up too, Grayson, is that what you've seen within autonomous vehicles is a subset that's very, it's growing very quickly of remote driving.

So you have a lot of companies now piggybacking off the AI environment and going into this remote driving atmosphere, which to me almost, I can see why it's a value add, but it is almost taking back a little bit of the growth that autonomous vehicles are seeing because how does auto, how do autonomous vehicles get good at what they're doing?

They run the same route a hundred thousand times. That's how they get better and precise with their models when we're offering other, in other words, we're taking up some of that bandwidth with people who are sitting in Arizona driving vehicles from a remote destination. You're not only encouraging yourself to have what could be a very significant cyber incident with regards to ransom, because cyber co policies are usually only financially backed policies and, and that they only pay out financial.
So you throw in the bodily injury piece of this, you, you're complicating the situation. Not that I don't think some of these models are interesting and unique, but to me, I, I see AI developing there are a lot of carriers stepping into the space. There are a lot of InsureTechs focused on it.

But again, as the economy itself kind of splits between AI and this kind of quasi-AI, I think we're taking a step back a little bit and understanding. The true flow of how the claims and how they, the real improvement over human driving. You know what that will eventually be? Because again, if you're remote, you still got a human being driving the car.

Grayson Brulte:

Tele ops, remote driving. Scares me. I'll tell you something and I'm gonna, I'm gonna thank you. I'm gonna remove the company's name for security privacy reasons. Years ago, I met with home, I met with Homeland Security and they were asking me different questions about autonomy and autonomous vehicles.

And we started speaking about this one company that was doing teleoperation, and the gentleman from Homeland said to me, you're never gonna believe him. We went and checked the facility. We walked right in. There was no security, and he said, I could put a gun to their head and take over those fleet of vehicles.

And he goes, now I got a terrorist hostage situation, because the companies that, and they still don't have the security place. Think about that. You walk into a building, you put a gun to somebody's head, you take over a fleet of vehicles, you've got a terrorist situation on your hand, and for your neck of the woods, you've got a major risk.

And that's not being looked at. And the other risk aspect that's not talked about. All the cellular networks go down. T-Mobile had a big outage yesterday. Okay. Oh, we triangulate the networks. Ask anybody who has a cell phone, probably every individual, sometimes they don't work. Then what happens?

That's why you need the vehicle to operate on its own. Can you even ensure for tele ops with just the story I told you with from what I meant with Homeland Security to the networks? Has this become uninsurable at some point?

Edward Walker:

No. I think that depends on our human counterparts and their ability to cause havoc, especially on the digital side.

So I like, while I appreciate your story, Grayson I actually think the threat is much worse from a cyber perspective. I think the threat of somebody, 12 year old who knows the computer better than you or I jumps in there, hacks the system, holds them for ransom when they have human beings in the vehicle. You now have a brand new slice of cyber insurance that, that underwriters likely haven't even begun to understand. And yes, is it obtainable? Absolutely for the right price. But again, this is another subset of the industry that we are complicating, With the exposure basis that we're dealing with, the unknowns involves, and yes, is it insurable?

Absolutely, but it's going to be overpriced at this part in time because of the relatively unknown factors like you. You brought up one story, I brought up another, there. There are a lot of ways that model could, really of blow up cyber insurance or even just a simple kidnap ransom policy. I wouldn't say kidnap ransom is in the realm of a hard market, but cyber insurance most definitely is. 

Grayson Brulte:

Is there even enough capacity in the cyber market? And do, and when you ensure an autonomous vehicle slash autonomous trucking company, is it mandatory that the underwriter says, okay, this is great, but we gotta put a cyber policy on top of it?

Edward Walker:

Very typically, the way the policies are structured is that, it is a much more comprehensive approach that's necessary on autonomous. Let's, if we're speaking specifically, I we give our case of the remote driving it, it does play into that as. Being that you have employee or drivers driving remote does separate, say your board of directors a little bit more from the negligence.

That could be, attached to them in the worst case of situations. But when you look at AI vehicles and the development of the adequate risk management profile for that, yes, you have to take everything into consideration. You have to take the cyber exposure the vehicles could have, even from an AI basis. Can they can the technology be. Can the vehicle itself be ransomed? Can passengers be kept there? But you also have to look at it from this, that, from an AI perspective the technology is the brand and the technology in the brand is how much better are we than driving at driving or transporting individuals than another human being and this is what, as opposed to a model where you have W 2's enacting your strategy, you have now technology enacting your strategy. Your liability as a board of directors, as a company is much stricter because your model is much more direct. It is a much more direct result of your design and technology because that is the brand.

And so setting up the correct IP insurance, cyber technology, you know, directors and officers coverage all to work together comprehensively is of the utmost importance. And a lot of that really does require working with the same carrier and the reason it and Yes. Does that limit the market somewhat?

Absolutely. This is, these are the trenches of insurance right now. But what you do in that situation is you eliminate, I've sat in hundreds of claims meetings in my career, and the general rule of thumb, and this is not always the case, but this is general rule of thumb, is that when you have lines of liability insurance you generally would like to put them all with the same carrier.

So if there is, and it really depends on the variety of gray areas you might come across. We are talking about the absolute farthest, most maximum gray. Industry is possible. So you wanna make sure in the event of a claim, whether it's cyber, auto liability, directors and officers, or all three, which can be a piece of the equation, that we don't have one carrier here saying, no, that's not my problem.

That's your problem. This carrier here says, no, that's not my problem. It's actually this carrier's problem. We don't want that discussion taking six, eight months and then eventually somebody figures. We want coverage and the allocation of liability to be assigned immediately. And when you structure a platform, with sim with the same carrier across as many lines as you can, specifically in this AI context, you really eliminate that doubt factor as to who's gonna take the responsibility.

Grayson Brulte:

You invite, you eliminate the eeny, meeny, miny, moe game essentially. 

Edward Walker:

Correct, correct. It's not always the case. That again, Grayson and that'd be a perfect world. That's a perfect world looking at an old school insurance where, we've got your bot policies, we've got your carriers that will write X, Y, and Z policies, throw it all together.

We're in a market with autonomous vehicles where yes, there are carriers that will do that, but the amount of carriers that will do that are significantly less than your, Mom and pop sneaker store, looking for a business owner policy now. So it is a much more involved and complicated process, but it absolutely can be done.

Grayson Brulte:

How much of a concern to the large underwriters is IP theft? We've seen so many public examples of IP theft, especially going to China. And once it's over there it's not coming back. But it's a huge risk. 

Edward Walker:

The, and they can't even subrogate. Yeah. It's a huge risk and it's an incredibly pricey insurance policy, I will say, out of, and it's not a mandatory purchase, it's a discretionary purchase.

And would it be very important to a business model? Yes. However, right now that's a market I'd say that is, pricing insurance at unattainable levels, it ha it really has to be a true. Culture of safety and risk management, and maybe safety is too much of a word there, but really, safety, safeguarding of your intellectual property because, we're talking about very significant premiums here for a piece of your operation that's not mandatory.

And I say that because, you mentioned before we're dealing with a potential recession. We're dealing with, lots of cost cutting across the board. When it comes to what you need to do for the state, the city versus what you need to do with your company. I will always recommend that we go to the most, adequate risk ma management methods possible.

I will always encourage my clients to, to pursue these types of risk. Are they going to purchase them? Lionshare of them for IP insurance do not. 

Grayson Brulte:

To me, that's stupid because if seriously, if you, if we're going into a potential economic recession, banks will collateralize, there's a lot of really, they'll collateralize loans against the value of an IP portfolio.

And I've sat in several of those conversations, I'm sure. They are you insured for this risk? We'll loan against it, but are you insured for that risk? And there's, and we're talking billions of dollars of appetite that I've seen out there. So we're going potential. And you have a potential, it's called a credit line here. Why wouldn't you ensure, and in case a downturn hits that you can go tap that credit line. 

Edward Walker:

It's, again, it's a complicated budget conversation. Do I agree with you that it certainly is a silly thing to, to discount?. Absolutely. However, what, in the grand scheme of the risk management conversation when you're dealing with, your auto liability, you're dealing with your d and o, also in an incredibly hard market you're potentially contemplating going public, which generally can take your D&O private company premium and multiply it by a factor four to 10 times, you're dealing with a lot of cost pressures and in the world of buying decisions, not that everybody doesn't go this direction. I'm speaking about tendencies here. This one tends to be put a as less of a priority, when really it should be focused upon a lot more heavily.

Grayson Brulte:

And this is where you and I will agree, if you're gonna build a company, you're gonna try and take the public markets, you better hope and pray you've got a really great risk. On your staff that understands all the nuances there and risk changes when you insure. How does it, we obviously know how the risk changes from when you're testing to, you're deploying with a driver in to, to fully driverless when you have no driver in the vehicle.

So we, we understand the risk profile there. How does it change from the insurance perspective? Is this the D&O going public moment where, all right, two to two to 10 x your insurance, what does that look like? 

Edward Walker:

It's not a bad analogy. Yes, it's it's definitely always safer for the earlier stages to have an individual or engineer in the vehicle to be just in test track phase.

As soon as you get it out in the road, you got third party exposure, you got bodily injury exposure. You're out there in the world testing your technology and really seeing if it could prove its. And that's where the carrier pool itself that's willing to ensure those.

Is smaller, it's odd considering this is like a graduation process. We're getting better and better at this and we're ready to go. And actually now a carrier that's ensuring us, because we used to have an engineer in the vehicle, no longer wants to play along. Now that's, that those are the technical rules, Grayson, that's why, I really enjoy my job because to me that presents a very normal day-to-day challenge for me, and that we need to communicate with our carrier at this upcoming renewal or during this time of change.

And discuss, Hey, we've been good to you. What's our loss record? What have we noticed? One of the biggest messages I give to my operators is, maybe we've had a good claims here, maybe we haven't, but what have you noticed? What are your, what's your data telling you? Let's go through it together.

Let's talk about where your strengths are. Let's talk about, going back to shared economy models. Who are your good drivers? Who are your bad drivers? Let's invest in the process a little bit because we need to take that narrative to our carrier. That's why I said these are tendencies, Grayson, with the right narrative, my team can go to that same carrier that doesn't wanna write, a particular, subset of AI or, level of autonomous vehicle and discuss, Hey, this is what we've seen.

This is why we are different than the data you. And that's why, as to your point, a very, dedicated risk manager is paramount to a successful operation because if you just choose to let the underwriter in the community just tell you how it's going to go you're gonna always be losing that battle.

Grayson Brulte:

But you need to pair that risk manager. With a great broker such as yourself is willing to sit down there, fight for your client to ensure the right policies are in place. I'm really curious, mobility's changing. We talked about today, we talked about sharing economy. We talked about Uber and Lyft drivers.

We talked about electrification. We talked about autonomy. Do the underwriters have teams in there that are looking at, okay, what's next in the future, transportation? What's next in mobility? So they can get ahead of it. So it's not like uhoh, wait, this new emerging trend in mobility's coming. Do they have, do you wanna call 'em SWAT teams or internal teams that are thinking about what all the new risks are and they could develop products when those event industries eventually scale? 

Edward Walker:

In spades, I would say right now the insurance community is dealing with a short supply of good talent. Just a lot of different businesses are, underwritings teams that used to be five to 10 people are now two to three people. And so what you do, not only does that impact turnaround times, again, we're on the on demand economy. lot of clients want things fast, can be complicated by workers.

So I guess my point is, they're almost so busy worried about what's right in front of. It can be difficult, and I'm not necessarily fully blaming them because again, this is, could be a short staffing conversation in and of itself, are they completely focused on the future?

I would say not always. It depends on what carrier you're talking to. Some of them, yes, absolutely. Some of them are innovating, some of them are looking to, attend InsureTech in New York and so on and so forth, and pay attention to the new models that are coming forward, the new underwriting plans.

Just the other day I saw a new, website based carrier for autonomous vehicles took a quick look at it, got a little bit of funding. So it's not just paying attention to the big dogs in the insurance community that are writing these risks, but also fostering a lot of these younger appetites.

And bringing them into the fold and doing what it takes to really get them ready for what the exposure is they're dealing with. So it's a constantly evolving battle. And someone, for someone like myself it's a job where I have to spend, considerable portion of my time evaluating and lending, perspective to prospective carriers that want to potentially join the ring.

Grayson Brulte:

And l let's not forget, and we're gonna go back in the insurance way back machine here. Lloyds of London started as Lloyd's coffee shop, where the maritime would get together, how to price it. And it was all done in a coffee shop. Lloyd's coffee Shop became the world famous, Lloyds of London. And you're right, you have to keep your eyes in the, in those new emerging underwriters cuz you never know they could be hap become the next Lloyds of London.

We don't know unless we give him a shot of insurance. Is a fascinating industry. It's one. find fascinating other individuals. Oh, it's boring. No, it's a great industry. If you're looking for a job, insurance is a great place to be. Ed. In your opinion, what is the future of insurance as it relates to mobility? Does it go on demand? Is it a per mile fee? What is the future of mobility insurance? 

Edward Walker:

I think it, it's contingent in a lot of items. I agree with you on the tort reform. I certainly think that social inflation is an unnecessary factor in the troublesome market we're dealing with right now. But with regards to the general future, what I see right now is. Likely Grayson, in your auto policy at your home. A lot of this stuff is based off of numbers and a lot of educated guesses and it's worked for a very long period of time and I see us generally moving in the direction over the next 10 years of, Allstate has this program, Geico has this program. Progressive has the plugins that actually monitor your mile to mile driving activity and does give you feedback. It does give you moment to moment pricing and I see a trend. I think we've exhausted our good faith period of that. We can trust the math and the math might not apply to every single person, but it will apply to the group as a whole.

I think we've moved past that or evolved past that again for maybe some unnecessary reasons like. The social inflation and litigation issues that, that, that do come about. However, I see an eventual change to a lot more individuals using that piece of the underwriting puzzle to make sure, there are good drivers.

You know what a lot of statistics say, 50% of premium goes of premiums collect carriers collect, go towards 95% of the loss. From the bad groups of people that they likely shouldn't have been insuring in the first place that they didn't know enough information about. And so I think this lends itself to a little bit more over the shoulder monitoring of each individual driver and quite frankly, much to the benefit of most of us.

It does feel scary, it's intrusive, no doubt about it. I do see it as a likely, a necessary, call it evil, if you will, in moving towards, opening up the market. To more insurance carriers. Cuz otherwise, if we keep playing on these old, antiquated means of underwriting, we're gonna find ourselves with, not just overly priced insurance, but an extremely limited marketplace.

You're not gonna be able to cancel it. You're gonna be able to say, Hey, I hate this, but guess what? I can't do anything about it. So I see us moving into this realm of more individuals using the Dons and more tracking techniques with themselves and taking more agency about their insurance premiums, even just on a personal level.

And then I ultimately think that autonomous vehicles, whether it be trucking or private passenger vehicles, ride share, I think the data will get good enough that we will eventually, maybe it's 10 years, 20 years, but eventually you know that per mile tracking of your insurance will eventually just turn.

We are mostly autonomous and we and the carrier side understands the autonomous better than we do individuals at this point. And we're gonna, we're going to, see the insurance market flattening at that point in time. Now, where that happens and what roles come into play over the next 10, 15 years, will certainly complicate that.

But I, I see that as a natural trajectory. Towards, some sort of equilibrium we might be able to establish in the auto insurance market in particular. 

Grayson Brulte:

There's no doubt that better data will give you better rates, but you mentioned the plugins. I'm concerned from a privacy perspective, and if I'm a divorce attorney, I'm having a field day, oh, you're having an affair. I'm gonna subpoena all that data. Yet to see a court case on. But you're gonna open up Pandora's box, and at the end, as we said earlier, lawyers are gonna win. How do we get around the privacy issue? 

Edward Walker:

That's a great question. I, candidly, that's why, I like to caveat what I said with just, there, there's gonna be some sort of middle ground in between everything.

I just. Through, through at you. Yes. Privacy's going to be a concern. It's already a concern. There, there are a lot of rules and regulations that would suggest that if you're an operator in California, you cannot track your renters at all. Even with the proper disclaimers. You talk to any ride share lawyer in the state of California, they will tell you it is illegal for telematics to be installed in vehicles in California.

Now do a lot of operators do it? Absolutely. Why do they do it? Cause they have to. The difference between their static pricing that they would get with a national interstate, or companies that don't require telematics. We're talking about tenfold differences in price. Not to mention your understanding of your business.

If you're not investing in telematics, you don't know who your drivers are, you don't know how to control risks or stop claims, so this privacy conversation is gonna be part of this equation for as long as this equation is on the table. 

Grayson Brulte:

At the end of the day, it's all gonna come down to economics and we barely started to scratch the surface on insurance today.
It's been a wonderful, insightful conversation. Perhaps next time we'll get into the privacy of telematics. That'll be a great one.

And for today, as we look to wrap up this insightful conversation, what would you like our listeners to take away with them today? 

Edward Walker: 

On the personal side, if you're a driver for Uber, Lyft and DoorDash, invest in yourself.

Take a look at what your options are. Uber and Lyft, all the website, they have great recommendations as to where you should go and insure yourself. But I would, my best recommendation is to take this seriously. It's your business, it's your invest in yourself, invest in protecting yourself. It might be a difficult justification when you're talking about increased costs with gas, so on and so forth.

But the pros far outweigh the cons in protecting yourself in this stage of the sharing economy as a driver, as a. The biggest, I'd say the biggest mistake I see across businesses in ride share is that they don't take the insurance seriously enough. They're not invested in driver behavior scoring.

They're not invested in pushing their claims down. Are they invested in lowering their premiums? Absolutely. Who isn't? But the real day-to-day, the real, in the trenches, what do we need to do to improve your portfolio of. And drive a narrative to the marketplace that we are different than everyone else, really requires a lot of due diligence.

And I would ask every, fleet operator, autonomous vehicle company, on the call listening, this is where you need to invest your time. You need to have dedicated resources to this, or it's going to come back and bite you. 

Grayson Brulte:

That's set up beautifully. I agree with what Ed said. Invest in yourself. Invest in your business. Do not cut corners. Do not take chances. We live in a litigious society where insurance plays a very positive role of protecting your family and your business. Today is tomorrow. Tomorrow's today. And the future is and has always been insurance. Ed, thank you so much for coming on SAE Tomorrow Today.

Edward Walker:

Thanks so much, Grayson.

Grayson Brulte:

Thank you for listening to SAE Tomorrow Today. If you've enjoyed this episode and would like to hear more, please kindly rate review and let us know what topics you'd like for us to explore next. 

Be sure to join us next week as we speak with Jigar Shah, Director of the Department of Energy's Loan Programs Office. He'll discuss how the LPO provides loans to support EV manufacturing under the advanced technology vehicles manufacturing loan program. 

SAE International makes no representations as to the accuracy of the information presented in this podcast. The information and opinions are for general information only.

SAE International does not endorse, approve, recommend or certify any information, product, process, service, or organization presented or mentioned in this podcast.


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