Blog: posts by Ian Dickie

Emergency Autonomous Braking: a no brainer for fleet insurance managers?

Last week the European Parliament formally called for all new cars sold in Europe to be fitted with Autonomous Emergency Braking (AEB) as standard. Analysts expect that EU member states will likely make the technology compulsory in the early 2020s. AEB is available as an option on most models today (at an average cost of GBP 1,300 but sometimes as low as £200) and any individual purchasing a new car should specify it if they possibly can - even if it means forgoing nicer seats or alloy wheels. But for fleet managers there’s really no excuse not to insist on AEB right now. Here’s why.

AEB is an automatic braking system that will engage to avoid or mitigate an accident if the driver fails to respond to an emergency situation. AEB systems use lidar, radar and/or camera technology to identify potential collision risks, taking into account a vehicle’s speed and trajectory. If a potential collision is detected, the system responds by warning the driver and then automatically applying the brakes if no action is taken.

AEB is one of a range of new Advanced Driver Assistance (ADAS) technologies aimed at helping drivers keep control of their vehicle in difficult conditions; and while the jury may still be out as to the real-world effectiveness of some of these driver aids (experts fear they might encourage drivers to relax too much at the controls), there is a wealth of international data available indicating the effectiveness of AEB in reducing crashes and injuries.

The US Insurance Institute for Highway Safety compared the Volvo XC60 and S60 (with a standard fit City AEB system) against a control group and showed a 15% reduction in third party damage claims, and a 26% reduction in personal injury claims.

In the UK, chauffeur firm TriStar worldwide switched to cars fitted with AEB and saw a 27% reduction in rear end crashes by its drivers. Overall repair costs, third party costs and associated charges like hire of replacement vehicles dropped 41% compared to the previous 4 year average.

Speaking at the Insuring Autonomous Vehicles conference in London earlier this year, Andrew Miller, Chief Technical Officer of Thatcham Research, revealed that in 2016 AEB systems were installed as standard-fit on just 21 per cent of new cars available in the UK, whilst a further 27 per cent of vehicles offer the system as an optional extra.

Yet Thatcham calculates that AEB could deliver 308 fewer deaths and serious injuries by 2025 and save society £138 million if the technology were deployed across all new vehicles sold in the UK.

Peter Shaw, Thatcham’s CEO said last week, “There’s an urgent need to change the consumer and fleet mind-set around car safety, especially when AEB can cost as little as £200.”

Fleet operators in particular need to join the dots and see how AEB could positively impact their fleet insurance and operating costs. For the majority of fleet operators, most insured claims (in terms of both numbers and value) are the result of damage caused by the insured fleet driver hitting the third party in the rear.

Rear-end collisions often lead to both third party property damage and third party injury - particularly in the form of claims relating to whiplash injuries. On an annual basis, insured claims from rear accidents typically run into hundreds of thousands of pounds for larger corporate fleets. And as any fleet manager knows, there are significant additional costs to the business on top of the insured cost, including lengthy claims administration, employee absence, vehicle downtime etc.

The resulting claims experience is the main piece of information used by underwriters to calculate renewal premiums, so any material improvement in the claims experience could reduce future renewal premiums.

AEB was made a compulsory feature for all newly registered heavy goods vehicles (over 7.5 tonnes) in the UK back in November 2015. What possible justification could there be for waiting almost a decade before applying the same treatment to passenger cars?

And as Gerry Keaney, CEO of the BVRLA said, “If the combined buying power of fleets and government procurement can be harnessed to adopt AEB it could deliver substantial accident savings very soon.”

So rather than wait for legislation to hit the statute books, fleet managers should be putting AEB at the top of their list of must-haves today. While AEB cannot be retrofitted, it is increasingly available on the vast majority of new vehicles at a cost which is likely to make financial, as well as ethical sense. Fleet managers could consider subsidising cars with AEB technology and thereby making AEB enabled cars more affordable within the pay grade of employees choosing their new company car. However you sell it, few features available today can promise the same ROI in terms of reducing premiums and keeping employees and road-users safe, healthy (and productive).

It really is a no-brainer.


Five of the most interesting urban mobility concepts from this year’s Frankfurt motor show

Smart vision EQ fortwo

According to Daimler, the smart vision EQ fortwo provides a new vision of urban mobility and individualised, highly flexible, totally efficient local public transport.

This is an autonomous concept vehicle, designed for shared-use, which picks up its passengers directly from their chosen location. New individualisation options help users to recognise that it is “their” vehicle by means of the Black Panel Grille at the front as well as large projection surfaces at the sides and the vehicle allows unprecedented individualisation, ideal for car sharing.

Freed from the task of actually driving, the passengers are able to relax in the spacious interior. The show car is the first vehicle from the Daimler Group to take the logical step of dispensing with a steering wheel and pedals.

The smart vision EQ fortwo is the first car in which all of the individual fields of expertise that make up Daimler’s CASE corporate strategy are combined. CASE stands for the strategic pillars of connectivity (Connected), autonomous driving (Autonomous), flexible use (Shared & Services) and electric drive systems (Electric).

“The smart vision EQ fortwo is our vision of future urban mobility; it is the most radical car sharing concept car of all: fully autonomous, with maximum communication capabilities, friendly, comprehensively personalisable and, of course, electric,” says smart CEO Annette Winkler. “With the smart vision EQ fortwo, we are giving a face to the themes with which Mercedes-Benz Cars describes the vision of future mobility within the CASE strategy.”

Honda Urban EV Concept

Surely the most appealing city car concept on show this year, Honda’s Urban EV Concept is built on a completely new platform, and showcases advanced technology within a simple and sophisticated design.

By any measure, Honda is lagging behind in the EV stakes and the Urban EV Concept is a statement of intent that the company will be raising its game. Indeed, at a global level, Honda aims to have electrification in two thirds of its new car sales by 2030. In Europe, the target year is 2025.

The styling is an homage to the company’s early small cars from the 1970s and Honda says the production version will look a lot like this when it goes on sale in 2019.

The concept includes what Honda is calling its Automated Network Assistant (essentially a form of concierge service). Honda says the system “learns from the driver by detecting emotions behind their judgments,” and uses this intelligence to drive future recommendations and advice.

The car features interesting rear-hinged doors and there is space for four people inside the minimalist interior. A super-wide touchscreen display dominates the dashboard and there is a noticeable lack of switchgear, hinting that voice and gesture control will play a significant role in the vehicle’s HMI.

Also announced was the new Honda Power Manager Concept, a fully integrated energy transfer system that can distribute electricity to and from the main grid, as well as directing power flow from renewable sources and managing the interaction of an electric vehicle battery connected to the home.

Mahle MEET

MAHLE’s Efficient Electric Transport (MEET for short) is described by the company as “vehicle concept for tomorrow’s urban mobility”.

Essentially a showcase for the company’s engineering expertise, what makes the MEET interesting is that MAHLE’s engineers have deployed a holistic approach from the very outset, from the powertrain to the vehicle thermal management to the operating concept.

The heart of the vehicle is the 40 kW IPM (Interior Permanent Magnet Synchronous Motor) traction drive. This systems output is specifically designed for urban use, but also allows for longer journeys at higher speeds of up to 100 km/h. As a heavy manual transmission is not required, switching losses are eliminated, leading to a further increase in systems efficiency. Using a 48-volt powertrain allows MAHLE to reduce the costs for the motor and power electronics by 25 percent.

Clever thermal management allows for the systematic utilisation of the available sources of energy and heat, helping to improve efficiency and extend the range of the vehicle. Heating and cooling are a huge headache in electric vehicles since the energy required to reach desired temperatures quickly (warm in winter, cool in summer) greatly depletes the battery and reduces driving range. The MEET uses a particularly efficient alternative to traditional vehicle HVAC in the form of targeted surface heating, made up of heating elements in the form of thin, flexible films. These are used only on the areas that come into direct contact with the passengers (such as seats, side trim panels, and arm rests). This quickly creates a pleasant temperature for passengers—largely independent of the cabin air temperature. Clever stuff.

Segway CityGo

We’ve all watched groups of nervous tourists trundling along crowded city-centre streets from Stockholm to Naples on the eponymous gyroscopic scooters (not always competently).

But with the announcement of the CityGo Last Mile System - a smart electric kickscooter network – Segway is making a serious play to reshape the future of first / last mile transportation within cities.

“With the concept of CityGo Last Mile System, we will enable commuters to travel the last mile in an effortless and elegant way, not to mention environmentally friendly. When not in use, CityGo scooters can be locked and charged at conveniently positioned 'Charge'n Go' stations or in cars' boots with the 'Boot'n Go' car storage units,” said Tony Ho, Vice President Global Business Development at Segway. “We are currently actively working with cities, car manufacturers, car-hiring companies, and EV charge networks to roll out this new concept to the mass market”.

Features like the adaptive power assist system enables users to activate and adjust speed intuitively, and to personalize riding preferences accordingly. With a maximum speed of 25 km/h and three different riding modes, Novice, Standard and Sport, the CityGo scooters are intended to appeal to wide spectrum of users.

Needless to say, the scooters are mobile phone ready and can be locked /unlocked, personalised and monitored via Bluetooth communications. The accompanying CityGo app is powered by a cloud-based management system, which allows all scooters, charge stations and car trunk storage units to work together seamlessly.

Car eWallet from ZF, UBS & IBM

German T1 supplier ZF has joined forces with IBM and banking giant UBS to jointly develop an open automotive transaction platform for mobility services based on blockchain technology.

Car eWallet has the potential to radically change the way manufacturers, suppliers and service providers process digital transactions and considerably simplify the use of vehicle services. Car eWallet is a digital assistant in the car that allows secure and convenient payments on the go. Moreover, it can also perform other tasks, like opening the trunk or doors.

The platform is built on IBM’s Blockchain technology, which makes it possible to synchronise the information of each participant in the network in a reliable and unchangeable data record. At the same time, it ensures that users only have access to the information that they are permitted to see and use.

Access to the Car eWallet is provided through the IBM Cloud and driven by Hyperledger Fabric 1.0, a blockchain framework and one of the Hyperledger projects hosted by the Linux Foundation. With this public cloud service platform the partners intend to build a secure blockchain network that can collect fees for parking and tolling, as well as future use cases such as car-sharing, energy provisioning to the power system or delivery services.



Could auto loans really be about to cause the next global financial crisis?

Everyone who works in the auto industry can vividly recall how horrible the last financial crisis was. The effect of the 2008 crash was devastating for auto sales as consumers postponed new car purchases and defaulted on existing loans. A few titans of the industry only survived thanks to massive state bailouts.

The root cause of the 2008 crash was, as we know, a collapse in the market for sub-prime mortgages, sold on to investors in the form of so-called Collateralised Debt Obligations (CDOs). Now economists think we could be due for another, similar shock – only this time the cause could be the auto industry itself.

The auto industry has been booming in recent years, with record sales and rising average spend per vehicle throughout most major global markets. But around the world, financial analysts are warning that the auto industry’s good times are built on unprecedented levels of credit, much of it sub-prime. And there are multiple reasons to think the bubble might be about to burst.

Take the UK for example. Interest rates have never been lower and ultra-cheap finance has fuelled most of the country’s growth over the past three years – nowhere more so than in the buoyant automotive sector. Indeed Britain saw a record £31.6bn in car loans last year.

In the UK, a new breed of ultra-low-cost loans known as Personal Contract Purchase (PCP) plans account for a staggering 82% of all new car registrations. PCPs have exploded in popularity because they seem so cheap. This is because PCPs only take into account the cost of the car’s depreciation (typically over the first 3 years), rather than spreading the loan and interest charge over the whole cost of the car. This has made the most expensive models (those which are expected to maintain their value best) affordable to those on lower incomes. Sales of up-market diesel SUVs, in particular, have been soaring.

Picture of man buying a new car

This, in turn, has created unprecedented levels of exposure for the auto finance companies and lending institutions. Last year, Bank of England economists writing in a blog post entitled Car finance – is the industry speeding? warned that “the industry’s growing reliance on PCP has made it more vulnerable to macroeconomic downturns”.

The banking industry, which provides most of the finance for PCPs, is vague when it comes to the details of how affordability and default metrics are applied and tracked across this vast market. Much as it used to be vague when probed about mortgage lending decisions. Analysts now worry that the absence of any standard way to calculate customer arrears and vehicle repossessions could mean that the 3% figure which the industry itself defines as “sub-prime” could, in reality, be far larger.

The Finance & Leasing Association (the trade body for car lenders) cannot provide figures to support its assertion that lenders are following conservative credit guidelines. It says PCPs are sold responsibly only to those people with a strong credit score. Yet lenders’ credit scoring policies, which are relatively transparent in the US – the original home of the PCP – are secret in the UK.

More troubling than the levels of irresponsible lending though is the sheer total volume of auto lending. Last year UK household borrowing to buy cars was up 12% on 2015 levels. This year, the total borrowed is expected to exceed £40bn. Cash purchases are almost unheard of. A record 2.7m new cars were sold in Britain last year – the fifth year in a row of increasing sales. Today the British “buy” more cars per capita than any other major European economy. Now with the economy slowing, there are real worries that this volume of lending will be highly vulnerable, even to small increases in interest rates or rises in unemployment.

Another cloud in the perfect storm might be diesel. Of the 2.7m new cars sold last year, 1.3m were diesels. Many experts foresee a collapse in the residual values of diesel cars, especially top-of-the range premium diesels, as the government considers a clampdown on the fuel as part of plans to improve air quality in cities.

And it’s not just the UK that looks risky. Cast an eye across the Atlantic and the indicators are every bit as troubling and on a much larger scale.

Today more than a million Americans are behind with payments on their car loans – a level not seen since the last financial crisis. Meanwhile Morgan Stanley is projecting that used car prices in the US “could crash by up to 50%” over the next four or five years.

As of April 2017, approximately $200bn had been loaned out by auto finance companies to consumers with sub-prime credit scores. This at a time when sub-prime auto loan losses have soared to their highest level since 2008, and the delinquency rate on those loans has risen to the highest level seen since the last financial crisis.

And, just like with sub-prime mortgages in the run up to the last crisis, sub-prime auto loans have been bundled together and sold on as – you guessed it - our old friend the Collateralised Debt Obligation!

There could well be pain ahead for the auto industry. It might not be as severe as the 2008 crash. But this time it will have been self-inflicted.