Auto Controls: Insurance's Self-Driving Revolution

Auto insurance loss control is a set of risk management practices designed to reduce the likelihood of a claim being made against an auto insurance policy. This involves identifying the sources of risk and implementing voluntary or required actions that a client or policyholder should take to reduce that risk. For example, an auto insurance company may incentivize a policyholder to take a driver's education course by reducing their premium. This reduces the risk of a claim being filed because a trained driver is more likely to operate their vehicle in a safer manner. Auto insurance loss control programs benefit both policyholders, through reduced premiums, and insurers, through reduced claim payouts.

Hand controls for disabled drivers

There are several types of hand controls available, including:

• Push/rock style: This control allows the driver to apply the accelerator and brakes by hand. The handle is rocked back to accelerate and pushed forward to brake. This style is ideal for drivers with no finger dexterity.
• Push/right angle style: This method is suitable for those with limited finger dexterity. The handle is pushed upward toward the instrument panel to brake and downward at a right angle to accelerate.
• Push/pull style: This can also be used for drivers with limited finger dexterity. Pushing the lever forward engages the brakes, while pulling it backward accelerates the vehicle.
• Push/rotate style: This style may be recommended for drivers with full or limited finger function and limited vehicle space. The lever is twisted to accelerate and pushed forward to brake.

It is important to note that hand controls can only be installed in vehicles with an automatic transmission and power steering and brakes. The cost of adding hand controls typically ranges from $2,700 to $8,000, depending on the type of controls and the complexity of the installation.

Additionally, hand control equipment can include spinner knobs, grips, and amputee rings to make steering easier. These controls generally require the driver to pass a special training class to educate them on the nuances of using the equipment.

Overall, hand controls for disabled drivers provide greater levels of freedom, independence, and safety, allowing individuals who are unable to operate a vehicle in the traditional way to regain control over their transportation.

Loss control programs

For example, an auto insurance company may incentivise a policyholder to take a driver's education course by reducing their premium. This means the insurance company will collect a smaller premium, but it also reduces the risk of a claim being filed by the insured because a trained driver is less likely to get into an accident.

Insurance companies may also require policyholders to take specific actions to reduce risk. For instance, they may require a commercial building to install sprinkler systems to reduce the likelihood of fire damage, or they might require the installation of a security system to reduce the threat of theft.

There are six essential loss control strategies:

• Avoidance: Companies can avoid a particular risk altogether, although this is sometimes impractical as it can impact revenue.
• Prevention: Preventative measures can be implemented to reduce loss frequency, especially for unavoidable risks.
• Reduction: To minimise the severity of a loss, reduction measures can be applied before and after a loss occurs.
• Separation: Companies can minimise the impacts of a single loss by isolating loss exposures from one another, reducing a company's dependence on single assets, activities, or people.
• Duplication: In the event a primary asset is damaged or destroyed, a company should keep backups, spares, or copies of critical property or information.
• Diversification: Having numerous projects, products, markets, or regions can help bear the brunt of loss exposures, preventing one event, or a series of events, from destroying the majority of a company's assets.

Risk management

Insurance loss control is a set of risk management practices that aim to reduce the frequency and severity of losses. This can be achieved through various means, including training, safety measures, and security protocols. By addressing these factors, insurance companies can lower the chances of claims being made, thereby reducing their payout costs.

In the context of auto insurance, loss control programs can be designed to improve driver safety and reduce the risk of accidents. For example, auto insurance providers may offer reduced premiums to drivers who take a driver's education course. This not only incentivizes drivers to be more cautious but also leads to safer driving behaviours, reducing the likelihood of accidents and subsequent claims.

Additionally, insurance companies may require policyholders to take specific actions to mitigate risks. For instance, they may mandate the installation of additional safety features, such as sprinkler systems or security systems, to minimize the potential for fire damage or theft. These requirements not only protect the insured property but also contribute to lower insurance premiums by reducing the risk of claims.

The effectiveness of risk management practices is closely tied to the quality of information and assessments conducted. Insurance companies must thoroughly evaluate the unique risks associated with each policyholder, whether an individual or a commercial entity. This includes considering factors such as driver selection, training, and vehicle maintenance for commercial auto insurance policies. By addressing these specific risk factors, insurance providers can tailor their loss control programs to be more effective and beneficial for both the policyholders and the insurance company.

Cybersecurity risks

The integration of smart, connective technology in vehicles has exposed new vulnerabilities that hackers can exploit. As global sales of connected cars are expected to surge to 115 million in 2025, automotive cyber-risks are becoming a pressing issue for insurers.

A report by Upstream Security revealed a 225% spike in automotive cybersecurity incidents from 2018 to 2021, with the majority (85%) of global attacks conducted remotely. With more cars connected to the internet, criminals can exploit access points in the vehicle and wireless key fobs to gain entry and control. Data or privacy breaches, thefts, and break-ins using wireless key fobs are the most common cyber incidents in vehicles. Malicious parties can also use spoofing and other forms of cyberattacks to gain access.

The rise in automotive cyber-risk has significant implications for auto insurance. Insurers must now consider cyber exposures, a relatively new frontier, in their risk assessments. The challenge for insurers is determining the ultimate cause of a loss, particularly in cases where hacking incidents are involved, as these may not be immediately apparent. Furthermore, the potential for data breaches when owners connect their electric vehicles (EVs) to public charging stations poses another layer of risk.

To address these emerging cyber threats, insurers are requiring organizations to implement robust cybersecurity practices. Underwriters are mandating documentation of cybersecurity measures, with a focus on the following critical controls:

• Multifactor authentication: Utilizing a combination of verification factors, such as passwords, PINs, security tokens, mobile apps, or biometric identifiers, to reduce the risk of unauthorized access.
• Endpoint detection and response: Employing machine learning and continuous monitoring to identify stealthy threats that lack the usual signs of infection, targeting endpoint devices like laptops, tablets, and mobile phones.
• Network access controls: Implementing the principle of least privilege to restrict user access to only the data and systems necessary for their specific job roles.
• Patch management: Maintaining a consistent approach to patching and updating software and operating systems to limit exposure to ransomware and other exploits.
• Incident response planning: Developing a formal plan to detect, respond to, and recover from cyberattacks, outlining technical and business requirements for containing and eradicating threats while maintaining operations.
• Cybersecurity awareness training: Conducting regular training to promote security best practices and educate users about social engineering and phishing techniques to empower them to recognize and thwart potential attacks.
• Secure remote access: Applying encryption, multifactor authentication, and other security measures to protect remote access protocols, while blocking all unnecessary remote access ports to reduce potential entry points for attackers.

By enforcing these cybersecurity controls, insurers aim to mitigate the risks associated with the increasing connectivity of vehicles and protect themselves and their customers from the potential financial and safety implications of automotive cyberattacks.

Insurance company internal controls

An insurance company's internal controls framework is often likened to a house. The foundation of this house is its people, processes, and technology, while the roof is supported by policies, internal controls, leadership tone, quality information, and communication.

The COVID-19 pandemic has exposed weaknesses in the foundations of many insurance companies, and leadership has had to shift its focus to include patience and resilience. With the dramatic increase in remote work, internal controls are operating differently, and there is more stress on internal controls as third-party vendors are brought in to process organizational information.

To address the additional stress on internal controls, leadership must set the tone for patience to allow staff the time and space to pause and ensure that control steps are followed faithfully. This means less calendar packing and more focused time to address issues.

In addition, insurance companies must be aware of increased cybersecurity risks and the vulnerability of risk capital. Business processes have changed, and issuing claims has become more difficult as claimants are hesitant to give up banking information.

To summarise, insurance companies must adapt their internal control models and leadership tone to meet evolving organisational needs and address challenges brought on by the pandemic.

Frequently asked questions