[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]



 
                   THE IMPACT OF AUTONOMOUS VEHICLES
.                   
                       ON THE FUTURE OF INSURANCE

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                         HOUSING AND INSURANCE

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 23, 2018

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-96
                           
                           
              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
              
                               __________


		  U.S. GOVERNMENT PUBLISHING OFFICE       
		  
31-460 PDF		  WASHINGTON : 2018		  
              

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

PATRICK T. McHENRY, North Carolina,  MAXINE WATERS, California, Ranking 
    Vice Chairman                        Member
PETER T. KING, New York              CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma             BRAD SHERMAN, California
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                     Shannon McGahn, Staff Director
                 Subcommittee on Housing and Insurance

                   SEAN P. DUFFY, Wisconsin, Chairman

DENNIS A. ROSS, Florida, Vice        EMANUEL CLEAVER, Missouri, Ranking 
    Chairman                             Member
EDWARD R. ROYCE, California          NYDIA M. VELAZQUEZ, New York
STEVAN PEARCE, New Mexico            MICHAEL E. CAPUANO, Massachusetts
BILL POSEY, Florida                  WM. LACY CLAY, Missouri
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
STEVE STIVERS, Ohio                  STEPHEN F. LYNCH, Massachusetts
RANDY HULTGREN, Illinois             JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania       DANIEL T. KILDEE, Michigan
LEE M. ZELDIN, New York              JOHN K. DELANEY, Maryland
DAVID A. TROTT, Michigan             RUBEN KIHUEN, Nevada
THOMAS MacARTHUR, New Jersey
TED BUDD, North Carolina


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    May 23, 2018.................................................     1
Appendix:
    May 23, 2018.................................................    27
    
    

                               WITNESSES
                        Wednesday, May 23, 2018

Adams, Ian, Assistant Vice President, R Street Institute.........     9
Carlson, David T., U.S. Manufacturing & Automotive Practice 
  Leader, Marsh & McLennan.......................................     4
Gammelgard, Ryan D., Counsel, Public Policy Resource Group, State 
  Farm...........................................................     6
Geraci, Sam, Vice President, Strategy, American Family Mutual 
  Insurance Company..............................................     8
Gillis, Jack, Consumer Federation of America.....................    10

                                APPENDIX

Prepared statements:
    Adams, Ian...................................................    28
    Carlson, David T.............................................    33
    Gammelgard, Ryan D...........................................    42
    Geraci, Sam..................................................    48
    Gillis, Jack.................................................    53

              Additional Material Submitted for the Record

Duffy, Hon. Sean:
    Statement for the record from the American Insurance 
      Association................................................    61
    Supplemental statement for the record from the American 
      Insurance Association......................................    66
    Statement for the record from the National Association of 
      Mutual Insurance Companies.................................    71
    Statement for the record from the Property Casualty Insurers 
      Association of America.....................................    86
Cleaver, Hon. Emanuel:
    Consumer Watchdog report entitled, ``Self Driving Vehicles: 
      The Threat to Consumers''..................................    88

 
                   THE IMPACT OF AUTONOMOUS VEHICLES
.                   
                       ON THE FUTURE OF INSURANCE

                              ----------                              


                        Wednesday, May 23, 2018

                     U.S. House of Representatives,
                                    Subcommittee on Housing
                                            and Insurance ,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:37 p.m., in 
room 2128, Rayburn House Office Building, Hon. Sean Duffy 
[chairman of the subcommittee] presiding.
    Present: Representatives Duffy, Ross, Posey, Luetkemeyer, 
Hultgren, Rothfus, Budd, Cleaver, Sherman, and Gonzalez.
    Chairman Duffy. The Housing and Insurance Subcommittee will 
come to order. Today's hearing is entitled, ``The Impact of 
Autonomous Vehicles on the Future of Insurance.'' Without 
objection, the Chair is authorized to declare a recess of the 
subcommittee at any time.
    Without objection, all members will have five legislative 
days within which to submit extraneous materials to the Chair 
for inclusion in the record. Without objection members of the 
full committee who are not members the subcommittee will be 
participating in today's hearing for the purpose of making an 
opening statement and asking our witnesses questions.
    The Chair now recognizes himself for a 5-minute opening 
statement. I first want to thank our panel for being here 
today. I apologize that we were late. We had a vote on the 
floor and it takes a while to get people back to the hearing 
room, but we are grateful for your presence and excited to hear 
your testimony on autonomous vehicles as it has a cross-section 
with insurance. Again, thank you for being here.
    Now, while the focus of today's hearing will be on 
insurance, other committees have already been looking at the 
issue, and I suspect Judiciary may look at AVs from a product 
liability perspective as opposed to our insurance perspective.
    Reality is catching up with movies like Blade Runner, 
Demolition Man, Minority Report. We have seen the capabilities 
of fully autonomous vehicles being tested in cities like San 
Francisco, Miami, Pittsburgh, and more.
    Auto insurance policies have already been impacted by AVs. 
For instance, we already have level two and level three AVs on 
the road wherein vehicles assist the driver in accelerating, 
decelerating, and steering.
    Manufacturers like Tesla already employing adaptive cruise 
control technology which lets you take your hands off the wheel 
for a lengthened period of time. There are a lot of people out 
there that are somewhat resistant to entrusting their lives 
with autonomous vehicles. And there are others who just want to 
drive. The freedom of shifting gears and being behind the wheel 
has an American freedom to it. They want to keep that. But at 
the end of the day, safety will be the top concern before the 
public is ready to fully trust AVs.
    We have seen the reaction from both industry and the public 
to recent accidents and how it has altered views on how ready 
this technology is from and for being deployed. There are 
others ready for the change. Senior citizens are the perfect 
demographic for AVs. The oldest among us are clamoring for this 
new technology. They don't want to drive any more than we want 
to be behind a Cadillac going 10 miles an hour under the speed 
limit.
    If you talk to millennials, their generation, they don't 
even own cars. They like public transportation. They think of 
Uber and Lyft also as public transportation. And in my D.C. 
office here, I only have two staff members that have cars and 
they are not millennials. They are older.
    At the corporate level, UberSUVs and UberBLACK are how 
executives get around town. These ride-sharing companies are 
also looking at employing fleets of fully autonomous vehicles. 
I have eight kids. I have gone through the pain of teaching two 
of them how to drive. I think I got a lot of gray hair from 
that process. So not only do you notice the increased cost of 
insurance, especially after your daughter backs into your 
campaign staffer's car, but also the stress of your kids 
getting in an accident.
    What does this technology do to keep our kids safe as they 
are new to the road and new to driving? As a parent, and eight 
kids, as many people know, you have fights in the back. What 
happens when you turn around, taking your attention off the 
road and trying to put out a fight? This technology can be 
remarkable in keeping our families and our kids safe.
    In Wisconsin, some of you might have heard, there is a big 
investment from Foxconn. They are looking to work with 
Wisconsin DOT to create AV dedicated lanes to drive over 4,000 
employees to their jobs at the company's plant.
    All of a sudden transportation to and from work could be a 
perk of the job. Autonomous vehicles, they are coming. What we 
hope to find out today is how insurers are looking at AVs in 
terms of insurability.
    Will auto manufacturers and tech companies developing the 
driving systems, will they retain liability for damage? Will 
specialized products be developed within the industry? How will 
data be shared for risk assessment?
    I look forward to the panel's insights and thoughts on this 
topic. Again, this is the first time we have had a panel in our 
committee on this topic in the ever-changing space with auto 
insurance.
    I am also interested in what role do you think the Congress 
should play. Do we have a space? If we do, what should it look 
like? Obviously, we don't want to crimp innovation. We want to 
make sure that we don't have laws that are aging as technology 
is racing forward. We welcome your insights on that as well.
    My time is about to expire, so I now recognize the 
gentleman from Missouri, Mr. Cleaver, the Ranking Member for 5 
minutes.
    Mr. Cleaver. Thank you, Mr. Chairman.
    And thank you for being here to provide testimony for us. 
And I don't think this is something that has been scheduled too 
far in advance of a reality. This hearing will address the 
impact of autonomous vehicles on the future of insurance. This 
is an exciting topic as well as the fact that we will explore 
technology that very well may reshape our country and our 
culture. However, as with any new technology, the benefits must 
be carefully weighed and the relevant policies must be 
addressed.
    I happen to be one of those who believe that new technology 
should be scrutinized. And I think we have that responsibility. 
And I appreciate the fact that the Chair has scheduled this 
hearing for that purpose.
    These autonomous vehicles are characterized by different 
levels, one through five where the car is fully automated, with 
no role for the driver. Currently, a number of companies like 
Google, Apple, Uber have begun to explore manufacturing these 
vehicles with various levels of automation and various levels 
of success.
    I was stunned a few years ago to read that Captain Kirk and 
Scotty actually laid the foundation for the flip phones that we 
started using. And that quite often scientists will go to movie 
makers and ask them about the future and to create something 
that doesn't seem real that eventually becomes real.
    I think the technology is going to evolve. And it is 
important for the insurance sector to consider how it will be 
impacted. Most States require drivers to have an auto insurance 
that covers their private vehicle. A shift to autonomous 
vehicles may change the type of insurance coverage to more 
reliance on commercial coverage and product liability. This 
hearing will give us a chance to hear from the insurance sector 
on how they plan to address what could be a huge change in the 
American insurance market. I would like to hear how 
affordability will be addressed in this evolving insurance 
market to make certain that all Americans of all economic 
levels will have access.
    And then finally, autonomous vehicles will collect huge 
amounts of data regarding where passengers travel. There are 
big questions, at least for me, that must be answered on who 
owns the data. What level of access should insurance companies 
have to it. And how will this data be protected. Thank you for 
being here today and I look forward to you shedding light on 
all of these knotty issues that we will have to deal with.
    Thank you, Mr. Chairman. I yield back.
    Chairman Duffy. The gentleman yields back.
    We now welcome our panel of witnesses. First we have Mr. 
Carlson, U.S. Manufacturing & Automotive Practice Leader at 
Marsh & McLennan, welcome.
    I now want to look to the gentleman from Illinois, Mr. 
Hultgren, to introduce our next witness.
    Mr. Hultgren. Thanks, Chairman. It is a privilege to be 
able to recognize and welcome Ryan Gammelgard from State Farm 
who traveled all the way from Illinois to D.C. to testify 
before the subcommittee today.
    Mr. Chairman, State Farm is a fixture in the Illinois 
insurance marketplace and I actually just had the pleasure of 
meeting with one of my State Farm agents, who serves my 
district, Jeff Keicher earlier this afternoon.
    Ryan works as Counsel in Public Policy Resource Group of 
State Farm's law department in Bloomington, Illinois. And in 
this role, he has coordinated Federal and State public policy 
positions on automated driving systems including providing 
testimony at the State level. Ryan, thanks for being here, 
looking forward to hearing your testimony along with the rest 
of our great panel today. And with that I yield back.
    Thanks, Mr. Chairman.
    Chairman Duffy. Thank you and not to be outdone by 
Illinois, we welcome our third witness, Sam Geraci, the Vice 
President of Strategy at American Family Mutual Insurance, a 
great Wisconsin company. Welcome.
    And our fourth witness, Mr. Ian Adams, Associate Vice 
President of State Affairs at the R Street Institute and Mr. 
Gillis, representing the Consumer Federation of America. 
Welcome, all.
    The witnesses will in a moment be recognized for 5 minutes 
to give an oral presentation of their written testimony. 
Without objection, the witnesses' written statements will be 
made part of the record following their oral remarks.
    Once the witnesses have finished presenting their 
testimony, each member of the subcommittee will have 5 minutes 
within which to ask the panel questions. Now, on your table you 
will note that there are three lights. Green means go. Yellow 
means you have 1 minute left and red means your time is up.
    Your microphones are sensitive, only when they are on 
though, please make sure they are on when you are giving your 
statement and answering questions. Now, with that, Mr. Carlson, 
you are now recognized for 5 minutes.

                   STATEMENT OF DAVID CARLSON

    Mr. Carlson. Chairman Duffy, Ranking Member Cleaver, my 
name is David Carlson and I am a Senior Vice President at Marsh 
& McLennan. And I lead our U.S. Manufacturing and Automotive 
Industry Practice.
    Marsh is the globe's leader in insurance and brokerage and 
is part of Marsh & McLennan Companies based in the United 
States. The U.S. Manufacturing and Automotive Industry practice 
is a network of global employees in over 100 countries 
representing our clients.
    I am honored to participate in today's hearing. And I will 
use this opportunity to share initial observations on mobility 
transformation and focus on the impact that autonomous vehicles 
will have on risk management and insurance industry.
    The future of AV is now. We are already driving highly 
advanced vehicles and by 2025, we will probably be sharing the 
road with autonomous vehicle technology. AV technology is 
creating seismic shifts in the automotive industry and the 
insurance sector alike, the trend raises questions about how 
the insurance sector will incorporate AV risk and underwriting 
and help consumers realize the anticipated insurance safety 
benefits.
    While AV risks are a shifting landscape for underwriters, 
the development and solutions must be embraced to manage risk 
effectively. Already, underwriting in principle of personal, 
commercial, and trucking auto insurance is taking into 
consideration the safety benefits of automated driving systems.
    As trends in autonomous technology accelerate, 
manufacturers, component suppliers and technology companies 
will start to assume more liability for the performance of 
their systems. The liability pendulum will shift from personal 
auto to commercial product liability or a hybrid of some form 
of coverage.
    Another likely key question involves risk management. As 
society becomes more dependent on various products, more 
liability and it will become necessary to refocus current risk 
management strategies to account for that shift.
    Due to the anticipated positive societal and economic 
impacts of autonomous vehicle technology, legislator, and 
regulators must consider establishing a regulatory framework 
for AV as a high priority.
    But, Government is not alone in moving with caution. The 
insurance industry is also in the early stages of adapting to 
the disruptive forces at play. As with cybersecurity and 
related insurance, there is value for public and private 
partnership to develop the technology and markets.
    Autonomous mobility companies are struggling to buy 
competitively priced insurance for auto risks. Startups and 
smaller companies are buying insufficient capacity in personal 
line marketplace. And the traditional insurance marketplace is 
struggling to address the needs of small and midsize fleets 
looking to enter the AV market.
    At Marsh & McLennan, we believe purposeful action is 
required. We have challenged ourselves and our insurance 
partners to develop scalable solutions that can address the 
risks as they exist today and evolve with the technology.
    Just the same, regulations cannot evolve into a barrier to 
deploying autonomous vehicle technologies. Currently, 
regulatory framework can limit the development of innovative 
insurance products when there is insufficient loss data or case 
law.
    Without flexibility, it is hard to develop solutions that 
address emerging technologies and changes in consumer demand. 
As consumers and companies no longer own assets, they'd rather 
buy them and use them as a service, insurance must respond 
accordingly.
    The ability to innovate and develop new ride-sharing 
insurance solutions has been a catalyst to the growth of that 
sector. Marsh has developed the first ride-sharing policy to 
adapt to the fact that people are no longer using their 
vehicles for 100 percent of personal or 100 percent of 
commercial use.
    The solution was pioneered leveraging the flexibility 
offered by the surplus lines market and had been codified by 
policymakers across the country. The solution provides 
protections for the ride-sharing public as well as the ride-
share drivers.
    Marsh has facilitated the creation of hundreds of insurance 
products throughout the personal insurance marketplace that 
have allowed broad consumer choice to purchase the insurance 
that meets individual needs.
    We envision a similar need for the innovation across the 
autonomous mobility platform. Consumer preference is moving 
away from the individual car ownership to mobility ecosystems. 
The effect of this is nothing short of revolutionary.
    To further enable the advancement of AV, policymakers 
should embrace the significant social and economic benefits of 
new technology. The insurance sector must be able to be nimble 
and willing to change in a way to view risks.
    Growing up, we were always reminded never to get into a car 
with a stranger. I am willing to bet that nearly everyone in 
this room got into a car with a complete stranger in the last 
week. Who knows, in another decade, we may regulate getting 
into a car with no driver at all. Thank you.
    [The prepared statement of Mr. Carlson can be found on page 
33 of the appendix.]
    Chairman Duffy. Thank you, Mr. Carlson.
    Mr. Gammelgard, you are recognized for 5 minutes.

                  STATEMENT OF RYAN GAMMELGARD

    Mr. Gammelgard. Thank you, Chairman Duffy, Ranking Member 
Cleaver, and other members of the committee. My name is Ryan 
Gammelgard and I am counsel in the Public Policy Resource Group 
of State Farm, where I work on public policy issues associated 
with automated vehicles.
    State Farm thanks you for providing this opportunity to 
testify today on automated vehicle technology and its impact on 
insurance. We have submitted written testimony to this 
subcommittee which provides an overview of how we view this 
technology in some of our main public policy positions. For 
purposes of my testimony today, I will summarize some key 
points.
    State Farm's mission is to help people manage the risks of 
everyday life and recover from the unexpected. State Farm has 
been the Nation's largest auto insurer for over 75 years. And 
we currently have over 45 million auto policies in place.
    The majority of our $76 billion in annual revenue primarily 
comes from auto insurance. So we do understand the potential 
impact the automated vehicle will have on the insurance 
industry.
    We also understand that the insurance industry and State 
Farm are going to be looking at a number of issues to make sure 
that we can better protect our policyholders as they undergo 
this transition with automated vehicles.
    To this point, we want to underscore the following. To the 
extent that automated vehicles enhance auto and highway safety, 
State Farm is excited about and in support of these 
technologies. At the same time, while automated vehicles may 
reduce or eliminate some risks, as recent events show, there 
will be crashes. And new risks are likely to emerge.
    In order to learn more about automated vehicle technology, 
State Farm takes an active role in collaboration, multi-
industry conversations, and research. One example is our 
support of MCity at the University of Michigan.
    In addition to gaining access to a 32-acre test track for 
automated vehicles, we also work with other industry members 
such as GM, Ford, Intel, Verizon, and LG to identify research 
opportunities that need to be addressed in the automated 
vehicle space.
    In addition to that collaborative work, we also want to 
make sure that we understand the technology for our own 
purposes. So we have a vehicle research facility in our home 
office in Bloomington, Illinois. And we also conduct our own 
customer surveys to gauge how people are actually perceiving 
this technology. More information on that is in our written 
testimony.
    Bottom line, it is important for us to help prepare our 45 
million auto policyholders for what the future holds. In 
regards to key public policy issues, I want to highlight the 
following.
    Data access is a key issue for the insurance industry. 
Crash-related data is essential for developing proper pricing 
and underwriting of these vehicles, for determining who is at 
fault and who is liable for crashes that do occur and then also 
for the public.
    Data access is important to determine the safety and 
reliability of this technology. Vehicle data access is also key 
for other key stakeholders as well. NHTSA (National Highway 
Traffic Safety Administration) in their most recent automated 
vehicle policy guidance referenced the importance of data 
access for third parties. And the American Association of Motor 
Vehicle Administrators (AAMVA), just within the past week 
issued guidance for States, outlining the importance for data 
access for law enforcement and other parties.
    Liability issues are also key for State Farm and the 
insurance industry. State Farm's current policy position is 
that existing State liability and tort laws are sufficient to 
address the emerging risks associated with this technology.
    However, we do recognize that more research and more work 
needs to be done in that area. There is a growing perception 
with the move to higher levels of automation and more of a move 
toward commercial fleet policy or more of a commercial fleet, 
there will be a shift toward more commercial and product 
liability issues.
    However, we do want to make sure that we let the system 
evolve before we decide to define and create new systems of 
liability that may not actually be to the benefit of the 
public.
    The final key point that we want to make is that as we look 
at legislation that is designed to help auto manufacturers, 
tech companies and suppliers innovate, the insurance industry 
needs to be able to innovate as well.
    We are faced with situations where we might have to create, 
develop, and underwrite products that by law we are required to 
match price to risk. In this future State there might not even 
be any data to show whether or not these vehicles are safe.
    And so I think we all need to work together as stakeholders 
in this conversation to make sure that we are allowed to 
innovate as well, to encourage the safe development of this 
technology.
    Thank you.
    [The prepared statement of Mr. Gammelgard can be found on 
page 42 of the appendix.]
    Chairman Duffy. Thank you.
    Mr. Geraci, you are recognized for 5 minutes.

                     STATEMENT OF SAM GERACI

    Mr. Geraci. Thank you, Chairman Duffy, Ranking Member 
Cleaver, and members of the subcommittee. Thank you for 
inviting me to testify at today's important hearing. My name is 
Sam Geraci, and I am the Vice President of Strategy at American 
Family Insurance.
    I look forward to testifying today about a topic that is of 
great importance to so many Americans and to American Family 
insurance policyholders. American Family Insurance is the 
Nation's thirteenth largest property casualty insurance group 
and is owned solely by our policyholders.
    Supporting them is our only priority in business. American 
Family fully supports the development of automated driving 
systems or ADS. And we are among the organizations supporting 
ADS work at the University of Wisconsin-Madison College of 
Engineering and the Wisconsin Automated Vehicle Proving 
Grounds.
    This work will benefit our policyholders, our community, 
and our environment. The development of ADS technology may be 
the most consequential transportation development of our time.
    This new technology promises better mobility and greater 
safety for everyone on our roads. The development and 
deployment of proven, safe, autonomous vehicles will require 
significant technological advances, regulatory changes and an 
active partnership between technology companies, vehicle 
makers, insurance companies, and the Government.
    Critical issues related to passenger safety, liability, and 
compensation require that insurance companies are included in 
the regulation of autonomous vehicles. Consumers will continue 
to look to property casualty insurers to provide them with the 
protections they have come to expect as this new frontier of 
automotive products evolves.
    For decades, insurers have compiled data and analysis on 
human drivers in order to provide actuarially valid information 
to measure a human driver's risk. Unfortunately, there is no 
comparable data or analysis regarding the risk levels of 
autonomous vehicles. Each auto manufacturer may have data on 
their vehicles, but neither regulators, agencies like the 
National Highway Traffic Safety Administration, nor the 
insurance industry have consistent access to that information.
    ADS vehicles are already producing enormous amounts of data 
as they are tested on public roads and it will be important to 
establish access to this data for insurers. At American Family, 
we believe that customers should have unrestricted access to 
their vehicles' operating data and the ability to share that 
data with third parties such as their insurers.
    Vehicle operating data will play an essential role in 
developing rates and underwriting policies. In the event of an 
accident, insurers will also require access to crash data. This 
is the vital data insurers use to determine relative liability 
for the inevitable crashes and to compensate crash victims.
    Detailed reviews of rates and coverages by State regulators 
requires insurers to provide extensive levels of actuarially 
valid data on crashes, on frequency and severity, and the type 
of operator that was in control of the vehicle. But we cannot 
provide that without data.
    Of course, this data would contain neither the ADS users' 
personal identifiable information (PII), nor any confidential 
business data of the vehicle manufacturer. We believe that 
State and Federal Governments should each continue to play a 
central role in ensuring the emergence of ADS technology while 
protecting consumers in the event of a crash.
    The Federal Government through NHTSA should continue to 
make determinations on vehicle performance and safety, as well 
as data integrity of autonomous vehicles. At the same time, 
States and localities should retain their traditional authority 
to make the determinations of the registration, licensing, and 
operation of vehicles.
    States should define and address personal liability issues 
in State law. Perhaps most importantly to American Family, 
States should retain the regulation of automobile insurance for 
the vehicle or operator.
    Unfortunately, we all know about the terrible impact of 
auto accidents. It doesn't have to be this way. And automated 
vehicles have the potential to make lives safer and mobility 
more accessible for millions of Americans.
    But in the meantime, we need to ensure that those involved 
in accidents continue to receive prompt and efficient help when 
they need it most. When crashes involving automated vehicles 
occur, insurers can help allocate responsibility among ADS, 
non-ADS, and other entities involved.
    Existing State liability and tort laws can evolve to 
address responsibility and liability in the same way that tort 
law has evolved with other technological and social 
developments. Ultimately, the insurance industry supports the 
development of ADS technology and should be a partner to 
technology companies, vehicle manufacturers, and regulators to 
promote safety on our roads.
    We look forward to continuing to be a central part of the 
discussion. And thank you for listening and look forward to 
answering any questions you may have.
    [The prepared statement of Mr. Geraci can be found on page 
48 of the appendix.]
    Chairman Duffy. Thank you.
    Mr. Adams is recognized for 5 minutes.

                     STATEMENT OF IAN ADAMS

    Mr. Adams. Thank you, Chairman Duffy, Ranking Member 
Cleaver, and members of the subcommittee. My name is Ian Adams, 
and I am the Associate Vice President of State affairs at the R 
Street Institute. For those of you not familiar with us, we are 
a free market think tank that is situated here in Washington, 
DC, though we have offices throughout the country. I am 
actually in from Sacramento, California.
    Our motto is free markets, real solutions. And that means 
we are often focused on issues that are of high complexity but 
low salience. And so in concrete terms that has meant we have 
spent a lot of time looking at property and casualty insurance 
regulation.
    In fact, our signature research project on an annual basis 
is an insurance regulatory report card that examines the 50 
States and their approaches to insurance regulation. And as a 
result of that research, we have come to some conclusions about 
the role that insurance plays as a social good.
    It allows consumers to evaluate, manage, and mitigate their 
risks. And we believe that when consumers are informed, they 
are best positioned to protect their interest. Risk-based rates 
and market competition have made U.S. roads safer places, 
because they have allowed consumers and automakers alike to 
understand both operational and design choices and how they 
impact risk.
    And it is with that understanding in the prospect of lower 
rates and competitive advantages that safety has, until very 
recently, steadily improved on U.S. roads. And that is why I am 
so excited to be here today, because autonomous vehicles really 
do present a potentially transformational moment in road safety 
here in the United States.
    Tens of thousands of people, as I am sure you are aware, 
are killed on U.S. roads every year and many more are injured. 
And yet the leading cause of death is not the failure of 
infrastructure and it is certainly not the failure of the 
operation of those vehicles. It is often the choices of the 
operator of those vehicles. Because we know that the leading 
cause of those injuries and deaths is human operator error, AVs 
present us an opportunity. They can offer us a safer approach 
to transportation.
    However, even though AVs promise hitherto unimaginable 
safety improvements, much uncertainty remains about if, when, 
and how the technology will ultimately be deployed and adopted.
    At R Street, we believe that risk-based insurance prices 
can actually help resolve some of that uncertainty. And we 
believe that those insurance products can help hasten the place 
of deployment by providing consumers not only a safety 
rationale but a bottom line, dollars and cents rational for 
embracing the technology.
    Now, if history is any indicator, safer vehicles will, over 
time, mean lower cost of operation provided consumers receive 
those price signals. However, today in some States, regulatory 
hurdles exist that undermine that process. For instance, in my 
home State in California, the law currently requires 
consideration of rating factors which will lead to the use of 
rates that are fundamentally irrational in the context of 
autonomous vehicles.
    Now, the arrival of this promising technology underscores 
the importance of ensuring that there is no lag between 
regulatory capacity and product necessity. And with that, I 
look forward to having the discussion that we will undertake 
today.
    Thanks for having me.
    [The prepared statement of Mr. Adams can be found on page 
28 of the appendix.]
    Chairman Duffy. Thank you.
    Mr. Gillis, you are recognized for 5 minutes.

                    STATEMENT OF JACK GILLIS

    Mr. Gillis. Thank you very much. Good afternoon, Chairman 
Duffy and Ranking Member Cleaver. My name is Jack Gillis. I am 
the incoming Executive Director of the Consumer Federation of 
America.
    CFA is an association of 275 State, local, and national 
organizations working to protect consumer interests. And we 
greatly appreciate the opportunity to be here today. We 
appreciate the subcommittee holding this hearing today, because 
frankly, we have more questions than we have answers.
    By raising these questions well before the AV is 
introduced, you are providing the time needed to resolve the 
intricacies associated with insuring these extraordinarily 
complex products. As the AV becomes the primary mode of 
transportation, we expect that insurance costs associated with 
personal injury will be significantly minimized. But the 
electronic sophistication needed to operate these vehicles 
could make them enormously expensive to repair.
    We also need to consider the role of the Federal 
Government. Right now, Congress is considering the AV START 
Act, a bill with some serious shortcomings that would 
dramatically affect auto insurance. The bill allows millions of 
vehicles to be exempt from safety standards, has no provisions 
to maintain occupant protection, no performance standards for 
safety features, no cybersecurity protections, and accident 
data is not being made available to the public, including these 
insurers. Without these requirements, insurers will have to 
guess at AV risk levels or be solely dependent on the 
manufacturers' performance claims.
    While there are many difficult questions related to 
insuring AVs, let me paint the picture of just one. With an 
autonomous vehicle, I will be able to program my vehicle to 
stop at my favorite coffee shop on the way to work. In my case, 
being from Massachusetts, I am going to choose Dunkin Doughnuts 
over Starbucks.
    While, in the Bay State that may be considered a moral 
decision, for most of us it is clearly a matter of preference. 
But what about the moral decision. On that same trip to work my 
AV detected a stalled semi-trailer truck in front of me and has 
determined with mathematical precision that there is physically 
no way that my vehicle will stop in time.
    However, it can move me out of that lane to avoid the 
truck. So imagine two choices. It can go left into a bike lane 
where a young, recently married couple, expecting their first 
child is riding to work. Or it can go right where on the 
sidewalk there is an elderly man in his early 90's hobbling 
along in a walker.
    Which way will the autonomous vehicle go? More importantly, 
who will program that decision? Like my choice of Dunkin 
Doughnuts over Starbucks, will I be responsible for programming 
the moral decisions of the vehicle? Or will the manufacturer or 
the software provider? Or will the insurance company have a 
hand in the decision, or even underwrite policies based on 
which choice is embedded?
    More importantly, where will the liability for that 
decision lie? And wherever that liability lies, who will insure 
it and what requirements will the insurer place on those being 
insured?
    As I mentioned, we have many more questions than answers. 
And I have submitted a series of questions in my written 
testimony which I hope to work with this committee on over the 
next year or two to resolve.
    But there are a wide variety of issues that will make 
assessing liability extremely complex. Responsibility for 
accidents, once determined by witness and police reports, will 
now include sophisticated computer data.
    The search for true fault in accidents will require the 
full power of the civil justice system. The right to challenge 
corporate mistakes and reckless conduct in a judicial forum 
will continue to be essential.
    And what about accident repair costs? Today, the sensing 
devices placed in plastic bumpers have significantly increased 
the cost of a fender bender. What will happen when the entire 
vehicle is covered with sensing devices? Will the manufacturers 
use proprietary technology in order to prevent a competitive 
marketplace for repair parts? If so, insurers will be forced to 
increase their prices while monopolistic manufacturers line 
their pockets selling overpriced repair parts that we need.
    And what about the potential for redlining? Favoring those 
who can afford more expensive technology and discriminating 
against those who cannot? For insurance to work, it must be 
available to all.
    So finally, we do have more questions than we have answers 
for. But thank you for beginning the process that will help 
ensure that the autonomous vehicle will live up to its enormous 
life-saving potential.
    [The prepared statement of Mr. Gillis can be found on page 
53 of the appendix.]
    Chairman Duffy. Thank you, Mr. Gillis and that was only 2 
seconds over. That was fantastic. Thank you, panel, for your 
testimony. The Chair now recognizes himself for 5 minutes. And 
like I said, Mr. Gillis, it is a fascinating scenario that you 
lay out.
    We as humans might make split second decisions in the 
scenario that you gave us, but this would be thought out and 
programmed into your vehicle what decision the car makes. And 
so here we are in a situation where you look at our age, our 
sex, our tickets, our accident record, put up a risk profile 
and determine rates.
    With autonomous vehicles and the data conversation we are 
having, how do you assess risk, decisions that will be made 
when you don't have great access to data? And Mr. Carlson, I 
think you were indicating that you are writing policies in this 
space, was that correct?
    Mr. Carlson. Yes, we have worked with certain companies to 
collect data.
    Chairman Duffy. Are they providing you the data?
    Mr. Carlson. Yes.
    Chairman Duffy. OK. Is everyone else having trouble getting 
data, do you feel like there is not going to be cooperation?
    Do you want to take this, Mr. Gammelgard?
    Mr. Gammelgard. From a State Farm perspective, our primary 
insurance business is personal line automobiles. We have 
noticed a trend as we have been working on these issues with 
the States over the past couple of years, that any attempt to 
get into a State law any type of data access provision that 
merely seeks to sync up with existing event data recorder laws 
has been met with some significant resistance from some of the 
manufacturers and tech companies.
    So when I say existing laws, the EDR laws that talk about 
collecting data 30 seconds before a crash and 5 seconds after, 
things that on their face, we see and think are pretty innocent 
and straightforward and just mirror what is currently law, has 
been met with great resistance.
    And typically what we have heard in that advocacy is it is 
impossible to detangle the proprietary information that makes 
automated vehicles work from the crash-related information that 
people typically have had access to, whether it is insurance 
companies or law enforcement.
    As we look to the future state, that is a high priority for 
us. That's why it is one of our main public policy concerns, 
because we do anticipate this world where it is going to be a 
little bit more difficult to gain access to that information.
    Chairman Duffy. Mr. Geraci?
    Mr. Geraci. If I may, the data we are looking for here is 
not proprietary information from the automaker. We are looking 
for the same data we would ask people today, so if you or I 
were in an auto crash, the police might ask us how fast were 
you going, were you stopped at the stoplight.
    The data we are looking for would be things like just that. 
How fast was the vehicle going? Was it accelerating or 
decelerating? Were hands on the wheel? Was it stopped when it 
was supposed to be? This is not proprietary data nor 
confidential data that is personally identifiable.
    Chairman Duffy. If we look at Waymo, and Uber, and Lyft and 
Tesla, and Ford, GM, Volvo, are they going to self-insure or 
how do they ask you to ensure them without providing the data? 
How does this gridlock break?
    Mr. Gammelgard?
    Mr. Gammelgard. Yes. Short answer to that is you are 
starting to see some collaboration in this space. Tesla, for 
example, is partnering with Liberty Mutual on an insurance 
product. And there have been some other startups that have 
looked to partner with tech companies and auto manufacturers 
for the specific purpose of getting some of that information.
    I think the difference between what we are thinking about 
with our public policy considerations is how do you really move 
that out to address all of the public policy, all the public 
concerns. So to American Family's point, when we talk about 
data access, it is data related to the crash, data that's not 
proprietary. How do we make sure that there is an ecosystem 
that makes that information available to the benefit again of 
not just the insurance industry, but others as well.
    Chairman Duffy. Mr. Gillis?
    Mr. Gillis. Mr. Chairman, this is really where you come in. 
We are going to need your help to ensure that everyone has 
access to this data. It is our data. We are the consumer. This 
is our vehicle. This is our accident. This is our experience. 
That is one set of data that needs to be made publicly 
available.
    The second set of data, something the insurance industry is 
going to need desperately, is how does all this technology 
work? What are the success levels of the automatic braking 
system created by Ford versus the one created by Tesla versus 
the one created by Chrysler? There are so many different 
variables and data is the only way we are going to be able to 
assess which ones work and which ones don't.
    Chairman Duffy. Do you see the tech companies trying to 
self-insure?
    Mr. Gillis. We heard that originally they said they would 
like to self-insure.
    Chairman Duffy. They would.
    Mr. Gillis. They would. However, now, we are seeing them 
back off a little bit and say, ``We are only going to insure 
for technological problems that can be attributed to 
ourselves.'' Now, we get back to assigning liability. Was it a 
technological problem that created the failure or did the 
driver make a mistake, or did I fail to download the software 
when I was notified to download new software, or did I not know 
that I was supposed to download new software?
    There are going to be huge liability issues associated with 
these AVs.
    Chairman Duffy. My time is up, but one quick last question. 
Do you guys factor in driver assist technology on your rates?
    Mr. Geraci. Right now, we have discounts or rather it is 
really in the early stages of this. The vehicle identification 
number, the VIN number has a lot of information in it around 
cars. It might tell us for example whether you have antilock 
brakes. But it doesn't have the presence of ADS technology in 
there or the type of ADS technology that is in there.
    For example, antilock brakes are antilock brakes. But 
artificial intelligence is as varied as human intelligence. The 
quality of that might vary from vehicle to vehicle.
    Chairman Duffy. OK. My time is expired.
    I now recognize the Ranking Member, Mr. Cleaver for 5 
minutes.
    Mr. Cleaver. Thanks, Mr. Chairman.
    Mr. Adams, I am trying not to be troglodytic in my views. 
In the 21st century, my own children criticize me for only 
calling on the cellphone, that is a waste of money. I am very 
interested in this technology. But frankly, I have some fears 
and one of them is--maybe you can give me information to calm 
myself down.
    Do you believe travel in vehicles or vehicular travel in 
the years to come will reduce the number of automobile deaths 
in the country?
    Mr. Adams. Thank you, Congressman. Yes, I absolutely do.
    This technology is going to remove the single greatest 
factor in the casualties we see on our roads to date. And early 
returns on the testing and limited deployment of this 
technology has been remarkably positive. I am very optimistic 
about it.
    Now, I agree with you as well. It is important that we 
exercise caution. When I think about what unfolded in Tempe and 
I think about the response of Governor Ducey to focus on one 
player in the environment, in the jurisdiction, and to tailor a 
solution based on their behavior, I think that's how we are 
going to have to move forward. We can't be putting the brakes 
on this technology across the board because its promise is so 
enormous.
    To answer your question, yes, I believe that we are going 
to see fewer deaths on the road.
    Mr. Cleaver. If you are right and I think you probably are, 
how do you figure out the insurance market--how do you price 
insurance in the years to come if the number of accidents are 
decreasing. Does that put a burden on the insurance industry to 
figure out new ways to assess those who use these vehicles?
    How are you going to survive if it is so safe that people 
don't even need insurance.
    Mr. Adams. Sir, that's also an excellent question. It is 
going to be incumbent upon insurers and tech companies and just 
developers at large to be working together, because I think it 
is the case that we will continue to see crashes. Their 
frequency I believe will go down dramatically, but our early 
returns our experiences with level two vehicles is that these 
systems are more expensive.
    And while over time the cost curve will be bent down I 
believe as a result of mass production and probably some design 
changes, moving some of those sensors from the front of the car 
to other places in the car where they are less vulnerable, you 
will ultimately see products that are going to be priced in 
such a way that there will be serious consumer side savings. 
That is going to redound to everyone's benefit.
    Mr. Cleaver. Mr. Carlson, I talked about affordability in 
my opening statement and I used the example, I moved here 14 
years ago and I stupidly didn't buy a house not too far from 
here because it was considered to be a bad neighborhood. Now, I 
can't afford to live there.
    The gentrification is happening everywhere. What happens 
with this new technology in terms of affordability? Is it 
just--and will only insurance agents be able to use the 
technology? The billionaires that you are.
    Mr. Carlson. Now, I think if anything, it is going to level 
the playing field. Having that much data accessible and as we 
have all said, making sure that it is accessible in the right 
ways and the right data, utilizing it to the consumer's end. 
Consumer preferences change and we have more informed consumers 
than ever before.
    The models of buying cars in general online is changing. 
You can look online and certain auto manufacturers are actually 
offering up insurance products beyond what the traditional was 
like glass and wheels and other things. I think it is actually 
going to introduce competition into the marketplace. And if it 
does the right thing, it should actually open the door for more 
people to have more affordable insurance and it should be based 
on actual real world data of your driving.
    Sudden starts, sudden accelerations, I am a bad driver, 
people can collect that information and understand that I am 
not the safest person in the world. Years ago, decades ago, 
that type of information wasn't going to be available to a 
police officer who shows up at the scene. Maybe there are some 
skid marks. Maybe there is somebody who was local that saw it, 
there was a witness, but outside of that, you were stymied by 
that.
    Mr. Cleaver. Thank you. My time is up.
    Chairman Duffy. The gentleman yields back.
    The Chair recognizes the gentleman from Illinois, Mr. 
Hultgren, for 5 minutes.
    Mr. Hultgren. I thank the chairman again. Thank you all for 
being here. This is very interesting and I think it is 
important for us to have these conversations.
    Mr. Gammelgard, if I can start with you, I want to begin by 
asking you about, some of this has already been discussed, but 
maybe just get a little bit more specific. The shift in 
liability that is expected to occur if an individual is using 
an autonomous vehicle instead of operating it him or herself, 
according to a report from the RAND Corporation, they said and 
I quote, ``Liability could shift to the companies that created 
the software and technologies in the vehicle or the 
manufacturer that integrated those technologies into the car,'' 
end quote.
    Do you believe State Farm or other insurance providers will 
have to reconsider the policies that they make available? And 
how are you working with auto manufacturers and their 
technology suppliers to understand the risks or lack thereof 
from autonomous vehicles and how to underwrite new policies?
    Mr. Gammelgard. Yes. Definitely as the technology changes, 
as you see higher levels of automated vehicles on the road, 
that more than likely is going to necessitate a change in how 
policies are written in the different products and coverages 
that insurance companies offer.
    That is something that I know from a State Farm perspective 
and I think for most other insurers, they are examining what is 
the potential impacts on insurance and what new products can 
you create. One thing that I do want to highlight that State 
Farm has explored and I know some other insurance companies, 
and I think this might address some of Representative Cleaver's 
questions as well is the introduction of personal mobility 
policies.
    Instead of ensuring the vehicle, ensuring the passenger of 
the vehicle, ensuring the person every step on their journey 
during the day, and that could open up product opportunities 
for people who never would have ever thought about buying auto 
insurance. From a State Farm perspective, we do view it as what 
are the opportunities afforded in this space. In regards to 
working with other companies, I can't disclose some of the 
specific opportunities that we are looking at with some of the 
auto manufacturers, the suppliers, but I can offer this up.
    Through our research partnerships at MCity for example and 
others, we do work closely with manufacturers and tech 
companies to get a better understanding of what this technology 
looks like, because we want to make sure that we understand the 
real world implications of this technology.
    Going forward, I think it is important to realize that as 
we develop these new products, as we look for these new 
opportunities, there are going to be new stakeholders and new 
participants in this whole automated vehicle ecosystem and we 
are always on the lookout for who that is.
    Mr. Hultgren. One last quick question for you if I could. I 
don't know if it is quick or not. But I don't know if you or 
State Farm have an opinion or thought of where liability should 
fall if we are talking about a fully autonomous vehicle, what 
personal liability might be there. Go to the manufacturer, 
which manufacturer would you go to?
    Mr. Gammelgard. Yes. Our main public policy position 
regarding liability is, would you think the existing tort 
system is adequate to examine things as they currently exist? 
But I think there is a perception again and an understanding 
that as this does really go toward the operating system being 
in control, then, does it shift to more of a product liability 
system? I think that is a fair assumption.
    At the same time, some of the things that we are working 
with and working against in some cases are attempts to carve 
out liability exceptions. For example, one thing that we see 
quite a bit around the States are attempts to carve out 
liability for manufacturers or tech companies if there has been 
a modification to the operating system that was not approved by 
the manufacturer. Without really defining what modification is 
that is a huge red flag for us.
    To help address that, we do try to work with standards-
setting organizations like SAE to make sure that we do have a 
better understanding of how they are developing some of those 
standards so that we can offer our input as well. Because 
again, we want to make sure we know as much about this 
technology as possible.
    Mr. Hultgren. Great.
    In my last minute, Mr. Carlson, if I could address a couple 
off questions to you about current underwriting practices and 
how these may evolve with the technologies for autonomous 
vehicles. Currently, how do you factor in the autonomous 
driving characteristics of a vehicle? And I do understand that 
some vehicles have things that operate more like a driver 
assist such emergency braking features while others are very 
close to being fully automated. How do you all factor that in, 
the differences?
    Mr. Carlson. From a risk based perspective, looking at the 
data, we are going to have to take a nontraditional approach 
because a traditional approach will yield just that. I think it 
is collecting the data in a way that looks at what are the most 
at-risk opportunities in the vehicles themselves, what type of 
characteristics--the chairman was talking earlier about where 
is the moral compass going to happen and where would the data 
be most critical.
    I think using that information with some of the actuarial 
services as well, again, without data and without enough loss 
or case law, it is very difficult for many of the colleagues in 
the panel to come up with something that says, ``Hey, this is 
solid. We know this is going to work.'' We have had to look at 
very different things.
    I would say that artificial intelligence is going to come 
into play here at some point in time. With the millions of data 
points that are going to be collected, you are going to need 
very powerful tools, analytical tools, algorithms that are 
going to be able to come up with something and then really 
smart people are going to say, ``This is where we should be 
now'' and we are going to probably change in 5, 10 years. It is 
just going to continuously change and improve on that as far as 
getting the data in the car and the rest.
    Mr. Hultgren. Thank you.
    My time is expired. I yield back.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus, for 5 minutes.
    Mr. Rothfus. Thank you, Mr. Chairman. I want to thank you 
for calling today's hearing. Autonomous vehicles represent a 
great opportunity for our economy and their potential impact on 
automotive safety could be profound.
    KPMG estimates that autonomous vehicles could help reduce 
accident frequency by 80 percent by 2040. Considering that 
nearly 40,000 people died in motor vehicle crashes in 2016 
alone, that means that this technology could save thousands of 
lives every single year. I am proud that much of the research 
in autonomous vehicles is being conducted in Pittsburgh by 
companies like Uber and Argo.
    I actually had the opportunity to take my first ride in one 
of these vehicles to the streets of Pittsburgh last summer. I 
can see the promise of autonomous vehicles and I want to ensure 
that Washington and State level regulators create a fertile 
environment for the further development of this industry. I am 
looking forward to hearing from today's witnesses and what you 
have been testifying about.
    First, I want to talk to Mr. Gammergard or Mr. Geraci. 
While this industry is new in developing products and testing 
in city streets, I am wondering how they are looking at the 
insurance aspects of it. Have you or others worked with the 
technology companies or auto manufacturers to develop insurance 
products?
    Mr. Gammelgard. Thank you for the question. Without being 
able to speak to specific work that we may be exploring, I can 
say that State Farm does have a long history in relationship 
with a number of different auto manufacturers in relation to 
examining data that we have access to that we are analyzing as 
we are adjusting claims. We do expect that relationship to 
continue going forward.
    I do think from my own observation having worked on this 
for the past few years, if you go back 2 or 3 years ago, there 
was this perception amongst those in the auto industry that 
self-insurance might be the way forward. I think that has 
changed a little bit. It seems, to me at least, there is a 
little bit more willingness to explore opportunities, and I 
think you are seeing that, for example, in Liberty Mutual 
partnering with Tesla. And I mentioned that earlier, but they 
were very, very public about that partnership.
    And I think it is fair to say that in this world, when you 
look at all the different stakeholders that are in the mix 
here, it is only natural that the insurance industry would 
start to be brought more into that conversation.
    Mr. Rothfus. Mr. Geraci.
    Mr. Geraci. Yes. And American Family also has a history of 
partnerships with different groups. But as an industry, we do 
as well with the automakers. The Insurance Institute for 
Highway Safety (IIHS) has a long history of working with auto 
manufacturers. The companies that partner with them often do 
crash test data. You have seen the crash test dummies. A lot of 
that takes place with IIHS.
    Mr. Rothfus. If we could talk a little bit about the State 
aspect of it, Mr. Adams, in your testimony, you discussed the 
importance of an accommodating regulatory framework that 
enables flexible product development, deployment, and pricing. 
Can you elaborate on what States are doing to allow for more 
flexibility?
    Mr. Adams. Thank you for the question. It is a mixed bag 
and that is part of the challenge with the laboratory of 
democracy approach that you have some States that had incumbent 
systems where you have to get prior approval for rates, and in 
some of those States, the timelines are really quite dramatic. 
And then, you have other States that require you to take 
factors like years driving, right, take driver experience into 
account.
    And as we see these new technologies come onto the scene 
and be deployed in larger numbers, what we are going to be 
observing is scenarios where we are asking how effective a 
driver has been over the last several years, and that data 
really doesn't have a lot to do with the actual risk being 
presented. It is something that the National Association of 
Insurance Commissioners, I know that this is on their radar, 
the National Council of Insurance Legislators, I know that this 
is something that they are looking at.
    But I think that the immediate answer to your question is 
we haven't seen any rapid regulatory changes being contemplated 
across the country yet.
    Mr. Carlson. If I may?
    Mr. Rothfus. Yes.
    Mr. Carlson. I think it is accretive to this conversation 
that several States have put arbitrary $5 million liability 
limits out and part of our solution was to actually build an 
insurance facility with several insurance companies that met a 
primary and a secondary layer that allowed risk to be managed. 
That is a business advantage and not a barrier.
    I think that is part of what has to occur is the ability 
and the willingness to create the sandbox where we can all get 
in and say ``OK. What must you have and what must the customer 
or the company testing these vehicles in order to meet and get 
some progress here'', but in a very methodical and very 
thoughtful way.
    Mr. Rothfus. Thank you.
    I yield back, Mr. Chairman.
    Mr. Hultgren [presiding] .The gentleman yields back.
    The gentleman from North Carolina is recognized for 5 
minutes.
    Mr. Budd. Thank you, Mr. Chairman. And thank you again to 
all of our witnesses. I look forward to hearing your thoughts 
this afternoon on what is an interesting and very important 
topic and even more so in the future.
    The National Association of Mutual Insurance Companies or 
NAMIC recently released a policy paper on AVs. The author, Tom 
Karol, points out that the single most important reason to 
support the development of AVs is the potential to enhance 
safety and to save lives.
    Karol notes that the enhanced safety must always be the 
primary focus of AV development and this brings a question to 
mind. How safe must an AV be before is allowed on the roads, 
Mr. Geraci and then Mr. Gammelgard if you could weigh in on 
that?
    Mr. Geraci. Sure. To be clear, the technology is really on 
version 1.0. They are still really evolving. It is in the 
testing phase. The relevant hurdle if you will is making the 
technology safer than a human driver. Right now, it is 40,000 
deaths per year because humans aren't perfect drivers as well. 
What we really need though is to get the data to understand how 
safe those vehicles are, which ones are at what level of 
safety.
    The Senate's Start AV Bill had a good amendment, the Inhofe 
amendment that would establish the Data Access Advisory 
Committee wherein the manufacturers and insurance companies and 
other interested parties would work together to determine 
access and ownership of data.
    With that, help from Congress that could assist in 
establishing some of the data that we--
    Mr. Budd. Good. Thank you.
    Mr. Gammelgard.
    Mr. Gammelgard. Yes. And to echo those comments and not to 
sound like a broken record, but data access is key and we can't 
stress that enough. When we look at current, I will just call 
them semi-automotive components that are on vehicles, Insurance 
Institute for Highway Safety does a number of testings, so does 
State Farm where we can actually get in and look to see how 
these components were working on a vehicle and that has led to 
some pretty good outcomes, right?
    We are seeing some real-world information that shows that 
some of these components actually work as advertised, but it is 
not a one-size-fits-all approach and everything really is 
contingent on being able to analyze that data. State Farm much 
like others and American Family are supportive of the 
amendment, the AV Start Act that talks about that Data Advisory 
Committee.
    The important thing there is, I think, it talks about a 
multi-stakeholder approach. It is the insurance industry. It is 
law enforcement. It is other organizations or other parties 
that are looking for the best way to go forward on this while 
understanding that data access is a key issue.
    And the final thing I will point out is as NHTSA is 
updating its automated vehicle policy guidance, we have filed 
comments with NHTSA and I know Insurance Institute for Highway 
Safety has as well, that starts to outline what different data 
variables do we think are relevant in this future state.
    We have definitely evolved, from this position of just 
broad general data access, to starting to get more refined so 
that we can respect that interplay between proprietary 
information and what is needed to appropriately determine 
whether or not this technology works.
    Mr. Budd. Good. Thank you for that.
    NAMIC, and this is also you too as well, so NAMIC's policy 
paper also points out that the critical issues related to 
passenger safety, liability, and compensation after a crash 
require that insurance companies are included in the 
development of AVs. There have been legislative proposals that 
would preempt State and local authorities from regulating and 
enforcing performance standards for AVs.
    But in terms of insurance, do you believe that the State 
should maintain their traditional authority in regulating 
matters of liability and insurance surrounding these AVs? There 
was a little bit of thoughts on that earlier, but I would 
appreciate your comments on that.
    Mr. Geraci. At American Family and I think this is true 
with State Farm as well is, yes, we believe that States should 
retain their traditional role. It is a little bit of a case of 
if it is not broke, don't fix it. And particularly as 
autonomous vehicles come out, they work better in different 
environments. In dry, flat environments, they tend to work 
best. You might want different rules there. We really do 
believe that now and in the future, you are going to want to 
see States controlling this.
    Mr. Gammelgard. Yes, and from a State Farm perspective, and 
we are also involved with NAMIC AV Council that has helped 
craft those policy positions. Very supportive of the States 
continuing to be able to regulate the business of insurance, it 
is something that is very important to us and also something 
that I would argue in this State as the technologies develop, 
is actually much needed.
    Mr. Budd. Very good. Thank you both for your time.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman, for 5 minutes.
    Mr. Sherman. As we move to self-driving vehicles, I hope 
things get safer. That is a good thing for society as a whole. 
It will of course affect insurance companies, attorneys, body 
shops, et cetera. There will still be some accidents and a 
question will arise as to whether we focus on a product 
liability model or on a driving negligence model and this will 
come up most in the area of what I would call failure to drive 
defensively.
    If I am in the right and I drive through and some idiot 
hits me, the fact that if I was a better driver, might have 
been able to avoid the accident notwithstanding his mistake. I 
was in the vehicle code. I have no liability. On the other 
hand, in the product liability area, if you could design a car 
that can avoid an accident even if an idiot does this or that, 
even if a road has this or that flaw, and you fail to do so, 
the fact that the vehicle operates consistent with the vehicle 
code may not be sufficient.
    And it will be interesting to see how the law develops and 
it will develop through case law and it will be unknown what 
the situation is. It would be better if we as a country could 
wrestle with these issues while the engineers are developing 
autonomous vehicles and have a national standard, and maybe you 
folks can give us some suggestions, the idea that we could keep 
up with the engineers here in Congress and--I don't know if we 
can do it. But at least we would have a try if we can.
    OK. Mr. Gillis, we are approaching a world where it may not 
be inconceivable that cars won't be owned by individuals. The 
ride hailing services will control the market. And when Uber 
sends you the picture of the driver who is driving the car that 
picks you up, it may just be a round circle or maybe--in any 
case, not a human being driving that car. And obviously, large 
companies would have more leverage in negotiating with 
insurance companies.
    Could you discuss how the dominance of a few large 
insurance purchasers instead of tens of millions of insurance 
purchasers would affect the industry?
    Mr. Gillis. The good news is that many of the companies 
right here are financially dependent on those hundreds and 
thousands of consumers that need automobile insurance. We would 
not be able to own automobiles if there was no insurance. We 
just can't--simply can't absorb the risk.
    As consumers move into not owning vehicles, they will not 
need personal auto insurance. What they will move into is what 
we have heard a little bit about today is personal mobility 
insurance. They will likely have to buy some type of insurance 
that covers themselves when--rather than get into a battle with 
one of the big technology companies who reportedly is going to 
take on the liability for failure. But still, there has to be 
fault. The fault will have to be determined.
    Mr. Sherman. Right now, there are plenty of people who have 
absolutely no insurance and absolutely no car. They call Uber 
and nobody is selling them a policy, an Uber-user policy. I 
wonder whether if I give up my car and start hailing the Uber 
that has no driver, whether I will need any insurance at all.
    Mr. Gammelgard, there are two types of autonomous vehicles, 
those where there is a driver in them now and then the 
autonomous vehicle assist, but the human has some 
responsibility versus situations where there is no human in the 
driver's seat, just in the back seat.
    Can you expand on the insurance implications of fully self-
driving cars as opposed to self-driving cars where you are 
behind the wheel and you are supposed to take the wheel when 
necessary?
    Mr. Gammelgard. Yes. And I think currently on the road, you 
have levels zero through two vehicles. We definitely insure 
some of those on the higher end of that scale. And then, the 
big question will be that transition to level four and five 
where theoretically, you don't have to have a driver. There 
might not even be a steering wheel in the vehicle.
    I think the challenge is going to be in that level three 
space. And if you look at some of the research that has 
occurred, it is this big question about whether or not a 
vehicle that has an operating system driving the car can push 
control back to a human operator. There is a safety critical 
situation. How long does a person need to get re-acclimated 
into driving a vehicle. I think those are going to be the 
challenges that the insurance industry faces as you see that 
transition from level two into level four.
    And those are the things that we need additional research, 
we need additional data access in order to be able to better 
judge how do we create and craft policies to help cover those 
risks.
    Mr. Sherman. I wonder if I can sneak in one more. OK.
    Mr. Geraci, the autonomous vehicles are not required to 
submit safety assessment letters to the National Highway 
Traffic Safety Administration before they are deployed for 
testing. At least that is what I am told. What steps are you 
taking to validate the safety of autonomous vehicles before 
they go out on the road?
    Mr. Geraci. We need to be able to get data to understand 
the safety of those vehicles. In order to understand the safety 
of the autonomous vehicles, we really need to get the data that 
would underlie the performance of those cars, so what is their 
record, what is their safety record, what is their performance. 
And getting access to that data would be foundational in order 
to help assess the risk that those cars pose or don't pose.
    Mr. Sherman. Maybe Congress ought to help with requirements 
that you get that data.
    Mr. Geraci. You could help with that. Yes.
    Chairman Duffy. The gentleman yields back.
    The Chair now recognizes the gentleman from Missouri, the 
Chair of the Subcommittee on Financial Institutions, Mr. 
Luetkemeyer for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Welcome, gentlemen. I apologize for stepping out a while 
ago. If I ask some questions that are duplicative, please say 
so and I will move on. I am just curious. We are talking about 
the liability exposure of the company. How does this work 
whenever you have an autonomous vehicle, it is driving down the 
street, a pedestrian steps out in front of them and there is a 
car coming the other way.
    Does the car hit the pedestrian? Does the car hit the other 
car coming on? Like, who decides which decision is the right 
one that minimizes liability? How does that work?
    There are five of you, anybody want to take a try?
    Mr. Carlson. Yes. Yes. Without divulging client names, many 
of the conversations have been around the morality of your 
question. It is a great question. The ultimate is the 
responsibility to the current passenger as I understand it is 
right now, we are going to protect the passenger.
    The ability for the car to--
    Mr. Luetkemeyer. When you say protect the passenger, you 
are saying that the car will make a decision on which one is 
going to be least harmful to the passenger. If it is to hit the 
pedestrian versus the other car, he will hit the pedestrian.
    Mr. Carlson. If it can make that decision. I can't give you 
an answer on whether it is going to hit a tree, a pedestrian, a 
dog, or a squirrel. What they are trying to do is utilize 
vehicle-to-vehicle data, vehicle-to-environment or what they 
call v-to-x and that technology is going to take time to 
development because not everything is interconnected.
    Right now, you have vehicles out there that can't 
communicate with other vehicles that are 30 yards ahead, 40 
yards ahead. Vehicle-to-X environment would be a situation 
where the vehicle is actually able to collect data off of 
infrastructure in other places. That should help with the 
morality issue where the vehicle is able to start making 
decisions and discriminate, if you will, between what is an 
object and something that can't be.
    I know it is a great question that many companies are 
trying to solve for, because that morality issue is something 
that from a risk management perspective, they do want to 
address to ensure that the vehicles are as safe as possible, 
but then also pedestrians and others. I would add that I ride a 
road bike and I would love for them to know that I am an object 
that shouldn't be hit while I am riding on the road.
    And earlier, one of the conversations was about how does 
this make a decision? What if a young athlete or a driver is 
driving along, makes a decision to scoot over and scare me off 
the road? That could be really bad for me. An autonomous 
vehicle won't make that decision.
    Mr. Luetkemeyer. OK. Thank you.
    You guys got into some discussions, I listened to some of 
those discussions with regards to State laws being--we want to 
make sure the States continue to enforce insurance laws. Is 
there an effort to work with the different State jurisdictions 
and say, ``Hey, we have this going on. Can you give us some 
direction?'' They have some ideas. Do they have any studies 
going on to help them with how they need to manage the 
oversight of this at all, or is it wait until you guys do 
something and then come back and see if it works.
    Mr. Gammelgard. From a State Farm perspective, I know we 
have been very engaged with AAMVA, American Association of 
Motor Vehicle Administrators, basically all the State 
department of transportations and administrators have been able 
to participate in a number of different events that they have 
had and spoken and provided input.
    And they recently just in the past week issued some 
guidance and guidelines for what they think the States should 
follow. We have been very engaged with the National Conference 
of State Legislatures. That is basically a nonprofit that helps 
collect different information that State policymakers then look 
at and review.
    Mr. Luetkemeyer. Are they helping facilitate between the 
manufacturer and insurance companies to be able to see you guys 
get the information you need to be able to make good decisions 
on insurance?
    Mr. Gammelgard. They are helping facilitate those 
conversations to the degree that they can, right?
    Mr. Luetkemeyer. Yes.
    Mr. Gammelgard. When they do have meetings and when they 
have different public partner, private partnerships, they are 
trying to make sure to reach out to a number of different 
stakeholders, so not just the manufacturers and the insurance 
industry, but other people and other groups that may be 
impacted by this technology as well.
    Those are the attempts that are going on that come most to 
mind. At the same time, I think there probably needs to be 
continued work to make sure that everybody tries to work 
together going forward on these issues.
    Mr. Luetkemeyer. Very good.
    I see my time is about to expire, Mr. Chairman. I will 
yield back the balance. Thank you.
    Chairman Duffy. The gentleman yields back.
    Mr. Cleaver. Mr. Chairman, I would like to enter into the 
record this article from Consumer Watchdog entitled, ``Self-
Driving Vehicles: The Threat to Consumers.''
    Chairman Duffy. Without objection.
    Chairman Duffy. If I could take the liberty to ask two 
questions, cyber hacking on these autonomous vehicles concerns, 
threats? Mr. Carlson?
    Mr. Carlson. Yes. I think it is a great question. I think 
it got a lot of fanfare when people were able to hack into a 
vehicle and without knowing all the knowledge actually, they 
had to remove the entire dash, they had to have a laptop. This 
was not just--and then, the second time they did it, they got a 
little smarter.
    My position and the thought is, is getting into that 
vehicle is maybe not the endgame for a malicious person. The 
end game may be getting into the financial services group of 
one of these large lenders where you are buying your cars. 
Personally identifiable information, I am pretty sure nobody 
really cares about me, but I am pretty sure that they would 
love to get into one of the large OEMs' global networks and 
make some type deleterious attack and do something that would 
stop production, industrial control systems, something of that 
nature.
    It is a possibility and it is not outside the realm.
    Chairman Duffy. Anyone else?
    Mr. Adams?
    Mr. Adams. We think it is a very serious problem and it is 
a very personally serious problem. There is absolutely no 
question. We have seen attacks on schools. We have seen attacks 
on shopping centers. It is inevitable that a vehicle will be 
attacked, and that's why we are begging Congress to set up 
cyber security requirements as part of the AV Start Act, very, 
very important.
    Chairman Duffy. Anyone else?
    Mr. Geraci. At American Family, we believe it is the 
Federal Government's role to help with that. Manufacturers are 
taking steps, so, there are only periodic uploads and downloads 
of data so that someone who is of malicious intent can't always 
access a vehicle, only at certain brief periods of time. But it 
would be good if Congress could include that in the 
legislation.
    Mr. Adams. Sir, if I may, I think it is important to 
recognize that the manufacturers are actually doing a fair 
amount in this space. They realize that one of the most 
important elements for the adoption of this technology is the 
trust of the consumer. They have a clearinghouse of information 
for vulnerabilities, they work together. This is something that 
is at the top of their mind.
    Chairman Duffy. OK.
    I want to thank the panel for their testimony today. I 
would just ask that you continue to advise and provide your 
insights and intelligence on what we in Congress should be 
doing specifically on our subcommittee and committee as a 
whole. We look forward to your wisdom and continued dialog.
    The Chair notes that some Members may have additional 
questions for this panel, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Without objection, the hearing is now adjourned.
    [Whereupon, at 3:54 p.m., the subcommittee was adjourned.]

                            A P P E N D I X


 
                              May 23, 2018
                              
                              
		[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]