THE STANDING SENATE COMMITTEE ON TRANSPORT AND COMMUNICATIONS
EVIDENCE
OTTAWA, Wednesday, October 4, 2017
The Standing Senate Committee on Transport and Communications met this day at 6:45 p.m. to continue its study on the regulatory and technical issues related to the deployment of connected and automated vehicles.
Senator Dennis Dawson (Chair) in the chair.
[Translation]
The Chair: Honourable senators, I call the meeting of the Standing Senate Committee on Transport and Communications to order. This evening, the committee is continuing its study on the regulatory and technical issues related to the deployment of connected and automated vehicles.
[English]
We have two panels of witnesses today. On the first panel, I would like to welcome Tomi Gerber, Assistant Vice President, Government and Public Affairs, Enterprise Holdings; and Craig Hirota, Vice President, Government Relations and Member Services for Associated Canadian Car Rental Operators.
[Translation]
Thank you for being with us.
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I would like to remind you of the five-minute time limit for the opening remarks, and I would ask the senators to be concise when asking questions. I invite Mr. Hirota to start the presentation.
Craig Hirota, Vice President, Government Relations and Member Services, Associated Canadian Car Rental Operators: Thank you, Mr. Chair and honourable senators, for the opportunity to represent our industry’s concerns.
Associated Canadian Car Rental Operators, or ACCRO, is a Canadian organization dedicated to the continuous improvement of the Canadian car and truck rental industry. ACCRO is considered the voice of the industry in Canada and aims to improve legislation that affects our industry. The car and truck rental industry in Canada operates over 150,000 vehicles, employs over 12,000 Canadians and has a total economic impact in excess of $7 billion annually.
The rapid evolution of our industry, especially in the last 10 years, has motivated the development of fleet management solutions for every aspect of ownership, operation and disposal of vehicles. In reviewing transcripts from previous witnesses appearing before the committee, many participate in the implementation, manufacture or regulation of new technologies. We bring the perspective of the end user/operator.
The vehicle rental industry succeeds when we listen to what our customers want and deliver efficient, safe results. Our industry’s capacity to cater to customer needs is significantly impacted by the regulatory environment. In terms of connected and automated vehicle technologies, present and contemplated, for our industry to best implement present and future products, we stress the need for a harmonized regulatory environment and equitable treatment based on the service delivered, not the method of delivery.
Automobile insurance risk can be a significant constraint on the growth of the vehicle rental industry. Automobile insurance in Canada still largely relies on principles of vicarious liability that were most appropriate in the days of horse-drawn carriages and chauffeured automobiles. In today’s world of emerging shared mobility solutions, the insurance environment needs to modernize by recognizing the negligent operator, human or computer, of a vehicle rather than defaulting to the non-negligent owner.
I will describe one example that currently applies to existing vehicle technology and will have application through much of the transition stage between self-drive and fully autonomous vehicles.
ACCRO has addressed unlimited vicarious liability since 2005. But there are still three provinces, New Brunswick, Newfoundland and Labrador and Prince Edward Island, that impose unlimited vicarious liability on non-negligent vehicle rental companies. This insurance environment is an obstacle for anyone wishing to operate a vehicle rental business in these provinces.
If we envision a future of reduced personal vehicle ownership through shared vehicles, it will be even more incumbent upon the respective provincial insurance acts to address a liability model that holds the driver and its insurance policy primarily responsible and reduces a non-negligent vehicle owner to the role of guarantor of the financial responsibility requirements in the absence of insurance held by a driver.
Even among the provinces that have implemented changes to unlimited vicarious liability and priority of payment, a lack of standardization complicates the assessment of risk in each province. The existing patchwork of regulation challenges deployment of current vehicle technology. If another patchwork of regulations addressing connected and autonomous vehicles is created, please consider the ramifications for responsively implementing consumer-desired mobility solutions.
The vast majority of our industry’s participants are mature businesses, some publicly owned. They have built their businesses in compliance with layers of regulation at the municipal, provincial and federal levels. Acting as a responsible corporate citizen provides value for urban planners, city budget chiefs and provincial and federal employment and finance ministries. Our industry recognizes the need to manage administrative workloads and works cooperatively with government at all levels to increase accountability.
The car and truck rental industry plays an important role in the mobility ecosystem. It’s important to remain focused on the service rendered, not the service provider or method of delivery. A single regulatory framework open to all will foster the best outcomes for viable businesses and exceptional consumer service.
Thank you.
Tomi Gerber, Assistant Vice President, Government and Public Affairs, Enterprise Holdings: Thank you, Mr. Chair and honourable senators, for the opportunity to speak to you this evening about regulatory issues that are facing the deployment of autonomous and connected vehicles.
As was mentioned, my name is Tomi Gerber, and I’m Assistant Vice President of Government and Public Affairs with Enterprise Holdings, which is a 60-year-old family-owned company that operates the Enterprise, National and Alamo rent-a-car brands, with a fleet of 1.9 million vehicles around across the world.
We are here today to say that we believe connected and autonomous vehicles will be transformative and we believe they are inevitable. The specific points we would like to draw attention to today are about how the competitive landscape for the future of autonomous vehicles and really the entire mobility ecosystem competitiveness will either be increased for decreased based on the decisions government makes now and in the years to come about how access to vehicle-generated data is controlled and regulated.
Competitive issues around data control and access have not yet been addressed, as far as we know, in front of this committee. We hope to bring some information to your attention for consideration. In my comments this evening, I will focus specifically on the data access issue, but in the brief we submitted we go into much greater detail about the issue, as well as bring up other issues that affect the industry in general when it comes to autonomous and connected vehicles.
We truly believe that mobility choices of the future will be dictated by how access to data is controlled, and further, if it isn’t regulated, that, too, will impact the choices that consumers have in the future mobility market. The easiest way I know to explain why we feel this way is to give you a bit of background about what has happened elsewhere in the world.
I’m sure most of you will be familiar with the European Union’s move to mandate that starting next spring all vehicles must have vehicle-to-vehicle connectivity to be sold in the European market as of April 2018. This move really spurred forward the discussions about how the data sharing and communication between vehicles would be handled.
The European Commission brought together a broad group of stakeholders to start having those discussions. The representation included vehicle manufacturers, tier-one suppliers, the insurance industry, fleet management, consumer groups — a very broad group of stakeholders. There was general agreement that a cybersecure, safe path forward existed that allowed for open access to data communications.
That drastically changed about a year ago, last fall, when the European Auto Manufacturers Association, or ACEA as they’re known, issued a position paper in which they declared that in order to make vehicles cybersecure, data access must be closed down. That position paper laid out what they believe is the path forward, and they call that the extended vehicle concept.
Extended vehicle concept is simply the idea that all vehicles that are connected and autonomous will transmit vehicle-generated data up to a cloud server, and the manufacturers will be the custodians of the data. If the owners of the vehicles wish to have access to that vehicle-generated data, they must negotiate for what data they can have access to, in what quality and format, and at what price.
Enterprise Holdings strongly believes that vehicle ownership should convey the right of access to the data that is generated by the vehicles that are owned. Let me give you an idea of why we believe it is so important in the future mobility market.
Almost every manufacturer has indicated an intent to start not only manufacturing autonomous vehicles but to provide mobility services directly to consumers. If we are in a position where a manufacturer is owning and operating their own autonomous vehicle fleet and providing transportation services to consumers at the same time they are selling cars to other fleet operators who are providing the same services to the same market of consumers but those manufacturers have the ability to restrict access to the data that makes the fleets operate efficiently and effectively and can dictate the cost those other providers have to pay in order to operate their fleets, you can see that competitive market distortions will quickly arise.
It is evident in the transportation services space where that would happen, but we also think it is important to understand that it affects other mobility-related industries such as insurance, fleet management companies, and vehicle repair and maintenance industries. All could be negatively affected if this extended vehicle concept is allowed to move forward.
I would also like to note that the European auto alliance that has put this forward believes it has the ability not only in Europe but in North America to move forward with this plan unless steps are taken to block it. Also, not only European auto manufacturers are signatories to this plan but North American auto manufacturers are also part of this membership that has put this plan forward.
I provide all of this information against the backdrop of cybersecurity. Enterprise Holdings absolutely believes that cybersecurity, along with safety and data privacy, is essential to get right in the autonomous vehicle environment moving forward. We disagree with an assertion that says the only way to have autonomous vehicles be secure is to close down access to the vehicle-generated data.
In our brief, we supplied references to a report that was done independently by the Transportation Research Laboratory out of the United Kingdom. It was commissioned by the European Commission to study multiple proposed technical solutions to this data access problem. It is important to note that the extended vehicle concept was deemed by this report as not compliant with fair market principles.
We would like to propose solutions at the same time. In the brief we supplied you with, we are suggesting that the committee consider an approach based on principles for data access and how use cases can be developed so that multiple parties, including manufacturers, owners and public services, can all have access to vehicle-generated data for specific use cases that are warranted in a way that can be secure and safe.
With that, I will thank you for the opportunity to speak to you. I sincerely appreciate the opportunity to share this information, and I look forward to answering questions.
The Chair: Thank you very much for these presentations.
Senator Eggleton: Let me pick up on Ms. Gerber’s comments. You are saying this extended vehicle concept is a bad idea. It certainly wouldn’t work for your industry. At the same time, however, you have pointed out that the close down and availability access to data is pushed by concerns about cybersecurity.
Cybersecurity, privacy and sharing of the data, or access to the data, are all issues that collide, as seems to be apparent in the European Union. You say not to follow their lead. Is there any lead that could be followed? What is happening in the United States? Is anyone doing this in a balanced sort of way?
We are concerned about safety and security. We are concerned about cyber-attacks and the privacy of data for individuals, the sharing of it between the manufacturer and the owner or users, et cetera, or the intermediaries. Yes, that needs to be sorted out, but our approach to this comes more in terms of public safety and security.
Where is there a good model we can look at if it’s not that of the European Union?
Ms. Gerber: On the extended vehicle concept, there are many independent researchers and academics that have put out papers that demonstrate that that extended vehicle concept does not create cybersecurity in any vehicle today because of the way the electronics are architected within the vehicle. There are more than 20 security interface risks. Your electronic key fob can be used to get access to critical functions. The USB ports can be used to get to critical use functions. The extended vehicle replaces the existing on-board diagnostic port that is one of more than 20 risks within vehicles today.
Work is being done on how to make vehicles secure, and the concept is called “security by design.” In the REST for the Internet of Things, most engineers will tell you that there will always be risks in connected machines, but you reduce the risk by designing security into the architecture of the system so that critical operational functions become siloed.
There is no one jurisdiction — Europe, North America, the U.S., Canada — that has the lead in legislation on this issue. But there are groups of scientists and academics that are putting proposals together that are available, and we can help point to the TRL study I mentioned on this access to in-vehicle data. It assesses three different existing options that are out there today.
Senator Eggleton: Maybe you can provide those research links to the clerk of the committee.
Mr. Hirota, in your comments, you said that you believe insurance acts to address the liability model and holds the driver and its insurance policy primarily responsible and reduces a non-negligent vehicle owner to the role of guarantor of the financial responsibility requirements in the absence of insurance held by the driver.
I take it what you are talking about, in terms of the non-negligent vehicle owner is, in your case, the rental car industry. However, there are those who say that as we get towards fully automated vehicles, we should be holding the manufacturers more responsible for all this intricate system of sensors, cameras and all of the things that go along with computerization of the vehicles. Why do you continue to say the driver should be held responsible?
Mr. Hirota: That is a good question. Earlier in my comment, I mentioned driver, whether human or computer. The advent of this new technology will eventually require the redefining of a lot of the colloquial terms we use to describe the operation of a vehicle. Whether the vehicle is being driven by a human in the driver’s seat behind controls or being operated by a manufacturer or a third party autopilot of sorts, it will be important to assign liability to whichever entity did not operate the vehicle in the correct way and made a mistake.
Senator Eggleton: Okay. I guess I missed your definition of “driver.” It is a broader term now.
I understand California has prohibited vehicle rental companies from assessing or using data obtained via on-board electronic surveillance technology, such as GPS, to obtain information relating to the renter’s use of the rental vehicle. For example, a rental company cannot use electronic surveillance technology to track a renter in order to impose fines or surcharges. Do any similar restrictions exist in Canada that you are aware of, or are you not in favour or in favour of doing what California has done?
Mr. Hirota: I am not aware of any jurisdictions that have specific statutes that administrates that use, although certainly a lot of those situations tend to fall under the jurisdiction of the provincial privacy officer. In cases where a consumer feels their personal data is being used improperly, they have filed complaints with the Privacy Commissioner in the past. Generally, as far as I know, it is not a common practice in the industry in Canada at all to use telematics as a way of imposing fines or tracking people.
Senator Eggleton: Do you have any comment on it, Ms. Gerber?
Ms. Gerber: Enterprise does not track our drivers. We take driver privacy seriously.
I would caution that as any rules are written that limit the use of the vehicle’s available technology, there are unintended consequences. We are working on the California unintended consequences that have resulted from that legislation, whether specifically or indirectly. We struggle now in how long we have to wait to utilize an OnStar system to identify where our vehicle is. If someone rents a car from us today and we find out later this evening that they have used fraudulent identification to rent the car and have essentially stolen the car from us, we have to wait to approximately 14 days before we can use the telematics to identify where the car is to recover it. I would caution that, with every intended privacy protection, trying to balance the owner’s rights is important.
Senator Duffy: Mr. Hirota, I am from Prince Edward Island. You mentioned P.E.I., New Brunswick and Newfoundland and Labrador as three provinces that impose unlimited vicarious liability, basically on car rental companies.Why would we in Prince Edward Island, the provincial government, not have changed their laws? I assume the other provinces and territories have changed their laws to make them more current?
Mr. Hirota: That is correct. Our industry has been working with local governments in those provinces for close to 10 years now. Even where there is a willingness within government to recognize that that issue makes sense to rectify, auto insurance is such a challenging issue for a government to tackle in terms of legislation that it has been an unattractive subject to put on a bill for fear of raising a debate on auto insurance.
Senator Duffy: Politicians are afraid that you’ll be accused of raising their rates. Will there be an impact on insurance rates if this law was changed?
Mr. Hirota: Our industry data in Nova Scotia, Ontario, British Columbia and Alberta has shown that there has been no measurable impact on private automobile insurance rates as a result of the changes to vicarious liability and primacy that affect rental car companies.
Senator Duffy: Could we see that situation? We have just come off a record tourist season in P.E.I. It is my impression that most of the rental cars we have on Prince Edward Island actually come from Halifax, or perhaps New Brunswick.Could we see operators refusing to serve our market if the law is not straightened out?
Mr. Hirota: Tomi may be able to answer more accurately, but when a company is looking to allocate vehicles, especially in seasonal markets like Newfoundland and P.E.I., there can be concerns as to whether they allocate them to Nova Scotia where their risk is somewhat lower or Prince Edward Island or Newfoundland. I don’t personally know of situations where that has resulted in a significant lack of availability.
Ms. Gerber: For Enterprise, we are committed to providing cars where our customers need them, but the greater impact is on smaller mom–and–pop type rental car companies where the cost impacts are so high that they are discouraged from doing business there.
Senator MacDonald: I would like to speak to you about rental cars. I rent cars quite a bit. In fact, the last time I rented one was a few weeks ago. I stood there and watched the car suck all the information out of my phone because I wanted to be able to speak hands-free on the phone, which is the safe way to go. A lot of consumers believe that the car rental companies should ensure this data is deleted, but I left that day and I don’t know whether or not my data was deleted.I would like some feedback. I would like to know what your assessment is of this view and what measures your organizations have taken, if any, to ensure that data is deleted after people leave their vehicles.
Ms. Gerber: I appreciate that question. We are very concerned with the same issue. What we are faced with today is a range of steps and processes from every different manufacturer, and it’s not even just between manufacturers but between models, trim levels and which entertainment systems are in the car. They all produce a different method for how to “factory reset” a vehicle to default condition. When we look at this, there are literally thousands of different methods to get that data cleared.
What we are doing as an industry is to start to have those discussions with the manufacturers. We’ve made maybe light of it in asking for an easy button. Obviously, we don’t anticipate the car would have a button, but some standardized method within a couple of steps that would return vehicles to a default situation.
Actually, I can report, as of noon today, some positive progress on this. In the United States, Congress is working on autonomous vehicle legislation. The house passed a version of the bill about a month ago, and the Senate committee on transportation took up their version of the bill today. A coalition led by the American Car Rental Association came together with an amendment that asks for a two-year study on data access issues that I addressed earlier, but also asked for a study to be done on the feasibility of manufacturers creating a systematic, uniform way to clear personal data. That amendment was adopted in the chairman’s version today and will be moving on to the full Senate.
Yes, we are engaged in it, and I think maybe making some progress there, but we need the manufacturers to make it possible.
Senator MacDonald: Now that the jurisdiction is outside of North America — Europe, Australia, South America and other countries — is there anything done on this area?
Ms. Gerber: Not yet.
Senator Gold: First, I’ve read the principles that you recommend. Clearly, the data that will be generated will be of interest to you, the manufacturers and others. Where will it be stored? Who will actually own the servers, the cloud, and within what regulatory framework do you envisage this happening? I realize my questions are related because assuming a technological solution, it needs to be regulated, and is national legislation regulation sufficient, given globalization and that vehicles cross borders?
Ms. Gerber: It’s an excellent question and one we continue to struggle with. Segmentation is not good for consumers or anyone else, so we’re hoping there becomes an international standard for this. We are trying to talk about this as a coalition of like-minded interests — I mentioned the whole range of associations and groups that are part of it — in every jurisdiction we can across the world in the hopes that organizations come together and put out a standard that can be met.
That’s why we’ve proposed a principled approach, because legislating or regulating a specific technology solution to us would seem to stifle innovation. It’s hard to keep legislation up with technology. We think if we can establish a framework that’s widely adopted, that would allow vehicle manufacturers to creatively meet those standards in whatever way works for them and also allow new innovative companies to come to the market with solutions as well.
In terms of who will own those servers where all this data sits, there are multiple options. At first, in Europe, the manufacturers suggested they would own them. That was met with not a lot of confidence from government. The suggestion is now that there will be independently maintained servers, potentially through the telecom market or who knows what other providers would enter that market. I can’t say I can predict how that will shake out.
Senator Gold: One of the points you made early on in your argument, as I understand it, is you want to make sure that the regulation or the failure to regulate does not inadvertently create a competitive disadvantage in favour of the manufacturers because one can monetize data. That’s the future we now live in already. There has to be something in it, whether it’s for your company, your industry or the manufacturers or others.How does the pie get divvied up, in your principled approach? In other words, what’s in it for the manufacturers to buy into the principled approach? What’s in it for you? What’s in it for public safety? Can you speak to that, please?
Ms. Gerber: The way we would see it is that as long as access is open to all the innovative parties that want to come to the table to produce services that consumers can purchase and utilize, manufacturers will have lots of opportunities to partner with some of those innovators to bring services through their own channels to their auto purchasers. But we don’t think it should only be the manufacturers’ partnerships that end up being deliverable to consumers. We think a broad range of innovators should be able to participate in that market too. There’s plenty of opportunity for the manufacturers to monetize that access through their partnerships with companies that will bring services to vehicles.
One of the fascinating things to me is lots of folks are saying the future of autonomous vehicles really isn’t about the vehicle’s service. That is one of the reasons that, potentially, mobility on-demand services will be so cost-effective for consumers, because the revenue opportunities are really all about what experience people will have for the three hours a day they spend in that car now that their attention isn’t on driving. Will people be taking college courses or doing their grocery shopping while they’re in that environment? The number of services that can be brought into that vehicle experience, the broader the access to that market, the better off consumers will be.
Senator Eggleton: I want to ask you both about this model state policy that the U.S. National Highway Traffic Safety Administration has put out. There are attempts to bring some consistency amongst the states. If we got all the provinces and municipalities into this, and if it’s not properly coordinated, it can be a problem.To what extent would your organization support the introduction of a model AV policy in Canada?
Mr. Hirota: That would be our preference, as an industry, in that it would just enable our industry to introduce a little more predictability in how they can implement use of these vehicles and distribute them across provincial jurisdictions.
Ms. Gerber: We’re very much in favour of uniformity. If a vehicle has to change how it operates as it crosses a provincial border, that’s disastrous for our industry, and I think for almost every industry that is involved in transportation.
There is room for model legislation on the issues that do appropriately remain at the provincial level for regulation, and there’s a space for federal intervention for some of the safety and cybersecurity issues as well. That’s fairly consistent with how the U.S. is approaching it.
The grey area in between I found interesting. In the U.S., with the legislation going on right now, they’ve said, “Well, all we’re trying to do is maintain the same delineation between state roles and federal government roles.” There’s a grey area. For example, in the States, they’ve always been able to give a test to a driver to determine that that driver could drive safely on their state’s roads. Do you give the test to the car now? Or is that a safety issue that’s now regulated at the federal level? There’s a grey area that will have to be decided where there’s new space.
But, yes, more consistency we think is better.
Senator Eggleton: We need coordination as well amongst all the various government entities.
Senator Duffy: I think your argument about who owns the data is becoming easier for all of the participants. Every day, there seems to be a new hack or a data breach somewhere. Consumers are very concerned about that. One assumes that there would be an “I accept” button on the dash when you drive one of these that you actually share the data of your trip or what you’re doing with Big Brother in the cloud. That part is coming along.
You’ve touched on an interesting thing, which is the provincial jurisdiction issue. As everyone at this table knows very well, we’ve had years of discussion about interprovincial trucking and the standards. In some provinces, the trailer can be 54 feet. In others, it’s 50 and on and on and on. We have to have some kind of détente between the federal and provincial government so that we don’t get into the very problem that you’re referring to.
My final question was: How soon is this coming?
Ms. Gerber: I will give you my personal perspective because I don’t think you can get one company, much less an entire industry, to agree on that. When I started following this very closely about two years ago, what I called the “under-over” for me was probably fifteen years, and I think the under-over for me today is about five years. I believe that the deployments will be very different in different places. I think different countries will have different levels of uptake and consumer confidence, and certain governments will take more dramatic action than others will. I think we’re going to see a broad difference, but, in terms of the technology being available, I feel like there’s much more that’s already there than most people are aware of.
Senator Duffy: What do you see or what are you hearing from the industry about green vehicles, hybrids, electric and so on? Will this all be part of this?
Ms. Gerber: I don’t know that Enterprise has necessarily a thought on that, but I think we are following the manufacturers who are making very bold announcements on how aggressive they want to be to move there. I will tell you that, from Enterprise’s perspective, with electric vehicles, our philosophy is that, when our consumers want them, we will have them. Initially, when electric vehicles were introduced into the market, we did pilots and tests and put electric cars in markets and had very poor utilization because consumers weren’t ready to trust them. But, when that trust is there, we will be right there with those cars.
Senator Gold: This may be a little bit off topic, but to what degree, if at all, does your industry accept liability or contemplate assuming some form of liability when, unfortunately, something goes wrong? Even in a largely automated vehicle, you would have the responsibility for actually agreeing to rent it to Mr. or Mrs. tout le monde. Even if the driver, the computer, the algorithm, is more responsible than the human might have been in the past, would you see the rental company assuming any responsibility, shared perhaps with others, for accidents or damages that ensue?
Ms. Gerber: We’ve started to look at what liability would look like in an autonomous-vehicle world. For us, the concern is not to replace the term “driver” with “car” when the car is the driver because that immediately puts you in a vicarious liability situation. What our very early thinking looks like on this is that, in an autonomous-vehicle world, there are really three categories of liability. There is negligence that can arise if an individual occupant of that vehicle did something to interfere with the vehicle’s operation that caused an accident. That would be on the occupant. There will remain the potential for the owner to have responsibility for failing to maintain the vehicle in a way that caused an accident. I think that, as the owner of a fleet of vehicles, we would continue to have that responsibility.Then I think, what was said earlier is that there’s a greater shift of responsibility to manufacturers because, if the negligence arises from the way the vehicle was programmed to operate, then that liability will rest with those manufacturers. But those are the three channels of liability we see moving forward.
Senator Eggleton: I want to pick up a couple of words that Senator Duffy used. He talked about the “I accept” click. Some of the testimony here at our hearings has talked about meaningful consent, in other words, using clear, non-legalistic kind of language, rather than those usual very long legalistic-looking pieces of documentation that people are asked to press the “I accept” click on.To both of you, what are your organizations doing to have more meaningful, clear, non-legalistic terminology so that people understand what they’re accepting?
Ms. Gerber: My data privacy officer would very much like the way you put that. We talk about it frequently. I think a great deal of it is going to depend on how the manufacturers create the systems that will enable us to ask along the way.
I think we see the potential for there to be basic levels of service. So, if you want to utilize one of our rental vehicles, there’s a certain set of data access that we’ll have to have to be able to get that car to drive itself to you and tell us that it’s safe to be occupied by you while you’re in it and how to get it back to us or to our next user.
Then I think there’s going to be another layer of more personal information, where, if a user chooses to make it available, there will be additional services that can be provided to them. For example, if you’d like to see opportunities for discounts on restaurants as you’re driving, maybe you say yes, and whatever service providers are out there can provide options for lunch places for you or let you know where the closest fuel station is or things like that.
I anticipate that there may be basic levels of permission that are granted just to function in a vehicle and then additional levels for optional services that can be accepted. That’s a very non-informed thought.
Senator Tkachuk: I have just a question of interprovincial trade, something that we’ve looked at in another committee that I’m on and the difficulty of the provinces to have a regulatory framework for the movement of products and trucks from one province to the other. Have you met with provincial ministers to discuss these items with them? Minister Bains just finished a long negotiation, and they haven’t gotten anywhere on this issue. These things are still problematic. I don’t see it changing very quickly, and it will be a very difficult situation. I don’t know what your industry can do, but are you doing anything?
Mr. Hirota: On that subject, we haven’t had any provincial-level discussions. Our industry does sit in on the CCMTA, the Canadian Council of Motor Transport Administrators, meetings to stay in touch and stay in the loop on their various projects of harmonizing between provincial transportation ministries, but we haven’t had any discussions yet regarding interprovincial commerce.
The Chair: Before setting up the next panel, I’d like to thank both witnesses for their presentations. We have some witnesses appearing by video conference, and we have two witnesses behind. I’d like to inform the committee that, when we come back, on the first day, we will have witnesses from the Americans appearing on teleconferencing, and, on the Wednesday, we will probably have Bill C-23 that will be sent to our committee, on the preclearance legislation.Ms. Gerber, and Mr. Hirota, thank you very much.
Honourable senators, we are having connection problems with the teleconferencing but, if you agree, I can ask the witnesses who are here to start with their presentations. Once the teleconferencing starts, we will get back to the other witnesses.
We now have two panels. From the IBC, we have Mr. Fiorino, Legal Director and Senior Counsel, and Ryan Stein, Director of Policy. From the Insurance Institute of Canada, appearing by video conference, we have Peter Hohman, President and Chief Executive Officer, and Paul Kovacs, Researcher and Author.
We will start with you, Mr. Stein. We are asking for presentations to be restricted to five minutes, and then we will go on to questions from the senators.
Ryan Stein, Director of Policy,Insurance Bureau of Canada: On behalf of the Insurance Bureau of Canada and its member property and casualty insurance companies, we are pleased to speak with you about the insurance implications associated with automated vehicles.
In the coming years, vehicles with fully automated capabilities will be on Canada’s roads. Several major manufacturers expect to have automated vehicles available for purchase in the early 2020s. The Victoria Transportation Policy Institute predicts that by the 2050s, automated vehicles will comprise more than 80 per cent of new vehicle sales.
Automated vehicles will change auto insurance underwriting, pricing, sales, distribution and claims management. The changing landscape will primarily come from the following three developments.
First, there will be fewer collisions but, because of the technology in automated vehicles, these collisions will have increased cost consequences. KPMG predicts that over the next 10 years, there will be a 35 to 40 per cent decline in the collision rate and a 25 to 30 per cent increase in repair costs.
Second, there will be a shift in the party responsible for collisions. The National Highway Traffic Safety Administration states that human error is the primary cause of more than 90 per cent of collisions. Automated vehicles will shift this distribution from the vehicle’s human operator to its manufacturer and/or its technology provider.
Third, there will be fewer individuals owning vehicles. A University of Michigan study estimates that automated vehicles will result in more vehicle sharing, which could reduce vehicle ownership by more than 40 per cent.
It is difficult to predict when and how vehicle ownership trends will change but, with automated vehicles coming to Canada’s roads soon, the provincial governments and insurers have to examine the adequacy of the provincially prescribed auto insurance products and supporting regulations from the consumer’s perspective.
Currently, vehicle liability coverage is based on human error. In an environment where more collisions will happen because of product malfunctions or failures, product liability tort claims will naturally be more frequent. These types of claims are more complex and take longer to settle than the typical vehicle collision tort claims. Legislative solutions that ensure that injured individuals receive timely compensation may need to be developed and implemented.
According to the Brookings Institute, resolving potential liability issues should not be a precondition to the rollout of automated vehicles. The Brookings Institute notes that product liability law has proven to be adaptive to new technologies and will be able to address the issues that arise with automated vehicles. Based on this position, it is suggested that changes to the auto insurance products and their supporting regulations may not be needed to accommodate automated vehicles.
The RAND Corporation has a different position. It notes that because collisions involving automated vehicles may not have an at-fault driver, governments should consider no-fault insurance. With no-fault insurance, the same amount of medical and income replacement benefits and additional compensation is available to all injured individuals regardless of who or what caused the collision, and there is no ability to sue the party responsible for that collision.
The U.K. government has been considering changes to its auto insurance legislation. These changes would make the auto insurance product compensate injured individuals for collisions that occur when the automated technology is driving the vehicle. In the event of such a collision, the vehicle’s insurer would compensate the injured individuals as it would if the driver caused the collision. After compensating the injured individuals, the insurer could try to recover any liability payments from the manufacturer, the technology provider or whichever party was responsible for the collision.
IBC set up an insurer working group to examine automated vehicles. The working group concluded that although injured individuals will be able to receive at least some medical and income replacement benefits, as injured individuals receive now, because of the product liability aspect, those individuals with a tort claim will have to wait longer to be compensated than a plaintiff in a typical vehicle collision case.
To facilitate the claims process, the working group is examining the applicability of potential insurance product and regulatory changes to determine their viability in Canada. An important supporting component will be federal vehicle safety standards that include the typical equipment standards and new standards for cyber and technological security.
Another important supporting component will be data sharing between vehicle manufacturers and insurers to determine a collision’s cause. We expect to have more details on the working group’s views by the end of the year.
Thank you for having us here this evening. We would be pleased to answer any questions.
Peter Hohman, President and Chief Executive Officer, The Insurance Institute of Canada: I would like to start by making a quick distinction between the Insurance Bureau of Canada and the Insurance Institute. The Insurance Institute is the industry’s professional education arm, which is different from the IBC’s role, although we are obviously colleagues.
Part of what the institute does is conduct research on topics of interest that impact the insurance industry, and we do this from an educational point of view and an apolitical standpoint so we have no interest in that.
One of the papers that we did is the one we forwarded to you on autonomous vehicles. Mr. Kovacs, beside me here, is the lead researcher and author of that report, so with that brief intro, I will turn the mic over to Paul.
Paul Kovacs, Researcher and Author, The Insurance Institute of Canada: We’ve tabled with you our report on automated vehicles and the implications for the insurance industry in Canada. We believe this is the most comprehensive report publicly available about the insurance implications of automated vehicles. We would be delighted to answer any questions you have about the report.
In the time we have available for our introductory remarks, I will focus on the single issue of road safety. In our opinion, this committee has the opportunity to order advance one of the most important road safety initiatives in Canada today, the issue of vehicle automation.
We can largely eliminate the leading cause of death for young Canadians — road collisions. Two steps are required. First, we believe this committee should recommend that the Government of Canada mandate that all new vehicles must be equipped with rear collision avoidance systems and other modern safety technology that currently exists. Second, all drivers should undertake training to learn how to best use this new technology. The combination of mandating the use of the new equipment and better training can lead to a remarkable reduction in collisions, fatalities and injuries.
About 100,000 Canadians were killed in road collisions over the last 30 years. More than 6 million were seriously injured. The technology exists now to largely eliminate this risk.
My new car, for example, has two cameras that monitor the road as I drive. If I am unable to stop safely, my car will stop itself automatically to avoid a collision. All the vehicle manufacturers offer technology of this nature today. Some include it only on their luxury vehicles; others offer it as an option on some of the vehicles they offer. Presently, most of the vehicles being sold in Canada do not include this technology, despite the fact that it exists and it could be provided, if required.
One company, Volvo, has stated that two years from now, they believe that no one will die and no one will be seriously injured in a new vehicle that they sell. This technology is available by the company right now for some versions and in two years will be put on all of the cars that they sell.
We are incredibly impressed with the potential of the technology that exists today, let alone the exciting improvements and developments that are expected in the years ahead.
When these safety features are mandated for all new vehicles, it will still take time, perhaps a decade, before the current fleet of vehicles is replaced. Importantly, it will also take time to educate drivers about how to best use the new technology. Driver training programs need to be redesigned and mandated. The combination of an early mandate requiring the installation of automated features in new vehicles along with driver training could largely eliminate collision fatalities within a decade.
Our institute has proposed that a national forum should be established where governments, insurance companies and other stakeholders work together to promote vehicle automation as a means to improve road safety in Canada.
On behalf of the Insurance Institute of Canada, thank you for the opportunity to share our comments. We would be delighted to answer any questions that you have.
Senator Michael L. MacDonald (Deputy Chair) in the chair.
The Deputy Chair: Thank you, gentlemen, for your presentation. We will go to questions.
Senator Tkachuk: Could you explain the numbers from both of you? Mr. Stein, you talked about human error. When you talk about human error, are you including influences such as alcohol, drugs or cellphones? There is human error where I made a mistake and caused an accident, and then there is human error because I was under the influence of drugs or alcohol or on my cellphone and wasn’t paying attention to the road.When you talk about your numbers and deaths, do you have a breakout of what all that was about?
Mr. Stein: The numbers we are quoting are from the U.S. administration. They include the human caused the collision. It could be just an error or for some of the reasons you are saying.
Senator Tkachuk: But that is an important distinction when you are doing the statistics because a person under the influence of drugs or alcohol will still need to be paying some attention to the road even though the vehicle may be doing most of the driving for him. This may even cause a more serious accident.
I am not sure about all the deaths that you talked about. How were your numbers derived? Were they derived from an error because a person was a bad driver and made a mistake, or was it because of some other influence, which is tertiary, actually?
Mr. Kovacs: What we are sharing with you this evening is the evidence that has been accumulated over several decades that creates the foundation for how insurance deals with vehicles, and it is based on frequent evidence that humans are the primary and almost exclusive, 95 per cent of the time, cause of collisions. That does include all of the reasons that you have correctly pointed out — sometimes a mistake, sometimes drinking and driving, a series of different reasons. However, at the end of the day, insurance is based on the foundation that it was one driver or the other driver that was at fault 95 per cent of the time.
The times when it is the vehicle’s fault or it is just circumstances beyond anybody’s capability are very rare in driving for several decades now. Insurance is the business of pooling those risks and deciding whether it was the first driver or the second driver, but we know one of those drivers is at fault.
Senator Tkachuk: But those are important distinctions when we are talking about statistics. Obviously, if you could eliminate alcohol and driving, your deaths would go down, or if you could eliminate drugs, your deaths would go down. If people didn’t use cellphones, your deaths would go down. The numbers are not just because a person made a mistake driving, which is what self-driving vehicles would try to eliminate by taking that person’s place, but rather because a person was behaving irresponsibly. That is an important statistic to talk about.
Mr. Kovacs: I absolutely agree. The reasons why humans are seen at fault 95 per cent of the time include many different elements, as you correctly pointed out. They are detailed in some existing research. However, with the capability of this new technology, including what is available today, not just what we are waiting for, a large number of those collisions can be reduced if all of the vehicles on the road had this technology.
Senator Tkachuk: So if a person gets into a vehicle at 0.08 or more, the car will look after it?
Mr. Kovacs: My vehicle has the capability of watching and stopping itself. One problem with the current technology is I can turn that off.
Senator Tkachuk: Of course.
Mr. Kovacs: So even though it is there, if I am impaired or whatever, but having that capability in a vehicle significantly changes. It does not reduce the incredible importance to focus on training, the behaviour of people and eliminating drinking and driving. All of those things are as important as they ever were. This technology is the next big positive opportunity to take road safety to a better level.
Senator Gold: Thank you, gentlemen. I would like to ask a bit about your industry.
If insurance is about the appropriate allocation of risk in part, given the new technology, as between the manufacturers or the technology providers and the humans who are in the driver’s seat or in the car, what is the best system? Something analogous to no-fault or something else, for your industry, accepting that road safety will be enhanced by technology? From your industry’s point of view, have you given some thought to what the ideal regulatory framework would be for the insurance industry as it adapts to the new technology?
Mr. Stein: That is a lot of the work we have been doing for about a year and will continue to do for some time, namely, trying to figure out what is the best insurance product for that type of vehicle. So far, what our members have said — and our talks are not final — is that the current product that is really based on the liability of the human driver error might not be an appropriate product to facilitate the whole claims process.
There is a lot of merit to a no-fault insurance product. That is something that the RAND Corporation has put out.
There is also a lot of merit to what the U.K. legislation was before the recent election. That was to take the whole liability component, the human error and the product malfunction, and put it under one policy, so that if there is a collision, from the perspective of the people that are injured, it would kind of work the same way as it does now and any issue about assigning who pays because of the fault between the manufacturer and the insurer would be done behind the scenes. The idea is to speed up the process for the injured individual, and there is a lot of merit to that.
It is really looking at both, and there could be others out there. If we find them, we’ll look at what will be the best product for those vehicles when they start coming in the early 2020s.
Senator Gold: Perhaps I might ask your colleagues in the institute for their point of view. If I understood correctly, that may be one step back from members’ interests and more academic interest. Have you a view as to what the appropriate regulatory framework would be for insuring vehicles going forward?
Mr. Kovacs: The observation that I would share is that the regulatory environment for auto insurance is extremely different between the provinces of Quebec and Ontario and several other jurisdictions across Canada.The private insurance industry has found a way to operate in whatever structure the province has deemed appropriate for that jurisdiction. So there are different models. There are different models within Canada and also internationally. The insurance industry has proved to be fairly adaptable to figure out each one.
I’m not certain that there’s a global consensus in the research community that one model is always superior, and that’s why there are different models around the world. And as was just shared, the insurance industry itself has yet to come to a consensus saying the companies believe there is one model superior to others.
There are different models in Canada. The insurance companies seem to make each work in the way that it pools money and looks after the needs of the public. I do not believe there is a consensus that one model is superior in all ways to another.
Senator Eggleton: This question is for you, Mr. Stein, but I invite any other of the witnesses to chime in on any of these questions.You think there is some merit — you’ve mentioned it twice now — in the possibility of no-fault insurance. How will that work in a transition period? We tend to think of autonomous vehicles running with other autonomous vehicles, but there will be a period of time when the conventional vehicle of today will be on the road with these other vehicles, and we don’t know how long that transitional period will be. How will that work in, let’s say, a collision between an autonomous vehicle and a regular kind of vehicle as we know it today?
Mr. Stein: I think what you suggested is one of the challenges with a no-fault product, namely, you can’t really have a no-fault insurance product on some vehicles and then say a tort-based product or a mixed no-fault/tort on other vehicles. If you were to go no-fault, you would almost need to apply that to all vehicles, automated and conventional ones. All around the country, there are a bunch of different products, from heavily no-fault to more tort-based. Obviously there is not this general view that no-fault is the best way. With the mixed vehicles on the road, that’s one of the benefits of the U.K. approach, that is, you can apply that type of insurance framework on the automated vehicles and it will work seamlessly with the conventional vehicles if there was a collision between them.
Mr. Kovacs: If I can build on that comment, the part I would share from our research it that it’s our view in terms of road safety that the vehicles are getting better and better and better. We will see fewer collisions and a positive outcome in terms of reduced road safety as we move from conventional cars to semi-automated to fully automated.
From an insurance point of view, as Senator Eggleton pointed out, it will actually be a very difficult transition for insurance. For the last several decades, it has always been clear that when there’s a collision, one of the drivers is at fault, so let’s figure out how to decide who is at fault. In 40 or 50 years, if all the cars are fully automated, always the manufacturer will be at fault. In the period in-between, which will be with us for a while, there will now be more disputes and uncertainty, which is not a word that insurance companies welcome. We will have to figure out in each particular case how much was the driver’s fault and how much was one of the new pieces of technology’s fault, and that will not be easy to do, especially if there is not data from a black box or something to help clarify that situation.
Mr. Hohman: There are even other vagaries such as when a person is exiting a parked vehicle, whether it happens to be a bicycle going by or pedestrian and there are injuries as a result of that. Those considerations need to be taken into account too. Even in a fully autonomous environment, how do you deal with that, or with the individual who is riding down a city street that has trolley cars and the tire of his bicycle gets caught in the track and he falls into the vehicle and is injured but doesn’t have personal coverage. That follows the accident benefits of that vehicle. So there are many of those things, as our colleagues at the IBC pointed out, that still have to be contemplated in that regard.
Senator Eggleton: Let me switch to data. There is now — and it is increasing all the time — the connectivity of vehicles, the database, and substantial data is being collected. There are two concerns here; one is privacy and the other is hacking into it.
From the insurance company’s standpoint, much of this information that is possible to get, for example, duration of use, speed, et cetera, are all coming even now through driver assistance features. How do insurance companies use this information, and what privacy policies govern the use of the data? To what extent, if at all, can insurance companies share the data with third parties?
Mr. Fiorino: Perhaps I can field that question. With respect to data and privacy rights, it is important to recognize that the insurance industry works when it comes to accessing and using data within the regulatory framework at the federal level, PIPEDA, in those provinces that have their own provincial jurisdiction, British Columbia, Alberta and Quebec with regard to the principles of that legislation.
The use of data that ensures use in the context of user-based insurance or telematics is one issue. That is driven on the basis of transparency and meaningful consent being obtained from the insured, and there is a set of regulations that are superimposed over and above that which is a rate classification system that has to be approved on the basis of being reasonable and predictive with respect to risk and being able to distinguish between risks fairly.
There is provincial regulation. At the federal level, there is PIPEDA. When it comes to outsourcing third parties to access data, there is regulation in that respect as well, whether it is at the federal level, which is the B-10 guideline with respect to outsourcing, and then Quebec has guidelines as well.
We have to distinguish the use of the data in the context of telematics, I believe, and user-based insurance and the use of data with respect to the deployment of automated vehicles. When we talk about insurers’ use of data with respect to automated vehicles, it will be absolutely critical that there is a model that allows insurers to access data that is relevant to the apportionment of liability in whatever model that will be employed. To the extent that there will be that issue of mixed liability between multiple parties, access to that data will be critical.
Senator Duffy: Following up on that point, do you have a problem getting access to the black boxes that currently exist in most modern cars?
Mr. Fiorino: From the perspective of accident reconstruction, at this particular standpoint, if there is friction in the market, I believe it would still be based on a consent-driven model that the data would have to be disclosed.
Senator Duffy: How does it work now?
Mr. Fiorino: In the context of litigation, if there were litigation and the concept of reconstructing that data, in the normal course of litigation, that data would be producible. The insurance industry would only have access to that data in the process of litigation and disclosure in the litigation. There is no direct access to that data in the context of —
Senator Duffy: But there is no legal impediment now for you to get it in the normal course of events, so would that model not just carry on in this new situation?
Mr. Fiorino: I think in the new framework of the deployment of automated vehicles, an issue that the committee has broached on numerous occasions is ownership of the data. From the standpoint of the industry, whether it is with UBI telematics data or the data that arises from the vehicle that is attributable to the behaviour of the owner of the vehicle, I think the notion would be that that data, as it relates to the individual, is personally identifiable information and falls within the privacy aspect. There is compliance with the privacy aspect that you would have to deal with.
If I can just take one step back on the previous question, we’re talking about what model would work best. But what we do know — and there is some consensus on this point — is that the current model that is, in essence, driver-centric, will not work particularly in that transitional phase. To draw upon my technical expertise for the committee, the reason that I think that does not work is what you have already heard from multiple witnesses. There will be a tremendous amount of friction because you’re going to have a train of defendants that will be named in a lawsuit. So you will have the driver, potentially; you’ll have the manufacturer; you may have someone who has worked with the vehicle with aftermarket parts; you may have software developers. And based on what you’ve heard with the last witnesses, leasing companies as well. Litigation in that context simply does not work from the standpoint of providing an expeditious result for consumers.
Senator Duffy: I understand that. It’s not slip and fall. This is going to be much more complicated.
Can I ask you to provide me your professional translation services here? A previous witness, Mr. Hirota from the Associated Canadian Car Rental Operators, told us that there were still three provinces — New Brunswick, Newfoundland and Labrador and Prince Edward Island — that impose unlimited vicarious liability on non-negligent vehicle rental companies. What does that mean? What does that mean for insurance prices in my home province of Prince Edward Island? Is this something that is strictly in provincial jurisdiction and, like everything else involving transport, will take forever to iron out?
Mr. Fiorino: I’ll take the first part of that question first.
From the standpoint that it is a matter of provincial jurisdiction, insurers are regulated at the provincial level. The jurisdictions that have capped the vicarious liability of leasing companies have done so on the policy principle that the individual who is best able to control the risk is the driver, and the leasing company, once that vehicle is leased, no longer has the locus of control and therefore does not have the responsibility in that regard.
From the standpoint of impact on premiums, I’ll defer to my colleague, Ryan. I believe the previous witness was correct. I don’t think there’s been any material impact vis-à-vis premiums on those jurisdictions that have either elected to impose that cap or elected not to reform their legislation.
Mr. Stein: We haven’t done an analysis of that, and I think the previous witnesses would have known better to answer that.
Senator Duffy: So this is simply an issue related to the leasing business as opposed to highway safety in general?
Mr. Fiorino: I think that legislation —
Senator Duffy: That affects the leasing businesses’ insurance premiums, presumably, if they have unlimited liability.
Mr. Fiorino: In theory, that’s correct. They would have greater exposure.
Senator Duffy: Thank you so much for all the important information you’ve brought tonight.
The Deputy Chair: I have some questions for both of your groups. It’s interesting that we have both the Insurance Institute of Canada and the Insurance Bureau of Canada. For the benefit of the public, what are the differences in your mandates? What distinguishes your two organizations? What’s your raison d’être individually?
Mr. Hohman: The Insurance Institute of Canada is the education arm of the industry. We were created back in 1899 to educate the people employed in the business to help them be better at their job. We would conduct research into topics of interest for the industry, and this particular report is on autonomous vehicles, but we also do research on other ones. We’re strictly an educational arm, and we serve all people who are employed in the industry.
Mr. Fiorino: The Insurance Bureau of Canada is a not-for-profit organization representing the interests of Canada’s property and casualty insurers and has a primary mandate of ensuring that there is a business environment in Canada for insurers to operate in a manner that allows insurance products, whether they are personalized products or commercial products that are available to Canadian consumers, at an affordable cost. Tied into that mandate is, of course, the primary objective of ensuring that Canadians, when it comes to their risk management needs, have not only products that are available to them but have the information available, whether it is consumer-based information or safety information, to make sure that Canadians are able to implement risk management solutions that are readily understandable and practical.
The Deputy Chair: I have another quick question. It’s great to hear the term “insurance” combined with the term “not-for-profit.” I think a lot of people would be surprised at the combination of those terms. But I do have a question for the insurance bureau.
A report produced by the Insurance Institute of Canada suggests that higher repair costs of AVs compared to traditional vehicles due to the various computers, sensors and cameras installed in the vehicle will offset some of the savings and insurance costs that AVs are expected to bring. I would like your assessment of this view. Once these offset effects of costs are taken into account, what are the anticipated savings in insurance costs associated with automated vehicles, if any?
Mr. Stein: The price of insurance is based on the likelihood of a claim and the likely cost of that claim. A lot of the projections for automated vehicles is that, yes, they will be more expensive to repair because of the technology involved in them, but at least the projections say that’s mainly going to be offset by the fewer collisions they will be in. I can’t project when that will all happen and what the time frame is, but if the cost of claims go down, which tend to represent three quarters of the price of auto insurance, the price will follow it.
Senator Eggleton: I have a couple of quick questions and a follow-up on my previous question about privacy issues. The Privacy Commissioner appeared before the committee and indicated that he was looking for more authority to be able to look into matters relevant to privacy involving vehicles as opposed to just responding to complaints. Do you see any difficulties in that?
Mr. Fiorino: I believe that when he appeared before the committee, he was advocating for the development of a code of practice. I think the industry would support any guidance vis-à-vis the use of data. As I mentioned to the committee members earlier, the industry fully accepts that data that arises from the use of automobiles, as it relates to the individual, is personally identifiable information and falls within the ambit and the purview of the authority of the Privacy Commissioner, so the industry would not be concerned with the collaborative construction of a code of practice in that regard.
Senator Eggleton: Another thing we’ve learned about is the possibility of other players getting involved in insurance that are already involved in either the manufacture or the operation of vehicles. We know about the traditional automotive industry, but now we also have, since we’re working towards what is, in effect, a computer on wheels, the Googles and all of the others who are interested in this field as well. Some of them talk about maybe the vehicle manufacturers getting involved in insurance as well. How does this all play into it? You would then have a manufacturer providing the insurance. How does that work in terms of your industry?
Mr. Fiorino: I’ll just add something, and then my colleague Ryan will complement the response.
From the standpoint of new entrants to the market, I think the concern is simply that, if there is an appetite for a manufacturer, for example, to be offering insurance products to Canadian consumers, the fair expectation would be that they would comply with federal and provincial regulation at the same level that any incumbent insurer would in the Canadian marketplace and that there not be a two-tier regulation system for a technology company, for example, that is offering a product. I think it is important, from the perspective of the protection of Canadian consumers both with respect to the products that they are purchasing and also ensuring market conduct as well, the solvency issues, that the same regulatory rules would be applicable to entities that wished to offer insurance in the Canadian marketplace.
Mr. Stein: I’ve heard that before, vehicle manufacturers getting into insurance, but I haven’t seen that happen practically. What we have seen is one vehicle manufacturer, and they’re testing this in one part of the world. They have automated vehicles, and they’ve bought insurance that covers all of those vehicles. So, when somebody goes to buy one of those vehicles, it already has insurance bundled in with it. That’s a different approach, and one of the things we said in our remarks is that automated vehicles could very well change the business of insurance. The insurance industry has a very important value proposition. They’ve been protecting Canadians for hundreds of years, for a whole variety of different risks that are extremely complicated, and there’s no reason why they’re not going to be big and important players in covering any risks associated with automated vehicles.
Mr. Kovacs: The part I would share, from some of the speculation in this field, is that the possibility of some of the vehicle manufacturers offering and including insurance has been discussed as something that might come in the future, but they have no experience in the actual business of doing insurance and they are customers of insurance. Some of the speculation was saying that, if the vehicle manufacturers do offer their customers insurance as part of offering the vehicle, they would likely do that by working in partnership with an insurance company. This could lead to a change in terms of which the insurance companies are behind doing the insurance, as some are closer to the vehicle manufacturers. Different insurance companies might do well out of this, and other insurance companies might find their business shrink because of this change. Some of the speculation is that these are very large, mature companies that realize that this is a special kind of risk, and working with an insurance company can be helpful for doing that.
Senator Duffy: I was going to follow up. It would seem to me that there’s an inherent conflict of interest that the Competition Bureau wouldn’t like very much, which is that, if the main source of litigation were to be the failure of a product and you’re going to an insurance company or the company that manufactured the product and asking that person to carry the fight on your behalf towards the manufacturer so you can get damages, I would think that it’s putting — I don’t know what the metaphor is — the wolves in charge of the henhouse or something.Would you not see that? Have we not gotten past that kind of self-dealing in this country?
Mr. Fiorino: From the perspective, again, of the friction that would be expected, I can see that, if you had a manufacturer that was, in actual fact, underwriting the risk, then there would be concerns from the perspective that you mentioned and, more importantly, I think, from the consumer when there’s a contested issue of liability with respect to product design or product malfunction. I think the arrangement that Mr. Kovacs was mentioning is probably the more likely arrangement, where you have a manufacturer that is partnering with an underwriter that is backing a product. That, I think, becomes less problematic.
Senator Duffy: That is sort of what happens now with auto finance. Various dealers have deals with finance companies in order to finance cars. So, presumably, this would be a variation on that.
Mr. Fiorino: I think you see it with new tech companies, but it would be a strategic partnership where they, in essence, have a third-party insurer underwriting the risk for their product. I don’t think that model is as problematic as the manufacturer themselves underwriting the risk exclusively.
Senator Duffy: One further thing on this: The caravaning of trucks. There’s a phrase for it. Old guys lose their memory, but what we see now where there are trucks on the 401. People see these huge convoys of tractor trailers. That’s a relatively new phenomenon, I think, in the last few years. Do you have any data on how well they do compared to the single tractor trailers and the number of people I hear who find it terrifying to be going at 100 or 110 clicks with one of these things beside them? Do we have any data on accidents, or are they as safe or safer than the old style?
Mr. Stein: Unfortunately, we don’t have data at that level to determine the safety.
The Deputy Chair: I’d like to thank the representatives of the Insurance Bureau of Canada and the Insurance Institute of Canada for their participation today.
Honourable senators, next week is a parliamentary break week, so we will not hold meetings. For our next meeting, on October 17, we will hear from officials of the U.S. federal government and the Government of Michigan.
(The committee adjourned.)