American International Group’s Management Presents at Consumer Electronics Show Conference (Transcript)

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American International Group Inc.(NYSE:AIG) Consumer Electronics Show Conference January 8, 2013 6:30 PM ET

Executives

Lex Baugh – CEO of North America General Insurance

Gaurav D. Garg – CEO of Global Personal Insurance

Robert W. Peterson – Santa Clara University School of Law

Kate Sampson – VP of Risk Solutions at Lyft

Salen Churi – University of Chicago Law School

Analysts

Lex Baugh

Good afternoon and welcome to the 2018 CES Research Summit. My name is Lex Baugh. I’m the CEO of North American General Insurance or AIG and I’d like to introduce my colleague Gaurav Garg, who is the CEO for our Personal Insurance Business. We’re delighted to be back at the CES Research Summit. This is the third year in a row for us and we’re fortunate enough to have been selected as the only insurance company invited to speak.

In 2016 we began our partnership with CES, and in particular we work closely with the Chief Economist for the CES at that point in time. And our initial efforts were along the lines of just trying to understand how the Internet of Things, how the consumer Internet of Things, how the industrial Internet of Things would impact risk.

Last year, we came back for second time. We released a study on smart safe data sharing with Kleiner Perkins. The concept there was to introduce the idea of digital trust and to understand better how we were get — we were coming to trust the digital age and what the impediments would be for business and for the adoption.

This year, I’m excited to say that we focus on the future of mobility and risk as autonomous features become driverless cars and trucks. And I don’t know how many of you saw it this morning, but in my hotel room they slipped the newspaper out of the door, the — I can’t say that I had read the Las Vegas Review Journal before in the Las Vegas Sun, but the big — article in there about Bitron. And Bitron is a fully autonomous electric vehicle which is expected to be launched in China by 2019. So we will talk a little bit more about what we learn in the survey, but the expectations there are well in advance, so I think what most people are anticipating in the different tests that we’ve done around the world.

Gaurav and I are here to outline why we did this share study and then take a seat on a panel of experts which will explore the subject a little bit more deeply. As we step back and think about it the world of travel is changing profoundly. Its changing quickly. We — today we think nothing of sharing rides. Cars park themselves.

I was on the phone this morning with a partner at Mackenzie and he was like a young child, he was so excited about going around looking at cars that actually park themselves. And I guess it was probably about three years ago that I first got into a Mercedes prototype and I was pretty excited at that point of time when a car actually parked itself. These things are not something for the future, they’re here with us today. How many people have seen the Lexus ad where there was a jogger who jumps out from unobscured area behind a bush, the car doesn’t only have automatic braking in order to stop before hitting the jogger, the car actually steers to avoid the object jumping out of the bushes. That’s something that we probably couldn’t have anticipated only two years ago.

As our mobility behavior changes, we think about risk and exposure differently as well. The shift is upending our conventional wisdom about liability and the way that we predict the cost of risk. Within the insurance industry, we tend to look backwards in order to project the future, in order to anticipate what’s going to happen in the future and in a period of time when we were introducing airbags that was very feasible. The airbags were first conceived in 1971. It wasn’t until 1998 that they were actually mandated in cars — new cars released in U.S — in the U.S. And so that gave us a span of 27 years to learn to understand how do drivers react to having airbags. Do they take more risk, do they drive differently, what happens with airbags, do we get more serious injuries and less death, those things turned out to be the case, but not something that we necessarily understood very well in 1971.

These technologies that I talked about earlier that we’re seeing were cars are automatically breaking, cars were automatically avoiding an oncoming pedestrian, those were things which really only in development 3,4, or 5 years ago and today they’re already becoming ubiquitous in the transit market.

The biggest change in risk management between three years ago and today is that today we have the power to know more about more things and with more certainty than ever before. For insurers that’s very valuable. This is an industry that used to price car insurance on the basis of the color of the car. We are able to correlate the color of the car with the likelihood of an accident. Very different from the capability that we have today with the data feeds that are available to us from these new technologies.

Some of you might be sitting there wondering why is the insurance company doing this at a Consumer Electronic Show? And I know Gaurav have some thoughts that he would like to share with you on that.

Gaurav D. Garg

Thank you, Lex. Delighted to be here today. Autonomous vehicles, I think fits very well with the Consumer Electronic Show. What is an insurance company doing here? So it is about the risk. As the risks transfers from self-driven cars to driverless cars, there is a huge shift in the risk profile. And why is it important? Is the technology can lead to safer roads? We do know that there are around 40,000 human lives lost in car accidents in the U.S alone. And guess what, 90% of this is supposed to be through human error.

So if we have technology that can prevent this, it would not only save lives, but make for safer roads, safer societies. So these individuals and families that travel in these cars, through the survey, we thought we should give them a voice. They should have a seat on the table because ultimately they would be the end consumers. So this survey that we did we asked road users in three countries, in the U.S., in U.K., and Singapore on three aspects. The first aspect what is the risk on the road today? The second aspect what do they think the risk will be with semi-autonomous vehicles, which are already there on the roads. And the third aspect how would they think the risk will be with driverless cars.

Now we will discuss the findings today in the panel, but one was — one finding was very interesting with many of you may agree with. The drivers in the U.S rated themselves to be superior than the average driver. Well that’s what the survey said. So we will discuss more about it today. But two ends of the spectrum emerge in this survey. One in the — end of the spectrum is that people are concerned about things like cybersecurity privacy of data. You will see in videos about — of hacking of cars, of the music system going off of, of cars being — the windshield wipers going on. So there are YouTube videos about that. So they are concerned about that aspect.

The other end of the spectrum is that with this technology they also feel that the cars will become safer. And if the cars become safer, there is an expectation that the insurance premiums on cars will go down. There may be other areas I will talk about that the insurance premium will balance off on liability versus personal car insurance. So we’re really excited today to be here to discuss this. I will go back to Lex and ask him as to how is the risk shifting Lex?

Lex Baugh

We will talk a little bit about that in the Q&A, but what is clear is that risk will change. It’s not simply going to disappear. It’s going to some extent shift, it’s going to blur conventional lines that we think about between man and machine. Gaurav represents the personal side of the insurance business and I represent the corporate commercial industrial side, both from the same insurer. And what we’re trying to work out and working through various partnerships and collaboration with our customers is exactly how that risk is going to migrate.

So is it between the auto manufacturers, the software providers, the parts manufacturers or perhaps the road construction people that are building the infrastructure that’s going to or the municipalities that are responsible for the infrastructure that’s going to speak to the cars. Is it the communication providers? Well they have some responsibility here or is it some new enabling technology which we are really not even aware of yet. Answers to these questions we debated for quite some time and we’ve certainly only scratched the surface of these questions in our survey. But it’s important to start somewhere and speaking of — starting somewhere. I want to return the podium to Gaurav and ask him to introduce our esteemed panelists.

Gaurav D. Garg

Thank you again, Lex. We are honored to share the stage with three experts in the field, who will join us now for the discussion on some of these questions. Santa Clara University School of Law Professor Emeritus Bob Peterson. Bob and Professor Glancy were true partners in this endeavor and an integral part in developing our findings today. Welcome Bob.

Robert W. Peterson

Thank you.

Gaurav D. Garg

Kate Sampson is the Vice President of Risk Solutions at Lyft. She is a well respected insurance leader in the sharing economy after decades of experience at Marsh. She advices several start-ups on innovation. And finally our moderator, Professor Sal Churi, who runs the Innovation Clinic at the University of Chicago Law School. Tomorrow Sal releases IoT risk managers checklist Part 2, focused on Europe and the GDPR, a project that we at AIG were delighted to partner with you on.

With that, I’d like to turn things over to you, Professor Sal Churi.

Salen Churi

Well thanks, Gaurav. Very happy to be here with all of you and thanks to AIG in putting this panel together. Just quickly a little bit about the Internet of things, risk manager checklist. It’s meant to be a practical approach to get risk managers asking the right questions as they implement IoT processes into their businesses and their products and services. So this is actually the second collaboration between University of Chicago myself and AIG, where we’ve addressed IoT in the sort of risks that we see on the horizon.

Last year we did it for the United States and this year we expanded it for Europe, with the looming sort of question of GDPR and it sort of being implemented on the horizon. We thought it was important to address those questions for risk managers who do business and who’s businesses touch Europe. So with that shameless plug aside, I will open it up to our esteemed panel here to talk about autonomy. We will start with you, Professor Peterson. We would love to hear a little bit more about your work at Santa Clara and with AIG. I understand you’re a professor of insurance and liability there. Can you tell us a little bit more about how long you’ve been thinking about driverless cars?

Robert W. Peterson

Yes, well, the despite appearances I was not around in 2011 when the first silent movie was made about a robot driven car, but I had for many, many years thought insurance law, towards [ph] law, products liability. So when it looked like autonomous vehicles were going to become a reality, this was a very happy wedding for me. So I started really the research again writing in the area in 2012. But my colleague Dorothy Glancy, also in the faculty had been working with smart cars for well over 20 years starting with a grant she got from the Department of Transportation.

So we’ve been working in the area for quite a long time. So when the opportunity came along to collaborate with AIG on this paper, both professor Glancy and I jumped at it. We also due to a fairly lengthy white paper for the transportation research Board, which actually if I may plug this, so won an award and she’s back in Washington DC at the moment accepting that reward on behalf of all of us. In that same year 2012, California the legislature adopted a statute enabling the Department of Motor Vehicles to begin creating regulations for self driving vehicles. This has been a long and somewhat labored birth because they still don’t have their final regulations out. But we do expect they may be out by the middle of 2018, if things go as we hope that they’re going to go. So this has been a really exciting area to fall into and in the waning years of my academic experience, so I feel very, very lucky to be working in this area.

Gaurav D. Garg

We all know you’re just reaching your prime now. So this one is for Kate from Lyft. We know Lyft is really focused on changing mobility in the future. We can tell that especially from last week at a really exciting announcement of a partnership with Aptiv. So how do you think about autonomy and the features that are available today and how that kind of leads into sort of full autonomy in the future?

Kate Sampson

Sure. So we’re super excited to be at CES wearing my Lyft hat, demonstrating the first point-to-point ride hailing experience, so you can head out to the gold lot and actually experience that and what’s super exciting about it it’s really the first real-life example of how autonomous technology can be used in a scalable way, providing this experience to all the CES folks. But really thinking about the future on what this technology is going to do to emission’s, our City is congestion all of that. So when I start to think about full autonomy. I start off with — we all might not own a fully autonomous car. We might not own one now, we might not ever own one, but we’ve all experienced autonomous technology, whether it would be cruise control, the parking assist that we talk about, it’s all been there.

So when I actually think about full autonomy, Level 5, a autonomist technology that has no means for human interaction when the car is moving, I think from a Lyft perspective we tend to think a lot about the impact on the environment, the impact on our commutes, what our cities are going to look like. Are we going to live further away from the city because that commute in is very efficient and you can work and it’s quick or we going to live in the cities because the cities are going to be so livable. We are going to have green spaces where there weren’t parking garages. So, at Lyft we think about that.

Personally I live in the Bay Area, I’m a big skier. I just drove back from Lake Tahoe yesterday, 4.5 hours through Sacramento traffic and I really am dying for this technology to make that ride better. I want that car, that’s my living room. But then professionally when I think about full autonomy, I do — and this is professionally from a risk professional, I think it’s going to be much safer, but I also think there is going to be a significant shifting of liability. When I think about all the players that are in this space that will all have influence on that experience in the future, we still have a ways to go as Lex and Gaurav were saying before and where that liabilities going to land. So I’m thinking about that.

Salen Churi

Yes, tough life making it back from Tahoe. So Lex, you’ve been talking about risk shifting for years. Can you tell us a little bit more about what do you mean when you say that unpack it a bit for us?

Lex Baugh

I think I spend too much time thinking about risk shifting and I’m not skiing in Tahoe, but we have spent some time studying it, we truly believe that risk is shifting and shifting in really three categories, three different dimensions. The first area where our risk is shifting is just in the mitigation of risks, the management of risk. Most of the technologies that you see being developed and certainly the auto industry is no exception to this are focusing on those things that human beings don’t do particularly well. And so an example of that would be automated braking that where the car actually stops itself as it’s getting closer to the object in front of it — directly in front of it. For whatever reason, the human being sometimes fall asleep, sometimes they’re distracted and they tend to accelerate right into the back of an object which they should be seeing. That’s a good example of where industry is stepping in using an autonomous feature to improve the safety to take the human out of the process in order to make that process safer.

The second dimension of change in terms of risk is moving from one party to another. And the third dimension is that risk will aggregate differently so that today risk in the largely human environment is a compilation of the actions of many, many independent actors in the process. And so you might have thousands, you might have actually millions of individuals making decisions which are leading to relative risk as they execute on that decision. I think that the machine will do a far better job of making the decision, but when it gets it wrong, it won’t get it wrong once, it will get it wrong thousands of times or millions of times. And so the aggregation of that risk is very different than what we’ve had to deal with as an economy up until now.

Perhaps if I give a couple of examples of industries where this is the case and I’ll come back to auto. The first one I would give you as an example is the production of ammonium nitrate. Ammonium nitrate is — it comes it’s a product of petroleum input that runs through a chemical process in order to ultimately produce ammonium nitrate as an end product. It’s an — it use as an explosive highly volatile something that we as insurers have spent a lot of time worrying about, thinking about trying to engineer. Well if we go to the plant today, and we go and knock on the door and try and find out where the engineers are at the plant, they’re not there anymore. The three shifts of 8 hour engineers who were controlling temperature, pressure, output were managing the maintenance of that facility. They’re not there anymore. There’s an industrial control system that’s not only controlling the process at that plant, but it’s actually controlling the process at many plants across the country. And so — and that’s actually not that industrial control system is not developed by the petrochemical company, it’s actually — it’s a control system developed by Raytheon. And so the question of when something goes wrong, who is responsible, is very different. The chances for something to go wrong are far lower. When they do go wrong they might happen not only one plant but might happen at multiple plants.

Another example closer to the to the customer or to the consumer side of the houses medical malpractice. So one of the things that hospitals get sued for today is when people show up and they get a false negative. So they show up complaining of chest pains, they’re sent home. They said that if they’ve got angina, they don’t have a particular risk of heart attack. They’re sent home, if they have a heart attack and they have a bad outcome from that heart attack. That’s it, that’s a classic medical malpractice type of exposure for hospitals today.

In the environment where we have an embedded chip that’s able to monitor the release of an enzyme which happens before you have a heart attack usually six or seven days before you have a heart attack, that person is never going to show up in the hospital in the first place. There’s going to be a new liability for the development of that medical equipment and for the monitoring of that medical equipment and maybe the doctor monitoring that patient may have a new liability that they didn’t have before. But the liability at the hospital will disappear. If something goes wrong, it’s less likely to go wrong. If it goes wrong, it may go wrong in multiple instances.

And finally the example of the automobile where you have these autonomous features and where the car is fully autonomous, kind of hard to imagine that the car will not be safer and that people won’t be safer driving cars. I think Elon Musk’s concept of us thinking, but it’s bizarre in 5 or 10 years time that we would allow somebody to hurtle down the highway at 80 miles per hour uncontrolled in a hunk of 2 tons of steel. So it’s probably a pretty good vision in terms of how we’re going to think back about a truck — about driving before the age of autonomy. But as we move towards autonomous driving the risk won’t disappear. The risk will be perhaps with the manufacturers, I talked — alluded to earlier, perhaps with other parties or contributors to the process. The risk will be far less frequent, but the ramifications of the system going wrong have far greater severity implications than they would have historically.

Our future mobility study really pretty much agreed with that. They said where there was no autonomy, it’s clear the driver is primarily responsible. But in cases where you get driverless cars, other entities will take on responsibility who will be most liable in the accident involving a driverless vehicle on a manufacturer, software programmers, were perceived to be the most liable, followed by the vehicle occupant, vehicle owner, notice the difference, but the distinction between occupant and owner in an autonomous world. The Internet service provider, parts manufacturing, the pedestrian, I’m not sure how that came up and finally road construction companies maybe you take responsibility for not looking both ways when you walk out into the road, I’m not sure.

Salen Churi

Assumed risk. So this was for you Gaurav. From a consumer perspective, what is one really big issue that we sort of the industry at large kind of building autonomous technology have to address before we get to broader adoption?

Gaurav D. Garg

So, I mean, there are multiple things that we have to address before we get for the down this road. And there are a lot of complex issues relating to technology, relating to infrastructure that Lex talked about. But I think one of the biggest issues that I see and coming out of our study is the perceived trust gap with the consumer. So if you look at our study you will see that less than 50% of the respondents actually feel safe with a driverless car on the road. While 4 out of 10 think that this is safer, but would they be comfortable with a driverless car on the road. So that that creates a big — hurdle to surmount for any innovation or any progress to be made in this area. So there are things people are confused about it.

There are media reports, but at the same time can a car anticipate the millions and millions of scenarios? Will it be able to identify as Lex said a pedestrian crossing? Would it be able to identify a stationary object instead of a pedestrian? Would it be able to identify a bike instead of a car? Would it be able to identify a pet or a cat running across the street? Would it be able to actually see what the — a four way stop means? Is it a four way stop dead end, three way, there is a lot of permutation combination that need to be worked into. So let’s assume that technology is able to do everything, but there still has to be this trust gap that needs to be overcome with the consumers to be able to trust the technology and adopt it. So in my view this would be one of the biggest hurdles as we go down the road.

And one thing that as Lex was speaking is interesting is that once the anonymous vehicles come in, there won’t be a DMV. Will there be? There will be no licensing.

Lex Baugh

It sounds like we are thinking.

Gaurav D. Garg

Anyone can just sit in a car and go.

Salen Churi

So we will go back to Kate to talk about autonomous and the ridesharing contacts. So, over the past five years consumers have really taken to an embraced ridesharing. How do you think consumers are going to respond to autonomous rides?

Kate Sampson

Yes. So, with no surprise I will probably be more bullish and optimistic about adoption. If I go back five years ago when we launched Lyft, I distinctly remember having a conversation with AIG to say I was an insurance broker the time, I worked at Marsh and I called AIG and said oh, I’m working with this company and this is what they’re going to do. They’re going to be the first peer-to-peer ridesharing and everyone will have an app and you can share ride with a stranger. And I don’t think it was AIG who said, but a number of insurers said, so hitchhiking. You’re going to just do hitchhiking. And we’ve spent our whole lives being told not to get in the car with a stranger. So — and then we launched Lyft and we are like hey, here is a pink mustache and fist bump and jump in the car with a stranger. What we knew in 2011, 2012 is that we were going to — Lyft was only going to be successful if we changed consumer behavior. We had to wipe out don’t get in the car with a stranger and get you to getting in the car with a stranger. And then a year later, well, so it worked. I think we all agree. I used to say raise your hand if you’ve been in a Lyft or an Uber and now every hand goes up in the room. But a year later, we launched Lyft Line. We said, now not only you’re going to get in the car with a stranger, but you’re going to get in the car with another stranger who is also going the same way as you and everyone said now that’s just crazy. And then within months, 50% of the rides in San Francisco were Lyft Line rides, sharing a ride. So I tend to think that the adoption of this technology is going to be much quicker by consumers than we think. I think there is some hesitation, but when I think about getting in the car with a stranger or getting in the car with technology that is being advanced over all this time by some of the greatest thinkers in the world, I’m pretty bullish on it. And I like to compare it to — I have the opportunity to be in a couple of these cars and when you first get in — I equate to when I had a Blackberry and I held on to my Blackberry forever, I’ve been around for a while in the insurance business, I had a Blackberry for a long, long time. And then finally I got an iPhone and I just thought oh, I’m going to miss the keypad, I’m going to not like this, and within an hour I thought why did I not get into this iPhone game before? So I think that we will get in these cars experience it and stay with it for long time. And I think it’s just going to be so much safer that I envision a time down the road where if someone takes out their car keys, you will kind of look at them and say you still drive, like are you using an autonomous car, because so many of the accidents are going to be caused by human drivers, not by the robot cars.

Salen Churi

Yes, we are going to have mothers against human drivers soon. So we will shift back to Professor Peterson. You looked at a number of different jurisdictions in your report and you found some interesting differences between them. Can you kind of just double-click on the differences between the U.S., the U.K., and Singapore and kind of draw some of the things that jumped out to you?

Robert W. Peterson

Sure, a little bit. [Indiscernible] signs are going back to ammonium nitrate. If you really want to find out about the power of ammonium nitrate, Google the Texas City disaster for about 1944 when they were loading a fertilizer ship with ammonium nitrate, and it blew up and they found one of the anchor is about a mile and a half inland. That gives you just a feel for ammonium nitrate.

Salen Churi

Maybe don’t Google it, you don’t want to be on the list.

Robert W. Peterson

Yes, that’s right.

Salen Churi

We are probably all — everyone of you is now.

Robert W. Peterson

Yes, there are a lot of differences between the United States and other countries, but there are a lot of things where they tend to agree too. And one of them is that they virtually all agree that they think that these cars are going to be safer that their driving is going to be less stressful, and that their personal safety is going to increase. But when it comes to some of the problems they also all agree that that they think the cost is going to be one of the major barriers to the deployment of these vehicles. I think that comes from the fact that 40% or so of the people in the United States and the U.K expect that they’re going to own one of these cars. Kind of surprising, well maybe not surprisingly, only 24% of the people in Singapore think that they’re going to own one of these cars. But if the cars are deployed on a fleet basis rather than an individual ownership basis, I think that particular concern about cost is going to fail little bit in the background. About the same percentage of people expressed comfort with sharing the road with these vehicles, this is a point that Gaurav was making, maybe 42%, 43%. On the other hand, a similar number expressed discomfort. So you have to ask yourself do we have a glass here that’s half full or a glass that’s half-empty, because that other 40% that feels uncomfortable is going to have to be persuaded, is going to have to be brought around through education and marketing and other things. Otherwise there’s going to be I think a political challenge due to rapid deployment of these. Cars are also a culture. They are a major part of the United States culture, but not surprisingly they are less of an element of the culture in Singapore, for example. And that’s probably because only 53% of the people in Singapore actually own a vehicle. You compare that with 79% in the U.K., and 85% in the United States. And you know from personal experience a lot of those people in the United States actually own more than one vehicle. I think 91% of the people in Singapore have actually used ridesharing, 91%. So they’re going to be more comfortable with this. If you look at the U.K., it’s only about 26% that have used ridesharing. And if you look at the United States its really only about 22%. Another impediment that people cited in the survey was they love to drive their cars. They enjoy driving their cars. They don’t want to give up their cars. They all say that you’re going to have to pry the steering wheel out of my dead hands, which the EMTs might actually. But I can understand again why in Singapore they are less concerned about that, because so many fewer people own cars in Singapore, so it’s not as ingrained a part of their culture. But I have lived in England for a while and I cannot see the joy frankly of driving my own car around London, but if you go for a nice weekend drive in the Cotswolds, there’s really nothing half so pleasurable as a nice drive for the Cotswolds, I understand that.

Salen Churi

So this one is to you Gaurav. What role do you think insurance plays in this overall journey towards autonomy?

Gaurav D. Garg

Well, insurance companies are obviously not in the value chain of building the autonomous vehicle with so many people involved. But as we discussed, autonomous vehicles expose different kinds of risks. So these risks are risks that an insurance company would be instrumental in helping manage to the ecosystem, to individuals and businesses. And as the survey points out, things like cybersecurity, I mean is more than 70% people who really worry about cybersecurity hacking into the cars which could be very detrimental. Imagine a fleet of vehicles which are autonomous on the roads are hacked into, it could result in catastrophic damages and loss of life as well. So to ensure that this whole ecosystem has the right protection, to work with the regulators as they frame regulation on liability and what would happen because it’s also incumbent on the regulators to make roads safer for people and how do we help shape that process. So insurance companies have to stay with the times, stay ahead of the times and that’s one of the reasons why AIG has invested heavily into this and we come to the CES and we’re talking about this and we published this paper is that we are seeing the trends and we want to be ahead with the kind of right insurance products with the various stakeholders in the value chain to help this process come forward and create the trust and confidence in the whole society, in the people who are investing in for this process to go on. So I think it’s a critical role that insurance will play for this to go forward.

Salen Churi

So opening up to the whole panel, if you can all just kind of share maybe the thing that jumped out to you most about this report. What really sticks out? Let me start with you Lex.

Lex Baugh

Sure. For me and I don’t think it was a big surprise. I think it was very evident in looking at the research that partnerships are critical to the way forward. So when I think about that from an AIG perspective or from an insurance companies perspective, and I was talking about the inability to be able to go back and look at history in order to project the future, that leaves really only the option of looking at scenario planning. And in order to build strong scenarios and to do good scenario planning, you have to understand the dimension of the autonomous driving challenge from more than just the perspective of the insurance company. You need to understand what’s happening from the standpoint of the communications industry, what’s happening from the standpoint of experience as these new prototypes are being built in and where they ultimately take us. And if you look at the paper you can see that that’s happening at multiple levels. You are seeing that there’s a sighting of the combination between Avis working with Waymo. You’ve got Volvo working with Uber, you’ve got nuTonomy working with Lyft, you’ve got Fiat, BMW, Intel, Mobileye, Delphi, all working together. This is happening across the landscapes and we’re talking specifically about the space of autonomous vehicles, but parallel activity is happening in many aspects of our economy. And this is going to be a requirement for us as we think about the development of the regulatory environment. So as we think about the development of the law, listening to the plaintiffs bar, they’re looking at this challenge and the one thing that’s going to be very obvious and has been obvious in every technological revolution that we’ve gone through today is that the law lags the actual science and lags technology. And so, we are not going to know exactly how the law is going to respond in every case. We have — we are going to have to work with partnerships to get the best view we can to develop that scenario. In the world of innovation, hubris is absolutely deaf. Everybody wants to win. We all represent businesses or ventures ourselves and we want that venture to win, but humility and the willingness to partner is going to be critical to success in this space and I think that comes out loud and clear on the work.

Salen Churi

Maybe move to you Gaurav.

Gaurav D. Garg

Well, I mean, if you look at the — this paper and the research, I’d tend to think that one of the biggest takeaways is that consumers have a voice. And at this moment they are kind of mixed and a concern on some parts as well as looking forward to the safety of the vehicles. So the consumers are the people who ultimately will be voting to deciding — who will be deciding and voting on regulatory changes, who will be sitting in juries who decide on liabilities as to where does the liability fall in case of an happening. And in my view as we take this forward, we have to continuously shape this whole consumer sentiment, and that I think is very important for success of this autonomous vehicles going forward.

Kate Sampson

So for me two things. I think the first is the paper really highlights the number of players, the number of concerns that are out there. And I — when we first launched ridesharing we certainly were disruptive to insurance companies, to transportation boards, to taxis. Consumers had a voice there, but when I look at autonomous technology and the number of partnerships, the number of people, the cities where building infrastructure to attract us to come and test in their cities, I really think the regulators — and this is a really complex regulatory environment. And I’m really hopeful that the regulations and the legal frameworks can be established to keep up with how quickly the technology is developing. And that’s the second takeaway is, I think this is coming faster than people think. In the report all three of the locations noted that they agree that a majority of cars on the road may be autonomous by 2051, so 35 years. And at Lyft we’re focused on getting a majority of rides autonomous by 2021. So there is a huge gap in what the report and what consumers are thinking for what some of the companies are working toward. So I think the future is here and its going to come quicker than people think.

Lex Baugh

I think that regulatory point is a very interesting one and that the regulation that controls most of motor vehicle operation globally was developed in the early 1970s and it doesn’t say anything about autonomous driving, you will be surprised to hear. Its — it really has as its tenet as a fundamental in all of the enabling legislation, the fact that there’s a human driver who’s responsible for the operation of that car. And unraveling that and rebuilding that legislation is going to be no small feat and I suspect that what we will see listening to the plaintiff’s bar a little bit that what we will see in the first instance is that that law won’t change immediately and won’t even change quickly. And that you’ll still be in a situation where the first action that you’ll have will be against the operator of the vehicle even if that operator is not actually in control of the car. And that will lead to subrogation activity against some of these other parties that we’re talking about and the law will evolve and will come to a different landing. I don’t know exactly the path if that’s going to follow, but I think that we will see something along those lines.

Kate Sampson

Yes. And I would also say it’s not the first time that this challenge has been put forth for insurance companies, for regulators. We have aircraft that, we’ve got an operator of the aircraft. We’ve got a Rolls-Royce engine or a certain engine we’ve got, autopilot technology in there, so we’ve seen situations where liability have to be determined. So it’s not the first time, but it’s on a much broader scale.

Robert W. Peterson

Yes, well speaking of airplanes and in the rate of adoption, let me just go back to when airplanes were first invented because in 1901 Wilbur Wright said to this brother Orville, it will be 50 years before people fly. Now Wilbur died young unfortunately from typhoid fever and didn’t live long enough to see another innovation which was vaccinations, but Orville actually lived long enough to see not only the destruction of Europe from the air but the breaking of the sound barrier in 1947, because he passed away in 1948. So when it comes to these kinds of predictions, you can either cite Yogi Berra or Niels Bohr, whichever one you want to credit with saying predictions are difficult especially about the future. But I think this train is now on a roll, self driving cars for the last 100 years have always been 20 years away. Well, now, look in your rearview mirror because things are closer than they appear. These — one was Uber founded 2009 I think and then Lyft a few years later, and now they are absolutely global. So a new technology in this age can sweep away the status quo almost overnight. So I agree with I think everybody here that the public perception is probably not correct that these cars are going to be on the road and insubstantial numbers particularly in urban areas where the value proposition is pretty obvious, very, very quickly. There are going to be a lot of regulatory challenges and the ones that we see right now between a little bit of a tension between the states and the federal government that who is going to take the lead with respect to a lot of this regulation is really just a microcosm of what’s actually going on globally, because virtually every country and every economy is working as fast as they can to deploy these and to come up with whatever regulatory structure they are going to have for that particular deployment. And the report does I think a very good job of — or the white paper of showing exactly how this is a global enterprise with all the different pieces that we’ve been talking about. If you go and take a look at pages 15 through 20 in the white paper and they have some wonderful charts that show how any particular vehicle is being developed today may have elements coming from all around the world going into it. So those are going to cause any number of challenges and there is going to be a lot of sifting out and settling down it’s going to be doing, going over the next years. But I’d say they’re here and I think you can go out to the gold lot right now and reserve an autonomous ride in a Lyft, if I’m correct. So maybe when we’re done here, Sal and all of us let’s go out to the gold lot and get on that train.

Salen Churi

It does seem like there’s a sense in which the people that are most optimistic about us or at least think it’s coming the most quickly are the people who have experienced a taste of that, right? Kate, you mentioned the experience of just sitting in one or the folks in Singapore who have more experience with the ridesharing, another theme I think we seen kind of woven through all this is the trust gap, right? And I think Lyft and ridesharing has gone a long way towards solving that problem, right? You mentioned the first thing that your mom told you when you were a kid is don’t get in a stranger’s car and now we all do that with regularity, because you guys built a digital trust platform and it’s really something I think that has helped people kind of acclimate to this. So it does feel like one of those things where when you say it sounds really pie-in-the-sky you’re going to get in this car, it’s going to whisk your way to somewhere, it’s not a stranger, it’s a robot. But the people who’ve experienced sort of the first steps we’ve taken in that direction tend to be a little bit more optimistic about it. It’s been said recently in Silicon Valley that we’re overstating the short-term effects of this and understating the long-term effects of autonomy. And we’ve talked a little bit here today about sort of where we are today and where we’re going in 2050 or 2030 or whatever the appropriate day is for that kind of deep penetration of autonomy. Can you guys talk a little bit about where you think we may go in between? What is the adoption look like? What is that process look like?

Kate Sampson

I will start. So if I think about it where we are today, the car is the second most expensive — most largest expense in your house. So I’m constantly wondering, there’s no question that we are close to if we haven’t already hit peak car. So, meaning, we have peak horse when we stopped buying horses and horse — the population of horses went down in America. Now it’s we have peak car and we know that 16 year olds aren’t getting their license. We know in the urban environment we are seeing much more adoption of rideshare versus owning a car. And I always use the analogy of if you’re — some of us have — we all use our cell phones and many of us still have a landline in the house, and we really don’t use it, just accepts cold calls and political calls, but we like having it. If that cost you $9,000 a year to keep, you would get rid of it in the second and you’d use an alternative, and I think that’s what we’re looking at when we talk about the transition to the various forms of ridesharing that will occur with autonomous technology or semiautonomous technology until we get to that level 5 state. So I think we’re seeing more and more use cases for ridesharing in this middle ground. We’re seeing nonemergency medical cases where we’re partnering at Lyft with folks who want to help their patients get to their dialysis appointment or come for their checkups. So we are starting to see the use cases just explode in preparation for this really being the future. So I think we are going to still see adoption of ridesharing and the elimination of car ownership may be you go from three cars to two cars or two cars to one car through this transitional period. But it will start to be more and more obvious to consumers that this is the future as those things start to emerge.

Salen Churi

A rip off of that, I think that applies equally to the regulatory picture, right. So as things sort of start to get adopted you may see more and more willingness to engage with them. So this kind of parallels the sort of personal feelings that people might have and their optimism or pessimism about autonomy, but to just take one example there was a company called Zipline. I don’t know if you guys have come across them, it’s a drone medical delivery company. So they have autonomous drones that are today delivering 20% of Rwanda’s blood to the hospitals and currently can’t operate in the U.S under FAA regulations. But once they get to that penetration and they show the tremendous transformative power of being able to make those deliveries and the lives that they’re changing, it becomes easier for regulators here to get comfortable with that. And so sort of echo your comments that you sort of start to build out a framework where you can see adoption coming across jurisdictional lines in even international lines.

Robert W. Peterson

Well, I think we’re as humans, xenophobes [ph], and that’s part of how we stay alive as we are a little bit fearful of new things until we establish that they are at least harmless to us. And then if they’re useful we will adopt them. But I could say just from personal experience I wrote in a Google car number of years ago, we went out on 101 and 280 and I was nervous when I first got in the car, but probably within five minutes I was relaxed that I was chatting with the person who was in charge of driving the car and it was really — it took no more time than that for me to sit back and say I like this and at 75 the other people that are around me when I’m driving would like it if I were in one of those cars too. Yes, but when you think about the rate of adoption, one of the figures that’s always stuck in my mind is it if you deploy these cars on a fleet basis and within a particular operational design domain you have only 5% of fully autonomous vehicles, but each of those replaces six cars. Those are cars that either aren’t going to be bought or they’re going to be retired, or they’re going to sit in their driveway, you really have 30% penetration. 5% time is replacing six cars, so it can happen very, very fast without deploying cars one-for-one or even close to one-for-one. So if I can commit the Yogi Berra era of guessing about the future, that is my best guess, it’s going to happen very fast.

Salen Churi

Well, I think we will conclude there. Thank you so much to our esteemed panel here for sharing their thoughts and to AIG and to the authors of our reports. And for all those who would like to dig in and take a look at the report and learn more, you can find more on www.aig.com/innovativetech. Thanks so much.

Question-and-Answer Session

Q –

[No formal Q&A for this event]

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