SM SCHIFFThe world’s most dangerous’ insuranceS publication September 9, 2005 Volume 17 • Number 15 INSURANCE OBSERVER How the S.U.V. Ran Over Auto Safety BigandBad by Malcolm Gladwell Editor’s note: Auto accidents happen for many reasons. These reasons, however, do not include one’s credit score, address, sex, or age. Although those factors are used as predictors of future dri- ving experience, they are lacking, and leave sig- nificant room for improvement in the field of pre- diction. As Daniel Finnegan, president of Quality Planning Corporation, explained at the 2004 Schiff’s Insurance Conference, auto-insur- ance rating, as we currently know it, is weakly predictive. It is, as he put it rather provocatively, about ninety-eight percent astrology: insurance companies have virtually no idea which specific drivers are going to have accidents. Any edge that underwriters can gain that helps them calculate which drivers will have accidents will make a huge difference in results. It’s not difficult to imagine that, eventually, cars will be equipped with monitoring devices that send information back to the insurance company in real time, where it will be analyzed by sophisticated underwriting programs. Examples of useful information would include An agent delivers a policy to a nonstandard risk. where the car is being driven, how fast it’s Detroit suburb of Wayne. The Expedition front. The seats get bolted to the middle. going, how many miles it is driven, what time was essentially the F-150 pickup truck The body gets lowered over the top. The of day the driving occurs, whether the driver is with an extra set of doors and two more result is heavy and rigid and not particu- impaired in any way, how often the steering rows of seats—and the fact that it was a larly safe. But it’s an awfully inexpensive wheel is being turned, and so on. The gathering truck was critical. Cars have to meet strin- way to build an automobile. Ford had of such information will undoubtedly raise se- gent fuel-efficiency regulations. Trucks planned to sell the Expedition for rious concerns about privacy, but it seems like don’t. The handling and suspension and $36,000, and its best estimate was that it an inevitability. If the information is avail- braking of cars have to be built to the de- could build one for $24,000—which, in able, eventually it will be used. manding standards of drivers and passen- the automotive industry, is a terrifically The following article by Malcolm Gladwell gers. Trucks only have to handle like, high profit margin. Sales, the company explores the issue of auto safety and S.U.V.s. well, trucks. Cars are built with what is predicted, weren’t going to be huge. After Contrary to what you might think, big cars are called unit-body construction. To be light all, how many Americans could reasonably not necessarily safer than small cars. They are enough to meet fuel standards and safe be expected to pay a $12,000 premium for often more dangerous—for both their own dri- enough to meet safety standards, they what was essentially a dressed-up truck? vers and for drivers of other cars. Why? Read on. have expensive and elaborately engi- But Ford executives decided that the neered steel skeletons, with built-in Expedition would be a highly profitable n the summer of 1996, the Ford Motor crumple zones to absorb the impact of a niche product. They were half right. The Company began building the crash. Making a truck is a lot more rudi- “highly profitable” part turned out to be IExpedition, its new, full-sized S.U.V., mentary. You build a rectangular steel true. Yet, almost from the moment Ford’s at the Michigan Truck Plant, in the frame. The engine gets bolted to the big new S.U.V.s rolled off the assembly SCHIFF’S INSURANCE OBSERVER • 300 CENTRAL PARK WEST, NEW YORK, NY 10024 • (212) 724-2000 • DAVID@INSURANCEO BSERVER. COM line in Wayne, there was nothing “niche” breath, and charged $45,000—and soon self-centered, and self-absorbed, who are about the Expedition. Navigators were flying out the door nearly frequently nervous about their marriages, Ford had intended to split the assem- as fast as Expeditions. Before long, the and who lack confidence in their driving bly line at the Michigan Truck Plant be- Michigan Truck Plant was the most prof- skills. Ford’s S.U.V. designers took their tween the Expedition and the Ford F-150 itable of Ford’s fifty-three assembly plants. cues from seeing “fashionably dressed pickup. But, when the first flood of orders By the late 1990’s, it had become the most women wearing hiking boots or even work started coming in for the Expedition, the profitable factory of any industry in the boots while walking through expensive factory was entirely given over to S.U.V.s. world. In 1998, the Michigan Truck Plant malls.” Toyota’s top marketing executive The orders kept mounting. Assembly-line grossed $11 billion; profits were $3.7 bil- in the United States, Bradsher writes, workers were put on sixty- and seventy- lion. Some factory workers, with overtime, loves to tell the story of how at a focus hour weeks. Another night shift was were making $200,000 a year. The de- group in Los Angeles “an elegant woman added. The plant was now running mand for Expeditions and Navigators was in the group said that she needed her full- twenty-four hours a day, six days a week. so insatiable that even when a blizzard hit sized Lexus LX 470 to drive up over the Ford executives decided to build a luxury the Detroit region in January of 1999— curb and onto lawns to park at large parties version of the Expedition, the Lincoln burying the city in snow, paralyzing the air- in Beverly Hills.” One of Ford’s senior Navigator. They bolted a new grille on the port, and stranding hundreds of cars on the marketing executives was even blunter: Expedition, changed a few body panels, freeway—Ford officials got on their radios “The only time those S.U.V.s are going to added some sound insulation, took a deep and commandeered parts bound for other be off-road is when they miss the drive- factories so that the Michigan Truck Plant way at 3 a.m.” The world’s most dangerous insurance publicationSM assembly line wouldn’t slow for a moment. The truth, underneath all the rational- The factory that had begun as just another izations, seemed to be that S.U.V. buyers SCHIFF’S assembly plant had become the company’s thought of big, heavy vehicles as safe: INSURANCE OBSERVER crown jewel. they found comfort in being surrounded Editor and Writer . David Schiff In the history of the automotive indus- by so much rubber and steel. To the engi- Production Editor . Bill Lauck try, few things have been quite as unex- neers, of course, that didn’t make any Foreign Correspondent . Isaac Schwartz pected as the rise of the S.U.V. Detroit is sense, either: if consumers really wanted Editorial Associate. Yonathan Dessalegn a town of engineers, and engineers like to something that was big and heavy and Copy Editor . John Cauman Publisher . Alan Zimmerman believe that there is some connection be- comforting, they ought to buy minivans, Subscription Manager . Pat LaBua tween the success of a vehicle and its tech- since minivans, with their unit-body con- nical merits. But the S.U.V. boom was like struction, do much better in accidents Editorial Office Schiff’s Insurance Observer Apple’s bringing back the Macintosh, than S.U.V.s. (In a thirty-five-m.p.h. crash 300 Central Park West, Suite 4H dressing it up in colorful plastic, and sud- test, for instance, the driver of a Cadillac New York, NY 10024 denly creating a new market. It made no Escalade—the G.M. counterpart to the Phone: (212) 724-2000 Fax: (434) 244-4615 sense to them. Consumers said they liked Lincoln Navigator—has a sixteen-percent E-mail: [email protected] four-wheel drive. But the overwhelming chance of a life-threatening head injury, a Website: InsuranceObserver.com majority of consumers don’t need four- twenty-percent chance of a life-threaten- Publishing Headquarters wheel drive. S.U.V. buyers said they liked ing chest injury, and a thirty-five-percent Schiff’s Insurance Observer SNL c/o Insurance Communications Co. the elevated driving position. But when, chance of a leg injury. The same numbers One SNL Plaza, P.O. Box 2056 in focus groups, industry marketers probed in a Ford Windstar minivan—a vehicle Charlottesville, VA 22902 Phone: (434) 977-5877 further, they heard things that left them engineered from the ground up, as op- Fax: (434) 984-8020 rolling their eyes. As Keith Bradsher writes posed to simply being bolted onto a E-mail: [email protected] in “High and Mighty”—perhaps the most pickup-truck frame—are, respectively, Annual subscriptions are $189. important book about Detroit since Ralph two percent, four percent, and one per- For questions regarding subscriptions please call (434) 977-5877. Nader’s “Unsafe at Any Speed”—what cent.) But this desire for safety wasn’t a © 2005, Insurance Communications Co., LLC. consumers said was “If the vehicle is up rational calculation. It was a feeling. Over All rights reserved. high, it’s easier to see if something is hid- the past decade, a number of major au- Reprints and additional issues are avail- ing underneath or lurking behind it.” tomakers in America have relied on the able from our publishing headquarters.