Best's Review


Future Travel

Elon Musk's Hyperloop high-speed transportation system offers new risks for insurers.
  • Kate Smith
  • July 2015
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Los Angeles and San Francisco are notorious for their long rush-hour commutes. But some day, in the fast-approaching future, it could be quicker to travel between those two cities than it is to drive through either one.

Elon Musk, the founder of PayPal, Tesla and SpaceX, two years ago laid out plans for a transportation system that would cut the transit time between L.A. and San Francisco to just 30 minutes. In a white paper filled with pencil sketches and lofty ideas, Musk unveiled his idea for the Hyperloop, a system of high-speed tube travel that proposes to transport passengers and cars in aluminum pods at speeds of up to 760 miles an hour. In May, Hyperloop Transportation Technologies, a company that has no affiliation with Musk but ran with his idea, closed a deal that will allow it to begin construction of a $100 million, five-mile test track in central California.

As new forms of high-speed transportation, such as the Hyperloop, move closer to becoming a reality, insurers must consider the potential risks as well.

Though shooting passengers and goods through pneumatic tubes may seem risky, the fact that the concept is so highly engineered makes it a more palatable risk. "The insurance industry loves risks that are engineered," said Randy Nornes, executive vice president with Aon Risk Solutions. "Underwriters can look at the engineering diagrams and test results. They can inspect manufacturing and construction. They can review documentation.

"The Hyperloop is an engineering risk," Nornes said, "and these risks are actually much easier to understand than other types of emerging technology."

The Hyperloop would transport passengers and cars in sealed capsules that travel through steel tubes at high, but subsonic, speed. The capsules will be supported via air bearings, much like an air hockey table. To mitigate the risks of thermal expansion/contraction and earthquakes, the tubes will be built upon pylons fitted with adjustable dampers. Musk, who plans to build a Hyperloop test track in Texas, estimated the total cost of a Los Angeles to San Francisco system would be between $6 billion to $7.5 billion. That compares with $68 billion for California's planned high-speed rail system between the two cities.

In some cases, such as the shipping of goods, this form of transport could be less risky than traditional methods. "It's probably going to be safer than putting things on a truck," Nornes said. "Or a train, for that matter."

Musk is not the first to explore high-speed tube travel. Robert Goddard, who invented the liquid fuel rocket, researched the idea in the early 20th century. Others followed in recent decades. The main differentiators in Musk's conceptualization are in the designs of the air bearings and tubes.

"He didn't take it as far as he could have. He's not putting it in a complete vacuum," Nornes said. "He's doing a partial vacuum with air being sucked in the front and being shot out under some skis. It's really creative.

"This technology has been around for over 100 years," Nornes said. "It's just a new application of the technology. So I think the insurance industry will be very supportive."

From a risk and insurance standpoint, underwriting tube travel should not be terribly difficult.

"This is just another form of transportation," Nornes said. "We've got the Virgin commercial rocket ship for passengers, so we have things now that are sort of out there and the insurance industry is writing them. You're kind of just hoping that you get the price right.

"With the Hyperloop, until it starts to actually operate or even get in the testing phase, it's just another construction process," Nornes said. "And there's nothing magical about that."

by Kate Smith, senior associate editor, Best's Review

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