While we are currently in the “developmental” stage of self-driving cars, advances are constantly being made. One of the biggest concerns with the technology in its current state is how safe it is, with Tesla running into a few problems with its Autopilot feature being an example. However, one of the end goals of self-driving cars is to make roads safer, as a computer is able to react more quickly and accurately than a human. A computer is also much less likely to become distracted with text messages or drive intoxicated.
While this is beneficial for society as a whole, it poses a real challenge to the auto insurance industry. Over 90% of all vehicle accidents are caused by human error, so removing the human from the equation will have a massive effect on the insurance industry. The insurance industry will have to evolve to survive in a world where their current revenue model will not be feasible, barring massive downsizing by companies.
What are some ways that insurance companies can adapt? Can major players in the industry such as GEICO and Progressive still exist at their current size, or will they be forced to shrink? Will fewer providers be able to exist in the new market?