Michael Sorokach
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?
Sources:
https://www.bloomberg.com/news/articles/2019-02-19/autonomous-vehicles-may-one-day-kill-car-insurance-as-we-know-it
https://www.wired.com/story/tesla-autopilot-safety-report-statistics/
I don’t think auto insurers will drastically change within the next 20-30 years. In the distant future, when autopilot has replaced a majority of drivers on the roads, I could see auto insurance being more like renter’s insurance. In the wired article you linked, we can see that Tesla’s autopilot, as is, is involved in accidents 1/6th as often as a typical American driver by miles driven. As autopilot technology improves and becomes more common, we may get to a point where auto accidents are a rare occurrence. In this future world with far fewer accidents, the government might go so far as to remove the legal requirement that drivers have auto insurance.
Hello, Michael. Excellent post. I can see that you are truly passionate about auto insurance and intoxicated computers.
Although I agree that insurance providers will have to change some policies to account for the lack of human drivers, I do not think this alteration will be detrimental to the insurance industry. Whether or not humans are driving, cars will still need to be insured in some way. While accidents may be drastically reduced, there will still be accidents in the near future as systems will inevitably fail on occasion. And even if autonomous vehicles make up the majority of cars on the road, I do not think we will reach a point where they will be the only cars on the road. Many people, myself included, enjoy driving cars. Sports cars wouldn’t be any fun if they were autonomous and required to go the speed limit. Also, there will always be motorcycles and bicycles sharing the road with autonomous vehicles. Therefore, there will always be the possibility of getting in an accident even if human drivers are not in control.
One thing insurance providers could do is focus more on covering non-accident related coverage. There will still be floods, tree branches, and rebellious uprisings to damage vehicles. Those will still need to be covered in some way by insurers. Given that insurance will still be required and possibly utilized less, it may be possible for insurance giants to exist or even increase in worth.
I think auto insurance industry will be forced to shrink as cars are moving towards autopilot, but I believe that won’t happen in the next 20-50 years. There has been noticeable technology advancement autopilot mode for cars. Yet, to completely convert to all driving cars to autopilot will take some time. Even though more than 90% of all vehicle accidents are caused by human error. Self-driving cars can still cause accidents to happen. There is no such thing as 100% safe even if all cars driving are in autopilot. Thus, if there is risk, there is need for protection of the risk. Therefore, I wouldn’t think auto insurance industry will be forced to shrink as cars are moving towards autopilot, but maybe in far far future, the auto insurance industry will have to lower their premiums for insurers as autopilot becoming more and more common.
I really like your post on the topic of Auto Insurance going away if Self Driving Cars are implemented into our society. I do agree with your post. I believe that Auto Insurance will slowly die out with more Self Driving cars are on the road. Most accidents are caused by human error or judgement so if computers can predict by using data, it can lower the chances of accidents. The only way I can see auto insurance staying around would only be for the users that are holding onto their classic car’s or those who don’t believe in self driving cars. I don’t think auto insurance will go away as a whole, but I don’t think auto insurance would be as big it is like today.
Walter Hodge
Michael some great questions to how the “System” will react or evolve when the introduction of self-driving cars is in effect. I feel, there will still be a high demand for insurance, but the premiums will decrease dramatically so overhead will get reduced. In most futuristic movies where cars are autonomous they still have a manual mode, I’m thinking there’s always going to be situations where it’ll be needed, therefore, liability and risk can be covered. In addition, insurance companies are always expanding into new areas, from digital insurance for businesses, to identity theft insurance for consumers. One business model I see for insurance providers that can be considered for self-driving cars is traffic delays. If computers make less mistakes, react, and respond faster, then times for your route should be calculated to your destination, if the time is not met one might want to be covered for the inconvenience.