Self-Driving Cars and Auto Insurance Industry may have a non-linear relationship. If you are thinking why it might be so, the answer lies in sole reason for the evolution of Self-Driving Cars. Self-Driving Cars have been making a lot of news in recent times. The main reason for an abrupt increase in popularity is because of the fact that they are really really close.
Self-Driving Cars and Auto Insurance Companies may not have a healthy relationship. The evolution and deployment of the increasing number of Self-Driving Cars may have a negative impact on the Auto Insurance Industries. The reason for this effect is that Self-Driving Cars are safer as compared to their human-driven counterparts.
With the Self-Driving Cars making the road a safer place, there are chances that this would increase the possibilities of people not taking Insurance Policies. The decreased number of accidents would mean that the car owners would need less coverage. This may cause the Insurance Premiums to go down. The decrease in premium is sure to affect the revenue of the big players in the Auto Insurance Segment as the auto insurance claims form a major chunk of the revenues for most of the insurance companies.
The Insurance Companies are currently spending a lot of time, money and human resources in trying to analyze the situation that might come when Self-Driving Cars take over the road. Currently, their analysis might focus on the impact the self-driving cars might have on their revenue and the steps to cope up with the same. They could also be focused on how to divert this situation to drive more revenue as well.
The CEO of AllState Insurance Tom Wilson had also mentioned of a scenario named Jet Sense the worst case scenario where people use Ride Sharing such as Uber or Autonomous Navigation and the no of accidents are decreased significantly. This will see the Auto Insurance Premiums going down considerably.
Warren Buffet, who also owns the Insurance Company GEICO speaking on Self-Driving Cars and Auto Insurance Industry, was also seen as supporting the fact that Self-Driving Cars and Auto Insurance Industry will have an unhealthy relationship with the former affecting the latter in a negative manner. In an interview with the CNBC, Buffet was quoted as saying –
“Anything that makes Cars Safer and very prosocial ends very badly for the Auto Insurance Industry. Though Insurance Companies have led the way on making cars safer (seat belts and all that), if there are no accidents, there is no need for Insurance. I think there will be a bigger reduction in accidents over a longer period. Cars have been made way way safer. Now when you start making the driver safer, that would be a big big jump. That will happen someday and when it happens, there will be a whole lot less auto insurance written”. “It will be bad for the Auto Insurance Industry over time if Autonomous Cars become a bigger part of the Fleet”, Buffet added.
Speaking on Self-Driving Cars and Auto Insurance Industry, Charlie Munger, Berkshire Vice Chairman in the same interview, also added that Berkshire has experienced Technological Disruption before. He cited the example of how Bill Gate’s free encyclopedia affected Berkshire’s Encyclopedia business. From what Charlie said, we can expect that Berkshire may already be planning to accommodate for the arrival of Self-Driving Cars.
From what we can see from the statements of the experts and little from what we can imagine, the Self-Driving Car Industry will definitely have a negative impact on the Auto Insurance Companies. However, at least some of the Auto Insurance Industries are already on track as they have started plans to accommodate the arrival of Self-Driving Cars.
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