Self-Driving Cars Might Kill Auto Insurance as We Know It
bloomberg.com
bloomberg.com
So premiums going down by 90% is an implied 90% reduction of harm from cars. That's both property damage and human injury.
Warren Buffett: "...so vigorous indeed that it sometimes causes the P/C industry as a whole to operate at a significant underwriting loss. This loss, in effect, is what the industry pays to hold its float". [1]
[1] https://www.businessinsider.com/warren-buffett-insurance-flo... (with a nice explanation).
If you are a multi-line writer at this point you are well aware of the impact that autonomous, vehicle services and mobility services will have on auto. At this point its slightly better than a loss leader for other more profitable lines.
Interest alignment is also with the self driving company, they have any incentive to improve safety of the car. They are simply liable so they act as an insurer and just add that to the cost of the self driving module.
For the buyer this should remove most need of insurance. Even if there is some "manual mode" the obvious provider would also be the self driving operator. They could track driving behaviour and adjust the rates, or offer some limitations for accident prevention.
So the insurance itself is still there, but it will be less important and shift to the self driving operators. Even if you own a car, you would pay some fee for the self driving module for updates and liability in one package.
I worked for insurance companies. Car insurance is a huge business, but not a very profitable or even sold at a loss. It is often used to get new customers to offer them other more lucrative products. That going away is still a huge shift and those companies are very old and slow.
For example in California by law you only need $30k coverage. In Alberta it's $200k (most have $1 Million). This is really surprising given in California an ambulance can cost that much, whereas healthcare is nearly free in alberta ($250 ambulance iirc).
I set my adaptive cruise control over the limit so I catch up to the car in front of me, for example.
Extremely easy to price into a lease; less obvious but still eminently feasible with a sale.
Legal liability will shift to the manufacturers, therefore individuals will not require insurance. Insurance policies will be purchased by the manufacturers and will cover the entire fleet under one policy.
> coverages should in theory get less expensive if claims drop
This is certainly the largest factor, as insured losses are expected to drop by 90%. A secondary factor will be that car manufacturers will be able to negotiate wholesale “group policies” on large fleets and get a better rate. Or they could self-insure and cut out the insurance industry completely.
> but profit margin on policies doesn’t necessarily change
I have already noted the profit margin pressure arising due to wholesale fleet insurance / self-insurance. But the more important point is that profit margin is not the only relevant measure for an industry. The total amount of revenue is equally important. If profit margins stay the same but revenues decrease, then there is a reduction in net income. Note that prices are expected to fall 90%, which directly impacts revenue.
No, it probably won't. Owners will probably remain liable in the first instance, for maintaining th vehicle in a safe operating condition; manufacturers (and the whole chain of commerce) will be liable, as they are now, for defects that exist at the time of sale, and will be (as they are now) attractive deep-pockets defendants.
But, for that reason, they will probably get very good at playing off failures (since drivers aren't in the picture to blame) as maintenance failures rather manufacturing defects.
A passenger is neither an owner, an operator, nor a manufacturer of a taxi.
Owners, operators, and manufacturers tend to be liable; passengers not under normal circumstances. If I get hit by a bus (to escape the taxi situation where the operator is usually the owner), the bus driver, bus line, and bus manufacturer can all be liable. Replacing the operator with a piece of equipment manufactured by the manufacturer and maintained by the owner takes the driver out of the equation, but there is no logical reason why it would remove liability from the owner.
Manufacturers already do that now...Ford was doing that back in the Pinto days.
The change to self-driving cars will make maintenance (and maintenance records) more important for drivers for liability purposes, but will also make it more difficult for the manufacturers to avoid liability.
For owners. Until we recognize AIs as legal persons, self-driving car drivers don't have liability concerns.
Nah.. Manufacturers will even invest heavily in lobby efforts for this to never happen. Even if consumers will likely not own the car as they currently do (see the growing trend that you're not actually owning the car but you're paying for the license to use it indefinitely) they will be responsible for keeping it running will be the de-facto 'operators' regardless if the car is driving itself. The car will probably not store itself, not maintain/clean itself, will not keep it's radars/cameras active and not blocked by dirt/snow/etc.. Call me a pessimist but the consumers will likely get shafted.
You're a pessimist!
Actually I don't see that there would be much difference. The car will perform at some level of skill and have an associated risk, lets say that amounts to $50/mo. The customer could pay the manufacturer to pay the insurance company, or the customer could pay directly -- same thing?
What fraction of people that currently own cars will that be? Probably depends on where you live. Taxi will probably never be the popular choice in, say, South Dakota. The economics just don't work out.
This is ignoring the fact that having an unproductive self driving car sitting in your garage becomes a significant opportunity cost itself.
Shared autonomous cars would end up being treated even worse than rental cars. People would smoke in them, vomit in them, damage the upholstery, steal the radios, let their pets go to the bathroom, spill all kinds of stuff in them on the way home from Home Depot, and so forth.
Anyone who can afford it and has a place to park it will want to have their own self-driving car to avoid having to put up with the shared ones.
Ownership will also be more convenient, e.g. you can leave your stuff in your car when you park it. Your car is reserved for you to use whenever you want, so you don't need to wait for a shared car to become available.
A failure to do poor maintenance shifts the liability almost entirely to the owner, but a defect puts liability almost entirely on the manufacturer. (But note: "jointly and severally liable" means that they're all on the hook with respect to the plaintiff's award. The assignment of liability is how the plaintiffs ultimately settle the bill amongst themselves.)
If the battle was lost, where's Tesla wrt to the deaths caused by autopilot? Or was the manufacturer's disclaimer enough to blame the dead operators?
Why? If you're operating a vehicle with known and manufacturer specified risks, thats on you.
I wonder self driving car manufacturers are going to try to get around this making the required maintenance and 'pre-flight' check list so onerous that basically nobody is completely in compliance and thus they're never responsible.
Yes, but is it on me, the drive, or me, the car owner? Or if someone else is driving my car who's fault is it then? In the self driving scenario couldn't you make the argument that while it's my car, I'm only the passenger and Waymo is in fact the driver.
Like.....if you let your friend drive, and the tyre bursts and you end up hitting another car for example - no one will be at fault(most likely), but your insurance will still end up paying for it. I don't see why it would be any different with AI driving the car, in essence it simply doesn't matter. An object belonging to you has damaged an object belonging to someone else - therefore your insurance has to pay for it.
Then I won't own the vehicle, I'll rent it and leave the maintenance up to the rental company.
Who would pay to own a car that sits around parked >90% of the time anyway? A rental company could have that car out making deliveries and ride share pickups until it's time to pick me up at the end of the work day.
And as an aside - how is this different than a taxi then, at that point? If that model already works for you, then uber fills that niche already. Unless there is some assumption that somehow it would end up being cheaper than uber? I can bet it would be cheaper for me to take ubers to work than own my car, and yet I'd prefer to have my own person vehicle and not deal with shared vehicles.
Uber doesn't fill that niche. I'm talking about a long-term rental whereby the car is guaranteed to be available to me during specific time windows. Uber is only for one-off trips, not a long-term replacement for my commuter car.
But yes, I have just done the calculation and it would in fact be cheaper for me to uber to work than to own my car. Yet I still prefer to have my own car that yes, does absolutely nothing for 95% of the month.
It could all be spelled out in a service level agreement.
a large portion of my current insurance is for uninsured motorist and under insured though my agent says the former is by far the biggest issue. considering law enforcement isn't making much head way there and true self driving isn't going to happen soon except under theme park ride conditions I don't think insurance is going anywhere.
IMO Id rather have the ability to buy my own insurance and have various choices of coverage. Nothing needs to change.
This may be bi-modal - many many folks would agree with you, but enough might agree with me for someone enter the market - potentially disrupting it.
Because you failed to maintain the vehicle in a safely operable condition. Now, if s manufacturers defect contributed to that failure, the manufacturer may also be liable, but that doesn't mean you aren't liable, and the manufacturer is going to claim and try to prove that that isn't the case.
I know HN has a software bias, but a self-driving car is not a blob of disembodied code, and the code that is present relies on the state of hardware for proper operation.
Less accidents happening around you, insurance claims write fewer checks for claims, your payment (which is basically a savings account contributing to "when you might need it" in my eyes) should be lower.
The insurance companies were instrumental in the development of things like fire codes, bank safes and the like; they hate paying out claims because their business model is to hang onto the premiums and invest them.