Like record companies at the dawn of online music file sharing, Allstate, Geico, State Farm, and others are grappling with innovations that could put a huge dent in their revenue. As carmakers automate more aspects of driving, accidents will likely plunge and car owners will need less coverage. Premiums consumers pay could drop as much as 60 percent in 15 years as self-driving cars hit the roads, says Donald Light, head of the North America property and casualty practice for Celent, a research firm. His message for insurers: "You have to be prepared to see that part of your business shrink, probably considerably."
Auto insurance has long been a lucrative business. The industry collected about $195 billion in premiums last year from U.S. drivers. New customers are the source of so much profit that Geico alone spends more than $1 billion a year on ads to pitch its policies with a talking lizard and other characters. Yet even Warren Buffett, whose company, Berkshire Hathaway, owns Geico, is talking about the long-term risks to the business model. "If you could come up with anything involved in driving that cut accidents by 30 percent, 40 percent, 50 percent, that would be wonderful," he said at a conference in March. "But we would not be holding a party at our insurance company."
The loss of revenue for the insurance industry gives me a sad.
(Score: 1, Insightful) by Anonymous Coward on Friday July 31 2015, @03:37PM
Payout would also drop considerably...
(Score: 2, Interesting) by AnonymousCowardNoMore on Friday July 31 2015, @03:48PM
Which could, combined with the mandatory insurance requirements in most locations, mean a massive increase in profit.
(Score: 1, Interesting) by Anonymous Coward on Friday July 31 2015, @04:37PM
Insurers are required by law to limit their overhead costs i.e. anything that is not a paid insurance claim. If they want more profit, they have to pay out more and charge more to keep their overhead the same percentage of revenue.
(Score: 1) by AnonymousCowardNoMore on Friday July 31 2015, @04:52PM
Overhead costs are things like salaries and office supplies. Profit is not a cost.
(Score: 0) by Anonymous Coward on Friday July 31 2015, @06:00PM
In accounting, no. In insurance law, yes.
(Score: 1) by AnonymousCowardNoMore on Friday July 31 2015, @07:01PM
I doubt that's universal but fair enough, you are correct wherever the law is written that way.
(Score: 2) by frojack on Friday July 31 2015, @07:45PM
Insurance is regulated everywhere.
There is enough competition in the insurance market (for now) to insure rates would come down if claims come down.
There isn't any valid statistics to suggest there will be fewer accidents or less serious accidents until driverless cars comprise a much larger percentage of the fleet.
Somebody has to repair those things. Those costs could be very high, at least as high as conventional cars, because. Who re-certifies the the driverless system after a fender bender? Joe's Bodyshop? I don't think so.
People who glibly assume away all accidents in a driverless fleet are idiots.
No, you are mistaken. I've always had this sig.
(Score: 0) by Anonymous Coward on Friday July 31 2015, @06:49PM
There are hazards other than collisions (flood, tree falling, windshield nicks, door dings) to be insured against if the car is new, especially if there is a loan on it. Also, if self-driving cars reduce collisions and lower insurance costs, more people may actually buy insurance. In California, the requirement for insurance is very poorly enforced - if you don't have a loan, there only impediment to driving uninsured or underinsured is risk of discovery. Discovery is only likely in the event of a significant collision. Traffic stops include a cursory check for a piece of paper saying that you are insured - I have never heard of anyone checking the veracity of that paper. If insurance becomes inexpensive, perhaps many more people will buy it.
(Score: 2) by captain normal on Friday July 31 2015, @10:21PM
Actually in Cal, you have to show proof of insurance when you pay your car registration every year. The companies that carry vehicle loans require collision and comprehensive coverage. If your car is paid for and think you can carry your on collision repair or your car isn't worth the cost of the insurance you only have to carry the required liability insurance.
When life isn't going right, go left.