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from the don't-tell-them-about-motorcycles dept.
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: 2) by takyon on Friday July 31 2015, @03:59PM
Scale the premiums to match the reduced risk of accidents.
In the interim period in which driverless cars share the road with many human drivers, accident rates will still be high on average, but the driverless car itself will be an incredibly "safe driver" for the insurance company.
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(Score: 2) by Runaway1956 on Friday July 31 2015, @04:06PM
I thought that insurance companies ARE MATH. Everything they do is by the numbers. Everything they offer is dictated by the numbers. They've got the statistics pegged, for almost everything. If/when they take a big loss, in a catastrophe such as major flooding, they just re-work the numbers. They may lose a little in the short run, but in the long run, they will always win.
(Score: 0) by Anonymous Coward on Friday July 31 2015, @04:18PM
Nope you are certainly mistaken. In most cases the business people decide what they want to price the product at, and have the Math people come up with a formula that closely approximates it. Yup I know.... but the price is always so much more than they would ever pay out that it doesn't really matter.
(Score: 0) by Anonymous Coward on Friday July 31 2015, @04:44PM
Insurance is merely a bet that you will be the unlucky one.
(Score: 0) by Anonymous Coward on Friday July 31 2015, @04:52PM
In the interim period where robots share space outside of containment cells with humans, crime rates will still be high on average, but robots themselves will be incredibly good citizens for the government.