If autonomous cars are so safe that accidents become rare, can the auto insurance industry survive?
Some car companies think they can eliminate road fatalities through autonomous driving and other safety features. “Our vision is that by 2020 no one should be killed or injured in a new Volvo car,” said the company’s president.
If that future becomes a reality, then why would we need liability insurance for our vehicles? (We’d still need insurance for theft or when someone else crashes into your parked car, for example.)
Automated driving is already here in several production cars, and dozens of companies anduniversity labs are working in the field. Tesla estimates that its Autopilot feature cuts accident rates in half, and that’s just in its current beta release. In Forbes alone, there have been at least four articles in the last four months about the possible death of auto insurance. So, the time seems right to take a closer look at the issues.
The US auto insurance industry is significant: it generates $220 billion in annual revenue and supports 277,000 jobs, about the same number of mechanical engineering jobs. Consultancy KPMG predicts that the market will shrink 60% by the year 2040.