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Self-driving cars could ultimately lead to fewer car accidents and shake up the $400 billion American auto insurance industry, but don’t immediately deposit low premiums in the bank.
This suggests that the types of risks insurance companies will cover in the future may change rather than disappear, according to a recent Goldman Sachs research note cited by Bloomberg.
“Autonomy can significantly reduce the frequency of accidents and restructure the underlying billing cost distribution and legal liability for accidents,” Goldman Sachs analyst Mark Delaney and colleagues wrote in client notes for each Bloomberg.
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Goldman analysts predict that insurance costs will fall by more than 50% over the next 15 years, down from about $0.50 per mile in 2025 to $0.23 in 2040. However, we still expect modest growth in car insurance premiums for at least the next 10-15 years.
Part of this is because new, high-tech cars push up repair costs and cost per bill.
“Even minor fender vendors are extremely expensive for many vehicles today,” Mark Friedlander, a spokesman for the Institute for Insurance Information, Industry Trade Group, told NewsNation.
Auto insurance giant Progressive warns that self-driving cars are unlikely to lower premiums and can even raise costs for expensive repairs.
It could pose new risks to insurers, including cybersecurity threats, as both Friedlander and Goldman analysts pointed out.
Berkshire Hathaway’s insurance director Ajit Jain also saw major changes ahead of time, saying he hopes that if self-driving cars become a reality recently, the auto insurance business will “change dramatically.”
“Most insurance sold and purchased revolves around operator errors and how often they occur, how serious they are, and therefore the premiums we charge,” Jain said at the company’s annual meeting in May.
Witness: The driver of a car that ploughed into the crowd outside Sophie Stadium was trying to “take people’s attention.”
If self-driving cars are found to be safer and involved in fewer accidents, traditional car insurance could be necessary and could replace product liability, Jain said.
When a computer is behind the wheel, liability for an accident becomes particularly complicated and remains a central issue in ongoing discussions.
Who pays the damage caused by technology, not human error? Is the automaker or software company responsible? And what happens if the accident arises from a cyber breach? These questions are still hashed. For now, regulations on self-driving cars vary from state to state, but clearer federal standards may soon arrive.
As evidenced by Waymo’s expansion of Robotaxi services to new cities, widespread adoption of fully self-driving cars may still be years away, but progress is being made.
Earlier this week, Elon Musk said Tesla is set to begin offering vehicles on June 22 in Austin, Texas, self-driving Robotaxis.
“We are very paranoid about safety, so the dates may change,” Musk wrote Tuesday.
As for the future of auto insurance, Friedlander warned against looking too far, highlighting the immediate challenges that will raise consumer premiums: higher parts and labor costs.
“In the short term, we are considering the impact of tariffs and could significantly increase the cost of car insurance,” Friedlander said.
The latest consumer price index released Wednesday showed car insurance costs have risen 7% over the past year. These prices have increased almost 60% since the pandemic, according to bank rate analysis of CPI data.
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