Insurance: Part 2

Yesterday I riffed a little bit on what insurance might look like in a driver-less car world.

Today, MarketWatch carries a press release from a report hypothesizing that driver-less cars may kill the auto insurance industry.

Actually, they don’t come out and say that in so many words. Instead, they write:

As the risk of accidents will fall drastically with the advent of autonomous vehicles, the insurance premium to cover that risk too will drop significantly. Nevertheless, original equipment manufacturers (OEMs) and suppliers will increase insurance spend to cover their share of product liability risk, thereby offsetting the shrinkage in consumer-driven insurance revenues.

With OEMs and tier 1 suppliers looking to ensure fool proof product safety, methods to access risk and certify the product will assume greater importance. The traditional method of underwriting that uses historic data will take a back-seat, paving the way for a new breed of underwriters capable of evaluating driving algorithms and assigning a relevant risk priority number.

I think the translation there is that disruption is coming to the auto insurance industry.

As Warren Buffett said:

“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.”


Originally published at www.davidincalifornia.com on October 20, 2015.

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