60 Minutes covered self-driving cars last Sunday and CBS News took a look at Mercedes’ vision of the car of the future. General Motors, which cut its R&D when it went bankrupt in 2008, now plans to get into self-driving cars in a big way.
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Tight-lipped Apple is rumored to be developing a self-driving car; at least, it is meeting the California DMV about getting a license for one. Toyota, which has been less enthusiastic about self-driving cars than many other companies, now promises to have them in the showrooms by 2020.
Wired complains that Google’s totally self-driven (no human override) car “looks like a Roomba” and “doesn’t even have a futuristic name.” What do they expect for a one-off concept car from a non-auto manufacturer that isn’t ever intended to go into traffic? I am sure that Google, which has $67 billion in cash in the bank, can make something a lot nicer if it wants to put something up for sale. (Apple, of course, has three times that much, which is one reason why many hope it is getting into the self-driving car business.)
One industry that will be changed, though not necessarily hurt, by self-driving cars will be insurance. As speakers detailed in this insurance industry sponsored conference, cars will still need insurance, though it may be more product liability insurance than accident insurance. If accidents are 50 to 90 percent less frequent, payouts will be smaller, so premiums will be smaller, but profits should stay the same or even rise as there will be more cars on the road.
Nor will the auto industry be hurt. If car sharing increases, it means that the average car on the road will put on more miles each year. There may be fewer total cars, but cars will wear out faster so the industry will be able to make as many.
Despite claims that Millennials don’t want to drive, auto travel is rising rapidly today, even before self-driving cars are available. It appears that 2015 will set an all-time record in the amount of driving.
If self-driving cars are a “disruptive technology,” then the main industry that will be disrupted is transit. The Antiplanner’s faithful ally, Alan Pisarski, observes that the annual growth in vehicle miles of driving is nearly twice as great as the total passenger miles of transit usage. Since the average car has 1.6 people, passenger miles of auto travel are growing three times as much as total transit travel. Once self-driving shared cars become available, no one outside of New York City and, possibly, Chicago will ever need to ride transit again.
The AP is correct that the insurance industry “will be changed, though not necessarily hurt, by self-driving cars” as liability shifts from the driver to the component manufacturers and software companies.
However, this bit is somewhat incorrect: “cars will still need insurance, though it may be more product liability insurance than accident insurance.” The car, or more accurately, car owner won’t carry product liability coverage. Car owners will still need a small policy covering theft, vandalism and incidental damage, e.g., if a tree falls overs in a windstorm and lands on a car. But that’s about it. Should be very cheap.
The prevailing view in the industry at the moment is that the component manufacturers and software companies will be liable for the rare accidents involving self-driving cars. Think Continental, Bosch, Johnson Controls, Trimble. The auto manufacturers tend to believe, at least at this point, that their risk landscapes will not be significantly impacted by self-driving cars. (Their business models for sure will be affected, but that’s another topic.)
Insurance companies that focus on motor insurance, e.g., Progressive, Geico, will see their premiums go way down and some of those companies will no doubt disappear. For big commercial insurers, the picture is mixed. The product liability risk will need to be mitigated, but it’s probably a small risk. Insurers that write commercial fleets, especially for service vehicles (think pest control, building trades, etc. — i.e., people who drive a lot but aren’t strictly speaking professional drivers) should see their premiums decline but profits increase as the loss ratios improve dramatically (they are historically very poor in that line of business).
This isn’t exactly what I’m thinking of but it’s in the ball park. My recent move lead to my auto insurance dropping by @ 43-46%… something like that. It’s a good example of the cost of regulations since where I moved has a considerably higher rate of accidents in general. Because of that and my lower cost of insurance, I upped other aspects of my insurance – especially the part dealing with uninsured drivers.
There are other similar examples involving all the different aspects of what we lump into auto insurance. A lot of what we pay for doesn’t have to do with coverage affected by whom caused the accident. I’m no so sure fully automated driverless cars, if they indeed ever happen, will change the insurance aspect of cars all that much at all.
More news: Daimler lorry drives itself on German motorway
This one caught me by surpise: The Next Big Thing the Left Wants to Ban: Human Drivers. I can’t decide if it’s simply right-wing clickbait or just a really stupid right-winger interpreting events based on a single tweet by a left-wing idiot.