Warren Buffet, billionaire investor and owner of Geico, once said that if someone invents a product that reduces the number of accidents by 30, 40 or 50 percent, that would be great, but no one at their company will hold a party. Donald Light, head of the research firm Celent, stated that we will witness a 60 percent drop in auto insurance premiums over the next 15 years as driverless cars reach the marketplace. He has told car insurance providers that they must prepare for this as they see part of their business shrink. These new changes could even be the reason that Progressive bought into the homeowner's insurance market recently.
While the latest advances in technology may spell the end for a need in consumer car insurance, a new market may develop for automakers. For example, if one of their automated features fails, they will want insurance to cover the question of liability.
Nevertheless, the one thing that no one can do is give an estimate for when this new technology will hit the market. This new technology, however, is not the only threat to the auto insurance industry. Some of the latest safety innovations have also led to fewer accidents. According to a 2014 study with insurance claims, when Honda produced technology that beeps when cars get too close in traffic, the frequency of certain claims
dropped. For example, bodily injury liability dropped 40 percent and medical payments were reduced by 27 percent. For a long time, auto insurance has stood as a highly lucrative business. In 2014 alone, insurance companies collected more than $195 billion from US drivers. The driverless vehicle could close the door on that marketplace.
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The Detroit News