The Robots are Coming

Autonomous (driverless) cars are coming.  In the next 10-20 years, many technologists and automobile experts estimate that the quality and price of autonomous cars will allow the slow takeover of American roads.  Google has been driving driverless cars around the Bay area without causing any accidents.  More companies are applying for permits to test technologies of their own. 

This revolution holds many changes for society, nearly all of which will be positive in the long-term.  Many of these revolve around accidents.  Almost 35,000 people died on American roads during 2012.  Hundreds of thousands more were injured.  Along with the reduced death and disability — the real impact on people — these cars will also cause less stress and, potentially, lower costs on the U.S. healthcare system.  Everybody that’s wasted countless hours in traffic because of fender-benders will also appreciate autonomous cars. 

And even without considering accidents, the gains for society will be tremendous, especially when all cars are autonomous.  Autonomous cars will accelerate together, drive closer together, and communicate with traffic networks to significantly reduce commute times in metropolitan areas.  Existing road networks will either be sufficient or allow less infrastructure spending in the future.  Driving closer together raises fuel efficiency.  So would less aggressive driving and less gridlock.  People could be working while traveling to and from work, hopefully increasing either productivity or the time spent at home.  Cars could be made to simulate either home offices or home theaters.

Anytime there is a disruptive technology, there are always short-term losers.  Short-term because nobody still cries about the demise of elevator operators, even though long-term this frees up individuals to pursue other more productive occupations.  Obviously, autonomous cars will be terrible for truck drivers and taxi drivers, and there will likely be a decline in the use of hotels along interstates.  Auto repair shops won’t have as many smashed-up cars to repair.  And of course everybody will miss the Allstate Mayhem, Progressive cheerful sales rep, and the GEICO gecko commercials.

One of the losers will be the automobile insurance market.  If accident rates fall by nearly as much as proponents expect, there would appear to be little to no need for automobile liability or collision insurance for private passenger and commercial vehicles (including bodily injury, property damage, medical payments, PIP, UM, and physical damage).  While there will continue to be a market for comprehensive coverage (for hail, vandalism, theft, etc.), this alone will not support the large number of companies and individuals (including agents, claims adjusters, etc.) currently in this field. 

So what do you think?  How should automobile insurers prepare for driverless cars?  Will driverless cars kill the automobile insurance industry?  Let us know.