Driverless Cars’ Next Disruption: Insurance

The auto insurance industry is preparing for a future of autonomous vehicles. Leslie Scism writes forThe Wall Street Journal that in 2015 car insurers brought in $200 billion in premiums.

However, as much as 80 percent of that revenue may disappear in the next several decades due to the adoption of autonomous vehicle technologies, which could potentially result in massive safety improvements.

Deloitte Consulting expects car-insurance premiums to drop to $40 billion by 2040, and it expects $100 billion to shift to product-liability insurance as responsibility for car crashes moves to automakers and safety equipment suppliers.

According to Scism, premiums will likely be calculated by how often cars face hacking attempts in certain parts of the country and how good satellite imagery is in areas. Currently, premiums are calculated by dividing the average number of miles driven by the number of accidents.

These improvements in safety will translate to lower insurance prices for consumers and also safer vehicles, while at the same time upending how we understand traditional industries like insurance.

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