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Self-Driving Cars To Transform Insurance and Other Industries
MarkWhittington writes: The advent of commercially available self-driving cars is about five years away, but already some are thinking about how they will disrupt the economy and how society operates in general. One industry likely to suffer is that of auto insurance. Since the vast majority of auto accidents are caused by human error, having more autonomous vehicles on the road will almost assuredly result in fewer overall accidents. Further, once we've transitioned to a society that mostly gets around using self-driving vehicles, most accidents will be the result of hardware and software malfunctions. Insurance for self-driving cars would more resemble product liability coverage than the sort of auto insurance we have today. Indeed, the technology will also likely impact diverse industries such as auto mechanics, taxi services, and health care, as well as policing.
Insurance companies can only raise rates if they can prove that their losses are higher than their permissible loss ratio. Almost all states require a filing that follows standard actuarial procedures in order to prove it. A lot of states, like California, have strict requirements on how much rate can be taken, and how much your permissible loss ratio can be. Some states are now banning the use of price optimization, which eliminates any possibility of using non-loss information to set rates. Insurance companies can't raise rates due to the "changing market".
So yes, in the long run the insurance companies will suffer to some degree. But, it just means that they need to change their business model.
Absolutely. As long as the insurance companies keep the lawmakers in their pocket, they will only gain by fewer accidents. If you have liability insurance (the only type that is legally required by most state laws), you are required to have it on each vehicle that you drive (even if there is only one licensed driver in the household). Yet the driver can only drive one vehicle at a time. The industry claims the insurance is on the vehicle and not the driver, but that argument wears thin as soon as you have a teen driver in the household or the driver get into an accident or even gets a ticket. The insurance is clearly on the driver, but the industry is allowed to charge for it for each vehicle. One obvious problem with this is that we claim to want to reduce pollution and improve air quality and have poured millions and millions of tax money into private industry all electric vehicles like the Volt. But because of the limited range, many people who would buy a Volt don't get one because they would have to have a second vehicle for longer trips if they did (particularly in single driver households) and be charged liability insurance on both.
Personally, I drive a larger vehicle than I would like. I do so because I feel that I need to ability to haul things around occasionally. If I could have a smaller vehicle without the double hit on liability insurance I would also have a small two seat vehicle (or maybe even one, or a motorcycle). The insurance company would win because statistically I could do less damage when I drove the smaller lighter vehicle, but they have their hooks into the lawmakers and they insist that they deserve the insurance payment on each vehicle even when there are more vehicles than drivers in a household.
I'm an American. I love this country and the freedoms that we used to have.
We must demand no-fault insurance... It is the only correct solution
Shitty driver?
You realize that "no-fault" really translates to "everyone pays," right? Why should I have to pay because some dumbass was texting and crunched my ride?
An enigma, wrapped in a riddle, shrouded in bacon and cheese