From Guest Blogger Jordan: Self-Driving Cars and Auto Insurance

The prospect of self-driving cars raises many questions in regards with liability for accidents, privacy and their ability to make ethical decisions, among other things, but these issues are expected to be outweighed by the many benefits that autonomous driving technology is bound to bring to society. According to a recent report, one of those potential benefits will be substantial car insurance premium savings, with self-driving cars set to reduce the number of motor vehicle accidents, which would eventually lead to lower insurance costs.

Metromile, a startup providing pay-per-mile auto insurance, has decided to try and calculate exactly how much self-driving cars would save drivers on insurance, and found that they will lead to significant reductions in auto insurance costs. Metromile is a company that collaborates with Uber on providing insurance for drivers working for the popular ride-share service, and it was asked by the Ferenstein Wire – a syndicated news service – to create an insurance model that would reflect how much drivers would pay for insurance after driverless cars become commonplace.

The model is based on a 20-year-old single female in the San Francisco Bay Area, driving 12,000 miles per year, with the assumption that driverless cars will reduce the number of accidents by 90 percent. While such a decline in car accidents suggests that auto insurance might become obsolete, Metromile takes into account that vehicles will still be stolen or broken into, meaning that the need for auto insurance will not be completely eliminated.

Metromile created an estimate of auto insurance costs for self-driving cars as compared against human-driven versions of the same model. Researchers estimate that yearly insurance premiums for a self-driving BMW 335 will cost $303, $1,200 less than insurance costs for the human-driven version. The difference in insurance costs between self-driving and human-driven version of the Tesla Model S, Lexus RX 450h, Honda Accord, Toyota Prius and Porsche Panamera is also over $1,000 per year, which means that consumers can expect to pay much less for auto insurance in the future.

The Ferenstein Wire quotes James Anderson, a behavior scientist at the Rand Corporation, who is confident that insurance claims will definitely go down after the introduction of driverless cars. “I would anticipate that in the short and medium term, claims are likely to gradually go down as crashes become less common,” Anderson says, adding that it is realistic to expect a 90% reduction in insurance costs, while also noting that consumers will not see such savings for at least 10 years, which is when driverless cars are expected to become widely adopted.

If these predictions turn out to be true, it would mean that self-driving cars will have a major impact on the auto insurance industry. With drivers spending as much as 90% less on auto insurance than they do now, insurers are bound to see a drastic drop in sales of coverage for personal and commercial vehicles, which will put a big dent in their profits. But, insurance companies have more than enough time to adjust their business models and do whatever it takes to adapt to the changing auto insurance landscape, which will definitely make them find new ways for generating revenue.