The End of Auto Insurance?


Will auto insurance disappear?

That’s a  “provocative but plausible” scenario according to a recent Celent report, “A Scenario: The End of Auto Insurance. What Happens When There Are Almost No Accidents.”

Technologies  such as telematics, collision avoidance, automated traffic law enforcement, and robot cars have the potential to radically reduce accident rates. The convergence of these technologies has the potential to eliminate them altogether.

While automobile fatalities have been falling since increased safety regulations were instituted in the 1970s, over 30,000 people died in accidents in 2012. About ten times as many people die in automobile accidents every year in the U.S. than died in the 9/11 attacks and yet there is little outrage about it. This may change.

Despite dropping fatalities, the cost of insuring vehicles has risen relative to other consumer costs and rapidly. The rise is not explained by rising cost of auto body work and seems difficult to understand given the lower costs of delivering auto insurance via the web as is now popular.

It seems these two trends are in conflict and will lead to an inevitable collapse of insurance rates. Vehicles will become an order of magnitude safer in the near term and fatalities in the U.S. could drop below 5,000 per annum. This will be big news.

And once that happens the automobile insurance industry as it exist today will become entirely unsustainable. Declining revenues will force insurers to reduce accident and theft rates for their insured parties just to survive. They will accomplish this in part by encouraging and rewarding customer’s use of safety technologies. Insurers are already offering discounts for cars with anti-theft systems such as GPS tracking devices. This trend will accelerate as accident avoidance technologies mature and become available in newer vehicles.

In a world with almost no car accidents, car insurance will essentially disappear. Technology has the potential to reduce both the severity of accidents and their frequency and has already nearly cut fatality rates in half. We can expect an even more radical reduction in fatality rates going forward and this reduction will be accelerated by offered insurer discounts. As a result the automobile insurance industry as we know it today could disappear almost entirely and it could happen within a decade.

Think it’s impossible? Consider the trade of the wheelwright as an example of what happens when a radical technology change rapidly obsoletes an old way of doing things.

5 Responses

  1. Peter says:

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  2. Yosarian says:

    Rus: The thing is, not only will there be almost no accidents, but it will become very hard to sue anyone for an accident. If you have an automatic Google car, and you’re not expected to do any driving yourself, how will a lawyer prove that you were in any way at fault in an accident?

    People will still be able to get insurance for theft or whatever if they want, but I imagine mandatory liability auto insurance will come to an end when cars are automated.

  3. Rus Moses says:

    While this is an interesting column, it misses some facts about auto insurance entirely.

    First, in pointing out the growing disparity between the cost of insurance and the cost of body shop repairs, it assumes that auto insurance only pays for damage to the auto. This completely ignores injury related costs and lawsuits as well, both of which are growing at staggering rates.

    Next, even if there were “almost no auto accidents” there are still going to be the cases where accidents do still happen. In those cases, the cost of repairs will undoubtedly be very high, owing to the growing complexity of the vehicles, and the assumed lower volume of parts being needed and therefore available. And, there will still be injured people in those accidents, which will lead to medical bills, lawsuits, etc…

    Lastly, collisions are not the only incidents that auto insurance pays for. Hail, high winds, flooding, vandalism, fires, theft etc will all still occur.

    I could go on, but suffice it to say, auto insurance isn’t going anywhere anytime soon.

  1. January 23, 2013

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  2. January 20, 2014

    […] 4. Reliability of the source • H+ covers technological, cultural, and scientific trends that are changing human beings in fundamental ways. H+ focuses on promises and threats that alter our lives and affect the way we live our lives. H+ is published by Humanity+ which is the world’s leading nonprofit for the ethical use of technology to extend human capabilities. The publisher, Peter Rothman has an extensive background in engineering and management with deep experience in the design, development, and launch, of commercial software products, Internet services and other mission critical systems. Peter has much experience doing product research which makes his article on auto insurance more resourceful considering much research has done on it and can be supported by other resources. 5. Quality of Info • The article is supported with many facts and graphs that show trends that relate to auto insurance. The information is relatively new and will take many years to see if the trends are correct. This article is a great introduction into some of the advantages we may see with the introduction of autonomous cars. 6. Link • […]

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