Warren Buffett Says Self-Driving Cars Could Hurt Auto Insurers
The Berkshire Hathaway boss believes self-driving cars could spell big trouble for insurance companies.
Could self-driving cars put an end to automotive insurance companies as we know them? That may be a future you could happily live with...unless you're Warren Buffett.
At Berskhire Hathaway's annual meeting held over the weekend, Buffett said self-driving cars could pose a threat to insurance companies, according to Business Insider. Geico is a wholly-owned subsidiary of Berkshire Hathaway.
The increased safety of autonomous cars would ruin these companies' business model, Buffett implied.
"If driverless cars become pervasive it would only be because they were safer," Buffett said. "That would mean the overall economic cost of auto-related losses had gone down and that would drive down the premiums," he concluded.
A massive reduction in crashes would theoretically reduce the need for high-value insurance policies, although it's unclear how the government would address current rules requiring drivers to have insurance in that scenario.
"If they make the world safer it's going to be a very good thing, but it won't be a good thing for auto insurers," Buffett said of self-driving cars.
Safety is one of the main potential benefits touted by autonomous car advocates. The principal argument is that, because they never get distracted and because their array of cameras, lidar, and radar can "see" better than human eyes, self-driving cars will dramatically reduce car crashes. But that's not something that can really be confirmed until large fleets of self-driving cars are actually deployed, and prove they can perform as advertised.
In the meantime, self-driving cars have shown that they are not immune to crashes. While they have proven capable of driving on real-world roads, autonomous cars still haven't mastered every situation human drivers routinely face. Crowded city streets and situations where clear lane markings aren't available have proven particularly challenging.
Even if the technology lives up to its billing, real safety benefits won't be accrued until the majority of cars on the road are autonomous. A handful of self-driving cars won't be able to counterbalance the impact of a large number of unpredictable human drivers. At typical fleet turnover rates, the autonomous car takeover might not happen for decades...if it happens at all.
So while self-driving cars have made impressive strides over the past few years, it's probably too early to cancel your insurance policy. But given how seriously automakers, tech companies, government regulators, and, apparently, even the likes of Warren Buffett are taking autonomous vehicles, it's likely that the technology will continue to develop.