Autonomous vehicles could eventually lead to fewer car accidents and shake up the $400 billion U.S. auto insurance industry, but don’t bank on lower premiums anytime soon.
That’s according to a recent Goldman Sachs research note cited by Bloomberg, which suggests the types of risks insurers cover in the future may shift rather than disappear.
“Autonomy has the potential to significantly reduce accident frequency longer-term and reshape the underlying claim cost distribution and legal liability for accidents,” Goldman Sachs analyst Mark Delaney and colleagues wrote in a client note, per Bloomberg.
Goldman analysts predict insurance costs will decrease by more than 50% in the next 15 years, from around $0.50 per mile in 2025 to $0.23 in 2040. However, they still expect modest growth in auto insurance premiums for at least the next 10 to 15 years, Bloomberg reported.
Part of that is because newer tech-heavy cars have pushed up repair expenses, leading to higher costs per claim.
“Even a minor fender bender is very expensive for many vehicles today,” Mark Friedlander, spokesman at the Insurance Information Institute, an industry trade group, told NewsNation.
Auto insurance giant Progressive warns on its website that self-driving cars aren’t likely to lower insurance rates and could even drive up costs due to expensive repairs.
Autonomous vehicles may also pose new risks for insurers, such as cybersecurity threats, which could increase the need for cyber coverage, both Friedlander and the Goldman analysts noted.
Ajit Jain, Berkshire Hathaway’s insurance head, also sees major shifts ahead and recently said he expects the car insurance business to “change dramatically” once self-driving cars become a reality.
“Most of the insurance that is sold and bought revolves around operator errors and how often they happen, how severe they are, and therefore what premium we are to charge,” Jain said at the company’s annual meeting in May.
If self-driving cars prove to be safer — and involved in fewer accidents — traditional auto insurance may become less necessary and could be replaced by product liability, Jain said.
Liability for an accident becomes especially complex when a computer is behind the wheel, and it remains a central question in an ongoing debate.
Who pays for damage caused by technology rather than human error? Is the carmaker or the software company responsible? And what if the accident results from a cyberbreach? These questions are still being hashed out. For now, autonomous vehicle regulations vary from state to state, though clearer federal standards may be coming soon.
Widespread adoption of fully autonomous vehicles may still be years away, but progress is being made, as evidenced by Waymo’s expansion of its robotaxi service to new cities.
Earlier this week, Elon Musk said Tesla tentatively plans to start offering rides in its self-driving robotaxis in Austin, Texas, on June 22.
“We are being super paranoid about safety, so the date could shift,” Musk wrote on X Tuesday.
As for the future of car insurance, Friedlander cautioned against looking too far ahead and highlighted immediate challenges driving up insurance rates for consumers — namely, higher parts and labor costs.
“In the short term, we’re looking at impacts of tariffs, which could significantly increase the cost of auto insurance,” Friedlander said.
The latest Consumer Price Index, released Wednesday, showed that the cost of motor vehicle insurance rose 7% over the past year. Since the pandemic, those prices have jumped nearly 60%, according to a Bankrate analysis of CPI data.
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