He may be old, at 87, but no one can say he’s not hip: Warren Buffett, investor extraordinaire, isn’t afraid of change, and billionaires usually aren’t. Not only does Buffett recognize the coming onslaught of the driverless car, but he’s eyeing a big break for driver in the form of lower insurance rates.
After all, artificial intelligence is supposed to be humans without accident-causing emotions.
And Buffett has every reason to be on top of this. His Berkshire Hathaway owns Geico.
“Driverless cars will reduce – perhaps dramatically – the need for auto insurance if they’re safer,” Buffett told Yahoo Finance. “If driverless cars are successful and people don’t hack into ‘em, that will reduce auto insurance premiums – and perhaps drastically reduce them.”
Buffett wasn’t ready to speculate as to when driverless cars will be mainstream enough to chip away at insurance premiums, saying it was still a “long time off”, but it’s coming, and he’s not worried about what it will do the insurance industry, either.
His reasoning is that auto insurance will still be a requirement as it is mandatory in most states, and due to the enhanced safety driverless cars are expected to bring, not only will premiums be lower, but payouts will, too—so it balances out for the industry.
For now, though, self-driving cars still have a fairly long route to travel to get to the mainstream, and much of the problem is psychological, as Wired magazine points out. The technology masters here, says Wired, continue to defend themselves using death statistics designed to quash any criticism. “It’s a compelling and worthy objective, but one that’s almost impossible for regular drivers to relate to”.
The big problem right now could very well be that driverless cars haven’t visibly proven themselves. They aren’t on the road for the average person to see, and the average person fears the unknown.
It doesn’t help that one of last week’s biggest news stories was the arrest of a British driver for putting his Tesla on autopilot and moving over into the passenger seat because he just couldn’t resist. It doesn’t matter, either, that this driving incident happened a year ago, and is just now making its way through the media.
Someone caught him on video and sent it to the police. Now his license has been revoked for 18 months. Related: Goldman Bites The Bitcoin Bullet
The push forward for self-driving cars cannot be reversed, and accidents in the run-up to this going mainstream are not going to derail it.
It will take time, but it will be the reality on the road. That means the insurance industry will have plenty of time to prepare for some major disruption, including questions about who will assume liability in an accident when a car has no driver, how to handle new premiums, and what to do if people simply drop coverage because they don’t feel they need it anymore.
As Venture Beat points out, there is a silver lining for the insurance industry, too, and it’s found in the harvesting of the massive data that will come out of driving based on artificial intelligence. This data could give insurance companies access to information that would help them better price premiums and find more useful services for customers that might otherwise go without.
Buffett isn’t scared, and Geico is a … chameleon in the industry, famous for adapting to the future.
By Jan Bauer for Safehaven.com
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