Why would they lower prices? The government mandates we MUST have insurance, so they know they've got a continued source of business. They'll simply increase profits. The average American has absolutely no way to correlate the amount they pay for insurance to what it costs the insurance company.
I'm convinced that the ability to shop for and purchase auto insurance online is the best thing (for consumers) to happen to the industry in a long time. Better rates, better claims processing, better customer service.
They can't do that because other companies will undercut them to gain market share. They could collude to set prices, but that's illegal in the US. Also, some auto insurance companies aren't organized as corporations, such as the Auto Club of Southern California, which is a not-for-profit mutual. They aren't saints, but since they redistribute most of their profits to policyholders, they don't really have much incentive to keep prices high.
> They could collude to set prices, but that's illegal in the US.
Interestingly, that is not true for insurance companies[0], at least at the federal level. They are exempt from a lot of federal law.
>The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, also known as Public Law 15,[1] is a United States federal law that exempts the business of insurance from most federal regulation, including federal antitrust laws to a limited extent.
Corporations have been doing illegal things for a while now. All you have to do is to share a reasonable part of illegal proceedings with the government - it's called a 'fine'.
The fact that something is illegal means that there is a risk in doing it, and a cost in hiding it. It's not quite the same situation as if colluding were completely legal and above-the-board.
Only if the industry as a whole agrees to not cut rates, and nobody new enters the market. In a competitive market, if the cost goes down (as would happen with fewer accidents) then the rates will drop.
I'm curious if we could see a future where the car manufacturers provide insurance for their product, and you would buy a combined hardware/software/updates/insurance subscription package from a manufacturer. It seems like the inevitable conclusion of all the debate around who's ultimately responsible for the actions a self-driving car takes.
If a large company like Google, Tesla or Uber owns a fleet of self driving cars, they can just self-insure. (The claims will average out to a well understood statistical distribution, and they simply set aside enough money to pay those claims.)
> The government mandates we MUST have insurance, so they know they've got a continued source of business. The average American has absolutely no way to correlate the amount they pay for insurance to what it costs the insurance company.
I have a hard time reconciling these two sentences. In the first, you sound like a passionate advocate of the free market. In the second, you act as though you have never heard of such a thing.
N.b. Personally, I am much happier knowing that (almost) all the people potentially plowing into me on the highway carry insurance.
Exactly, and keep in mind many states have moved to a 'no-fault' model. So they don't actually care who is at fault for the accident anymore. So the question becomes, why doesn't everyone just insure themselves (IE. Their own car/medical bills to the level they are comfortable with) rather than insuring everyone else and praying the guy that hit you does the same.
Affordable and accessible medical care is a prerequisite to that. After the injury aspect is taken out of the picture then it would make sense for everyone to insure as much as they want (e.g. homeowners insurance)
If I don't want to be insured for own personal bodily injury, why should I be forced to buy that product in a free market? What if the premium simply isn't cost effective? By forcing anyone to buy a product you are creating a captive market and thus insane prices. Especially when the businesses involved are explicitly allowed to collude[0]. Sounds like a bad deal for everyone but the insurance companies.
My intention was to point out that if the medical side of things was a non-issue it would be much easier for society to get behind the idea of "just insure your own property however much you want"
That sounds like it comes from the same people who make any speeding offense on par with DUI and having an at fault accident in most points based systems. One in seven people with a license not having insurance I can see (because they might not have a vehicle) but one in seven vehicle/driver pairs on the road not being insured for that combination seems very high without monkeying around with the statistics.
It actually sounds like a somewhat outdated (the trend is down and the most recent figure I can find is about 1 in 8 [0], rather than 1 in 7) figure derived from insurance claims (which may systematically misstate the share of drivers or driver/vehicle pairs, but probably is reasonably accurate in determining what people actually care about -- if I need to go after someone for damages resulting from an accident, will they have insurance? -- except to the extent that insured drivers are more or less likely to be in an accident with an uninsured driver vs. an insured driver, all other things being equal.)
My girlfriend isn't on my policy because she never drives my truck. Likewise the vast majority of the time I drive her car it's something along the lines of repositioning vehicles in the driveway. If I were to get in an accident in her car chances are there'd be a bunch of fighting with insurance but our insurance (same company, different policies) would probably wind up paying. Would I count as an uninsured motorist in that hypothetical situation? III has a very obvious incentive to portray insurance as something worth having as opposed to a waste of money (which it will be for most people who don't get into a situation involving medical or large amounts of property damage). I think they'd consider me uninsured in that situation.
Reporting rates also have an effect. There's a much higher reporting rate for small accidents with a single uninsured party than for similar accidents in which both parties are insured. If one party is insured it's in that parties interest to maximize documentation unless it's undeniably their fault. If both parties are insured then it's much murkier, damage amount, deductibles, who's at fault, etc, etc. come into play and if the dollar amount is relatively low it's often more faster and cheaper for them to settle the matter without insurance company involvement. Basically, if someone without insurance gets in a parking lot accident the vast majority of people will report it whereas that's not necessarily the case when both parties are insured.
Actually, in California, the government does not. You must have either a certain specified minimum level of insurance or a post a specified minimum surety bond.
It makes a difference because insurance companies don't have unlimited ability (even collectively) to set prices, since there if an alternative that they don't control.
This becomes absurd with self-driving cars. There are three types of collisions with human-driven cars:
1. Those caused by driver negligence.
2. Those caused by the owner failing to properly maintain their vehicle.
3. Those caused by a manufacturing defect.
With self-driving cars, the first one is impossible. A car that follows the law to the letter is by definition never at fault in a collision. The second one is still possible, but probably less likely. The car can take itself to the shop without your intervention, and I expect manufacturers would have it refuse to drive itself if you're too far off the maintenance schedule. The third category will now include bugs in the driving software, so the rate of collisions that fall under option 3 is likely to go up a bit.
Option 3 means that the manufacturer is liable, not the owner of the car. Since this encompasses the vast majority of self-driving car collisions, personal liability will no longer be truly necessary like it is today.
No, it (quite reasonably!) mandates that you must prove financial responsibility to a certain level[1] if you're going to pilot a two-ton hunk of metal at 70 mph around other people doing the same.
That has the side effect of requiring the typical person to buy insurance, as they can't afford the alternate means of establishing it.
Do you think that's somehow unreasonable? What standard would you prefer for determining when an activity should require such advance indemnification, and how does "driving a car" fail that?
Edit: Sorry if you just meant to make the bland, neutral point that more casualties -> more insurance revenue -> more insurance profit, but your tone suggested you think it's an unfair subsidy somehow.
[1] It varies, but here's California's form for alternately proving responsibility, which only requires you put up a bond of $35k, which IMHO is ridiculously low considering how much you could fairly be held liable for. I guess the logic is that "if you don't mind setting aside that much money, you must have enough seize-able assets in case you harm someone"? https://www.dmv.ca.gov/portal/wcm/connect/3a81272a-0834-43b6...
Most any reasonable person can make ~$1500 a year investing that $35K. So it doesn't seem like such a good savings considering you won't make that money on investing it, and you're almost certain to lose a lot more than than $35K if you're at fault in an accident.
The I will buy 1 usd nominal insurance from my car manufacturer along with buying the car. Or more likely get it for free with my accident and theft insurance.
What they get from the customer covers operating costs and payouts. Insurance makes money by investing that mountain of cash. Smaller mountain, smaller profit.
The article's title is a little misleading. This would shrink the market as a whole. Revenue would go down and earnings would go down as a result. However, it wouldn't have to affect profitability.
In fact, profitability would probably go up on these policies initially since the safety benefit would be immediate, but the implied risk in the policies would only come down over time as the safety works it's way into statistics.
(Apologies if I'm not using correct terms. Not an actuary.)
Only if the insurer in question is solely involved in auto insurance.
From the insurance company's perspective, they need enough of a capital reserve to mitigate the risk of a sudden shock in payouts. Spreading across larger geographic areas mitigates that risk somewhat, as does spreading through multiple businesses. Auto insurance is probably a particularly nice gig since it's relatively unaffected by things like natural disasters and would have a relatively smooth cashflow.
So, less capital from auto insurance means more capital has to come from somewhere else - more borrowing, if nothing else. That probably translates into either reduced profitability, or higher premiums on other kinds of insurance.
I'm not an actuary by any means, but that's my guess.
I disagree it was misleading. The reasoning is pretty straight forward; cars become safer and so insurers can offer lower premiums when 1/3 of your revenue goes away your earnings are harder to make.
A rationalization for Evangelicals. Once you realize the distinctions are all rationalizations to appease people that require cultural distinctions, you'll stop trying to rationalize a difference between financial chances.
Think "why am I more comfortable with gambling because my state mandates I pay it" and think about what circumstances led to that, and then think about what prompted you to care at all.
Eh? "Insurance" has never been illegal as far as I'm aware...
You're probably thinking about racketeering, but unless you actually believe your home insurer will set fire to your house if you don't buy fire insurance, the comparison probably isn't apt.
Insurance is generally only criminal when you are talking about protection rackets[1]. If the thing you are buying insurance against is the person selling the insurance, then it is illegal.
There have been a handful of religious communities, like the Mennonites, that don't believe in commercial insurance, but they instead have a community that will step in and help when something happens to one of its members. So it's still a form of insurance, they just don't use money.
ignoring the merits of insurance for a moment, are you really longing for society to be like it was a century ago? I assure you, we have it way better now.
The other bubble that driverless cars are going to pop is ticket revenue. There are a lot of police departments and cities who have structured a lot of their budget on heavy-handed enforcement of motorists.
That's going to decline significantly once driverless cars are scrupulously following the rules of the road. And any tickets that get written will be going against a giant corporation like Google, with detailed information about what the car was doing at the time of the supposed infraction, a lot more financial ability to fight the ticket, and a lot more incentive to protect their reputation.
Traffic laws are notoriously regional in the United States. The fines will adapt. There some potential infractions.
Such as keeping your car in a minimum condition. Or having legacy system support. It needs to get patches to update to newer network types.
Completely unattended driving (enter destination and taking a nap) is still up for debate. Requiring a machine to be watched seems like a pretty easy-to-pass regulation.
Current traffic laws are written for human drivers. If there are robotic drivers on the road other traffic laws will be passed for those.
> Completely unattended driving (enter destination and taking a nap) is still up for debate. Requiring a machine to be watched seems like a pretty easy-to-pass regulation.
Requiring a human to watch implies a means for the human to intervene and take over. Having a human second-guess the machine will increase accidents. And having the controls available for the human to do so will increase complexity and decrease reliability.
Many regulations are of questionable validity, but do you really want to be in a machine that you have no control over? Would robotic drivers be better at things like merging, keeping distance, not over correcting? Yes. But people will still want to intervene when it doing something dumb like driving into a pond, or gets stuck on a median and cannot figure out how to get off.
Driverless cars will probably not be magic pods that whisk you around. It's still a vehicle that needs to navigate terrain. And roads are not perfect everywhere.
> do you really want to be in a machine that you have no control over
Yes. I regularly fly in planes, which I have no control over, and which spend most of their time on autopilot. I also regularly deal with machines that do their jobs far better than I could, and I feel no desire to take over and do those jobs worse. Why should that answer change when the stakes get higher and the cost of a mistake goes up?
(That doesn't mean I want to beta-test an experimental driverless car; it does mean I'm eager for a non-experimental one.)
> But people will still want to intervene when it doing something dumb like driving into a pond, or gets stuck on a median and cannot figure out how to get off.
A vehicle that did any of those things would be considered broken in a deadly way. The solution isn't to hand people broken vehicles that they sometimes need to take over from; the solution is to not call a car driverless until it handles those situations (generally by not getting into such situations in the first place).
> Driverless cars will probably not be magic pods that whisk you around.
> Yes. I regularly fly in planes, which I have no control over, and which spend most of their time on autopilot.
Those planes with their auto-pilot system still have a means for the pilots to intervene. That's not quite the same as being in a vehicle for which no human has the possibility of intervening. (It's also a bit disingenuous to imply that it is.)
First, those pilots are heavily trained and certified, far more than car drivers. And second, far more accidents occur due to humans than due to mechanical failure (and of "mechanical failure", only a subset of those involve incorrect autopilot, though I haven't found that broken out). http://www.planecrashinfo.com/cause.htm puts total human causes at 67% (53% of which is pilot error), and mechanical failure at 20%.
Some accidents also occur specifically when pilots ignore/override the automatic systems; I'd be interested to see statistics on that, too, but I haven't found any.
Do you have statistics on the number of times that the pilot has to take control because the auto-pilot is unable to cope or is doing the wrong thing? Focusing just human-caused accidents vs. machine-caused accidents ignores this.
I really hate this association of aircraft and car autopilots.
Aircraft operate in essentially empty space, and barring major mechanical failure the pilots typically have tens of seconds up to many minutes to act to avoid disaster. In a car you often have less than a second to react, and certainly never more than 4-5.
Aircraft hardware and software is tested, retested, tested again, and certified. Auto hardware and software is pushed out the door with reckless disregard for reliability.
People forget planes, the kinds with sophisticated autopilot, don't come out with a new model revision every two to three years. Their cycles are very long, decades long.
Errr... yes it does. A runway is empty space. There are no other planes on it, it's a straight, well-maintained stretch of pavement, kept clear of ice and snow, with clear markings. Those are conditions so easy that non-self-driving cars can manage to navigate them for non-trivial periods of time without hitting anything! The Mythbusters have had a couple of cars go entirely out of control a couple times under those circumstances and the damage was a fence, once, IIRC.
There's more to landing than taxiing on the runway, like approaching the ground at a minimum of 250 km/h while getting hit by winds, often with very little visibility.
> but do you really want to be in a machine that you have no control over?
Yes, it would almost definitely be safer than a lot of drivers I've been in the car with, if not all of them. And it's be far less nerve-wracking than with some drivers.
This is purely opinion-based, but I think the problem is primarily local/city-level. That's where most of the current problem with ticket farming happens, and once driverless cars are commercially available I think it will be relatively unpalatable to ban them at a state level or higher.
You can pass traffic laws that target driverless cars without outright banning them. The cronies at a local/city-level that pass laws to turn traffic into a source of income have friends in state and federal. Or move to the state/federal level. Is the Federal government immune from passing similar laws?
If this sort of thing becomes common enough at the local-/start-level, I can see it becoming a legal battlefield for the companies that stand to benefit from driverless cars.
What makes you think Google will fight my ticket on my behalf? Surely, it would benefit them to have traffic laws written to clarify that the occupant is still liable for any laws his self-driving car breaks.
Also, as the other commenter said, the laws will adapt. The purpose of traffic laws is to maintain $X level of revenue, so if revenue starts to drop, local governments will increase the number and complexity of traffic laws until revenue is back to the expected level.
The end state for driverless cars is most likely not individual ownership. Large companies will probably own fleets of cars available for hail. In this world, the fleet owners would probably develop a rigorous process to cost effectively fight traffic tickets.
Even if local governments tried to increase the complexity of traffic laws, the fleet owners would increase spending on fighting tickets; this would result in an arms race which would be costly for the local government. It's much easier to extract rent from the little guys.
The worry I have is of increased enforcement of local non-traffic laws to make up revenue.
I'd expect it would be cheaper in the long run for those large companies to influence laws to move ticket liability over to their customers rather than take on the expense of fighting traffic tickets themselves.
Possibly, but that's assuming no aspect of consumer choice in the survival of ride hailing systems. If customers had to worry about tickets, they would quickly migrate to a competitor which assumed liability.
I envision a concierge service, with a low monthly fee or high one-time usage fee, for road side legal and technical counsel.
If the car is already driving, why should a a passenger know which rule the car was following at the time an officer said a moving violation occurred.
The concierge could access the car's driving records on the fly and provide specific reference to traffic laws at that specific jurisdiction. The officer and the concierge could hash out the entire interaction roadside and it could recorded.
Meanwhile, the passenger/"driver" would be sitting there mouth shut, hands on wheel, and hopefully not attracting any attention beyond the moving violation.
>local governments will increase the number and complexity of traffic laws until revenue is back to the expected level
creating a competitive advantage for least ticketed cars.
why wouldnt google just constantly update the software to comply with all applicable laws at all times? or Ford or Tesla
certainly Uber would have an interest in software that would follow all applicable laws, given the impression your robot driver getting pulled over would give to a passenger.
I expect eventually the software won't allow speeding when in autonomous modes. Why would it allow any illegal behavior? Stopping in the middle of the road at a green light? Turning right from the left hand lane? Driving without headlamps on 30 minutes after dusk, etc? These are all really rudimentary things to deal with in programming, simply disallow it. If you want to speed, you're on your own, minimal features like brake assist maybe still work. But making it possible for the car itself to break the law? I don't see it even in the medium term, and yes I'm aware the recent Tesla crash was speeding while Autopilot was on.
Pay per use becomes practical with the greater tracking granularity available. Driving on rainy days, hot days, cold days, heavier cars (trucks), all increase road wear. If we all paid the actual direct cost of driving, public transit and bikes would be a lot more popular in the U.S. (maybe everywhere).
Luckily the poors won't be able to afford to the new cars, so we can continue our campaign of oppression via infraction ticketing against them for quite some time.
The cost of owning a car (maintenance, financing, registration, license, insurance, tickets, parking, cleaning) will totally eclipse the cost of Lyft/Ubering a self-driving car, even (especially?) for the poor.
We're already to the point where if your commute is less than 8 miles or so, using Uber daily is cheaper than the cost of ownership on a $30k vehicle. Just imagine what self-driving cars will do to that equation.
I guess that's true. I'm not saying an 8-mile commute and a $30k car is where the line is either, though. That was just my situation roughly, and Uber wasn't a little less expensive, it was a LOT less expensive. Like, roughly 60% less expensive than owning the car when you factor in things like tread wear, depreciation, and the value of your time. And that's with no lease, no loan, and minimal insurance.
The true line right now (where car ownership becomes more expensive than Uber) based on my experience is probably closer to an 8-mile commute and a $15k car. That line gets much lower when you add in things like financing, overpriced insurance, and leasing, which do affect a majority of the population.
I should actually do a writeup about this. I have access to all my numbers on it but I've only ever done rough estimates (which were clear enough that choosing Uber/Lyft was obvious). Now I'm curious to see exactly how the costs compared.
Plenty of people in the valley also commute in a brand new M4, Tesla, Porsche GT3, etc. >$70k cars used for commuting might not be the norm, but look around some BigCo parking lots....I'm sure that the average is much higher than $30k depending on the company.
> We're already to the point where if your commute is less than 8 miles or so, using Uber daily is cheaper than the cost of ownership on a $30k vehicle. Just imagine what self-driving cars will do to that equation.
Which brings up the question: why the hell would anyone buy a $30k vehicle for 16 miles of commuting?! You can get a perfectly reliable car that's even reasonably safe and comfortable for regional road trips @ well under $10k, without even looking for sales or deals.
Until true driverless (no driver in vehicle, no insurance policy needed) happens, ownership will always be cheaper than daily taxi rides.
I did. I bought a LEAF for around $30K (minus $10K in government cheese) for a commute that's about 18 miles RT.
I did it because I wanted an electric car, and specifically a 2014 or later and there were very few 2014s for sale and those that were for sale were overpriced, IMO (in some cases, more than the net price of a new one).
Our other car is indeed a sub-$10K 2005 CR-V with 180+K miles on it.
Driverless cars are excellent witnesses of the behavior of other drivers. Speed, initiate an illegal lane change, roll through a stop sign, etc, and it wouldn't be a technological stretch for a driverless car to send a report to the police on your behavior. Police could even pay the owners of driverless cars that report bad behavior a reward, if one of their reports results in a ticket.
In a sense, the damage Uber and Lyft have already done to Taxis was a boon for them. They get some extra heads up that their industry is probably going to become defunct.
Yeah, good point, ships are pretty automated. But ships really do need crews for constant maintenance and supervision. You can put the helm on autopilot but that's about all it can do.
Now, let's talk about this again when someone makes a decent R2 unit.
Shipping is already tremendously automated. The remnants are most difficult, and the environment is difficult and has some particularly bad failure modes.
There are numerous tasks shipboard which aren't readily automated, and once you have one person aboard, you tend to need more (cooks, maintenance, multiple shifts, mechanics, etc.).
The reduction in employment in shipping since the 1950s, particularly relative to cargo handled, is already immense, much of that from containerisation though.
Local authorities will have to recoup costs via registration fees or maybe usage tax (miles driven times some decimal times an income bracket). Unless GM, Ford, Tesla, Google are going to maintain roads and pay for policing --although FB and co. could assess who have more perp risk and assess taxes accordingly...
Not sure how it would affect prices, but if driverless cars (let's call them autopilot-mobiles) take over the world, they may not be owned by individuals anyway, but instead bought as-needed from corporations (e.g. "Just $100 a month for the Commuter Plan".) This would shift insurance industry focus from insuring millions of individuals to thousands (or maybe only dozens) of corporations, so they could also save money on advertising. I will miss the gecko. And Flo (a little.)
And if it is dozens of corporations, there's no reason they wouldn't just absorb the insurance function. Right now because insurance is bought by consumers there's tremendous value in having a recognizable consumer-facing brand (Gecko & Flo). But if the car provider already has the ongoing consumer relationship, offering the insurance is a straightforward financial feature. Plus they'll be way more informed about the risk characteristics of their customers and vehicles. I don't see any remaining reason for separate auto insurance companies to exist if this version of car purchasing takes over individual ownership.
An improvement in safety is wonderful news. The public spending less money on insurance is wonderful news. All the individuals busy managing an auto insurance business have plenty of time to find a better use of their energy.
Isn't a healthy accident insurance industry a form of the broken window fallacy? There's a few people in my life I'd gladly have back and shrinking insurance companies would be a tiny price to pay.
I'd expect the WSJ to know better -- this article (while technically correct) miscategorizes how insurance works.
First of all, the article states that premiums will go down -- a reasonable, but not proven thesis. We don't know what will happen to insurance volume or prices, both of which go into calculating total premiums.
Secondly, the article doesn't really describe to readers how insurers make money -- almost no auto insurers make money directly on premiums. They make money on the float they get from premiums. Competition prevents most from making money on premiums directly, with some exceptions (GEICO, with the low cost sales model comes to mind). A reasonable assumption is that float will go down (again not proven), but we're also in an extremely low-interest-rate world right now -- something that's tough on insurers anyway.
But almost neither of these points matter.
Auto insurance is a required by most states (some states allow you to have a bond instead of insurance). It's mandated. These laws have to be repealed, and likely will remain intact for years while the transition to driverless cars happens. Similarly, liability and insurance will be required for malfunctions, tampering, and bugs.
IMO, P&C insurance, and specifically auto insurance's, imminent death has been greatly exaggerated.
I don't see insurance dying overnight, but if their cars are solely used in driverless mode[1] then it's in the manufacturers' interest to take on that risk directly: since they're ultimately liable for [virtually] all risks cars are compulsorily insured for[2] it makes sense to cut out the middle men and keep that float to themselves as well as streamlining the claims process. The ability to make mandatory insurance contingent on getting cars serviced expensively at approved dealers is a nice little bonus. So you get the mandatory insurance certificate with the car,[3] and a whole bunch of B2C auto brokers and insurers are left selling policies which are entirely optional and which consumers consider much more unlikely to be claimed on
Sure, some parts of the industry (Lloyds reinsurance syndicates underwriting the portion of the manufacturers' liability they're not willing to self-insure, which is probably the idiosyncratic risk of a negligence claim over software updates) still exist, but all those B2C players are fighting for a much smaller share of the pie which continues to decline as more people switch to exclusively driverless cars and they don't really get stolen any more.
[1]I think this is a very big if in the foreseeable future, but it seems to be assumed by the article.
[2]there's still a market for insurance against vandalism, fires not caused by the car itself and [to a much more limited than before extent] theft, but that's probably not compulsory in most jurisdictions and so a much tougher sell for the insurance companies.
[3] they could even build in the annual policy renewal fee for the design life of the vehicle into the purchase price if they really wanted to. I'm also assuming here that there's no legal impediment to individuals' motor liabilities being underwritten by a division of the vehicle's manufacturers in most jurisdictions.
Another thing that's going to take a huge it is police departments. Many of the initial encounters with police are by way of a traffic stop and patrol. With a self-driving car, there's no longer "probable cause" because the car is driving itself. This will cut off a huge source of income from the police and at the same time reduce the need to have so many police, which, in my mind, is a good thing. Expect entire highway patrol and regional agencies to be shuttered.
Still think there will still be a market for old school non automated cars. For the hobbyist or pleasure drivers on weekends. People still love their cars.
Insurance is a field in need of some disruption, regardless. A few numbers, in case people find it interesting.
The average insurance company only pays out about 50% of its income as loss (heavily dependent on sector, but for auto it's about right). For auto, they all use more or less the same ISO policy docs. They mostly all use the same call centers. Their adjustors are usually shared. Honestly, the only thing that really changes is the marketing.
Which is why 30%+ of every dollar you pay them goes to marketing. For auto, they are in this weird local maxima where 40% is loss, 30% is marketing, and 30% is profit. They expect to keep a customer for about 2-3 years, and then have to repeat the whole process. It is really sad.
just like universal unbreakable glass might hurt glaziers.
just like getting people to commit less crimes might hurt for profit prisons.
just like people not getting attacked might hurt self-defense courses.
I realize this is perfect-world absolutist thinking but industries that exist because of something wrong in the world shouldn't have a right to exist when that wrong is removed.
Great quote. I call it corruption, self-preservation that hurts the masses, and status quo thinking. Technology is going to hopefully disrupt all of this.
It's the only thing that can, if history is any guide. Society and "ethics" are so often a function of our technology, however simple we now consider that tech to be.
I can't say that it isn't apocryphal, but the worst example I've ever heard of this was an ambulance-driver's union campaigning against a law that was expected to reduce accidents... As I say, I don't know if it was true or not. I hope not!
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[ 2.9 ms ] story [ 183 ms ] threadInterestingly, that is not true for insurance companies[0], at least at the federal level. They are exempt from a lot of federal law.
>The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, also known as Public Law 15,[1] is a United States federal law that exempts the business of insurance from most federal regulation, including federal antitrust laws to a limited extent.
[0]https://en.wikipedia.org/wiki/McCarran%E2%80%93Ferguson_Act
I'm curious if we could see a future where the car manufacturers provide insurance for their product, and you would buy a combined hardware/software/updates/insurance subscription package from a manufacturer. It seems like the inevitable conclusion of all the debate around who's ultimately responsible for the actions a self-driving car takes.
I have a hard time reconciling these two sentences. In the first, you sound like a passionate advocate of the free market. In the second, you act as though you have never heard of such a thing.
N.b. Personally, I am much happier knowing that (almost) all the people potentially plowing into me on the highway carry insurance.
>N.b. Personally, I am much happier knowing that (almost) all the people potentially plowing into me on the highway carry insurance.
Do you live in the US? Where 1 in 7 drivers are uninsured?
So the claim boils boils down to, people don't know how to shop around for auto insurance? Forgive me for scoffing.
And 1 in 7 is a lot lower than it would be otherwise.
[0]https://en.wikipedia.org/wiki/McCarran%E2%80%93Ferguson_Act
That sounds like it comes from the same people who make any speeding offense on par with DUI and having an at fault accident in most points based systems. One in seven people with a license not having insurance I can see (because they might not have a vehicle) but one in seven vehicle/driver pairs on the road not being insured for that combination seems very high without monkeying around with the statistics.
[0] http://www.iii.org/fact-statistic/uninsured-motorists
My girlfriend isn't on my policy because she never drives my truck. Likewise the vast majority of the time I drive her car it's something along the lines of repositioning vehicles in the driveway. If I were to get in an accident in her car chances are there'd be a bunch of fighting with insurance but our insurance (same company, different policies) would probably wind up paying. Would I count as an uninsured motorist in that hypothetical situation? III has a very obvious incentive to portray insurance as something worth having as opposed to a waste of money (which it will be for most people who don't get into a situation involving medical or large amounts of property damage). I think they'd consider me uninsured in that situation.
Reporting rates also have an effect. There's a much higher reporting rate for small accidents with a single uninsured party than for similar accidents in which both parties are insured. If one party is insured it's in that parties interest to maximize documentation unless it's undeniably their fault. If both parties are insured then it's much murkier, damage amount, deductibles, who's at fault, etc, etc. come into play and if the dollar amount is relatively low it's often more faster and cheaper for them to settle the matter without insurance company involvement. Basically, if someone without insurance gets in a parking lot accident the vast majority of people will report it whereas that's not necessarily the case when both parties are insured.
This holds for my outdated one in seven number and the new 12.6% that GP linked.
Where do you live? While most people are legally required to the penalties for not carrying it are so weak where Im at a lot of people do not.
Actually, in California, the government does not. You must have either a certain specified minimum level of insurance or a post a specified minimum surety bond.
This becomes absurd with self-driving cars. There are three types of collisions with human-driven cars:
1. Those caused by driver negligence.
2. Those caused by the owner failing to properly maintain their vehicle.
3. Those caused by a manufacturing defect.
With self-driving cars, the first one is impossible. A car that follows the law to the letter is by definition never at fault in a collision. The second one is still possible, but probably less likely. The car can take itself to the shop without your intervention, and I expect manufacturers would have it refuse to drive itself if you're too far off the maintenance schedule. The third category will now include bugs in the driving software, so the rate of collisions that fall under option 3 is likely to go up a bit.
Option 3 means that the manufacturer is liable, not the owner of the car. Since this encompasses the vast majority of self-driving car collisions, personal liability will no longer be truly necessary like it is today.
You can still be "at fault" even if you followed the law in a collision. Laws - particularly driving laws - are not always black and white.
That has the side effect of requiring the typical person to buy insurance, as they can't afford the alternate means of establishing it.
Do you think that's somehow unreasonable? What standard would you prefer for determining when an activity should require such advance indemnification, and how does "driving a car" fail that?
Edit: Sorry if you just meant to make the bland, neutral point that more casualties -> more insurance revenue -> more insurance profit, but your tone suggested you think it's an unfair subsidy somehow.
[1] It varies, but here's California's form for alternately proving responsibility, which only requires you put up a bond of $35k, which IMHO is ridiculously low considering how much you could fairly be held liable for. I guess the logic is that "if you don't mind setting aside that much money, you must have enough seize-able assets in case you harm someone"? https://www.dmv.ca.gov/portal/wcm/connect/3a81272a-0834-43b6...
In fact, profitability would probably go up on these policies initially since the safety benefit would be immediate, but the implied risk in the policies would only come down over time as the safety works it's way into statistics.
(Apologies if I'm not using correct terms. Not an actuary.)
From the insurance company's perspective, they need enough of a capital reserve to mitigate the risk of a sudden shock in payouts. Spreading across larger geographic areas mitigates that risk somewhat, as does spreading through multiple businesses. Auto insurance is probably a particularly nice gig since it's relatively unaffected by things like natural disasters and would have a relatively smooth cashflow.
So, less capital from auto insurance means more capital has to come from somewhere else - more borrowing, if nothing else. That probably translates into either reduced profitability, or higher premiums on other kinds of insurance.
I'm not an actuary by any means, but that's my guess.
If so, why is it bad for it to disappear again?
Can't read the full article, since wsj have a competently implemented "To Read the Full Story, Subscribe or Sign In" shield.
Off the top of my head I can think of insurance products and the futures market.
But if you can find citations that will be very helpful for me!
A good quote I found: insurance transfers risks that already existed; gambling creates risk for entertainment.
Think "why am I more comfortable with gambling because my state mandates I pay it" and think about what circumstances led to that, and then think about what prompted you to care at all.
You're probably thinking about racketeering, but unless you actually believe your home insurer will set fire to your house if you don't buy fire insurance, the comparison probably isn't apt.
There have been a handful of religious communities, like the Mennonites, that don't believe in commercial insurance, but they instead have a community that will step in and help when something happens to one of its members. So it's still a form of insurance, they just don't use money.
[1] https://en.wikipedia.org/wiki/Protection_racket
What you may have refered to is a particular ruling that insurance contracts are not commercial contracts, but that has been overturned.
That's going to decline significantly once driverless cars are scrupulously following the rules of the road. And any tickets that get written will be going against a giant corporation like Google, with detailed information about what the car was doing at the time of the supposed infraction, a lot more financial ability to fight the ticket, and a lot more incentive to protect their reputation.
Such as keeping your car in a minimum condition. Or having legacy system support. It needs to get patches to update to newer network types.
Completely unattended driving (enter destination and taking a nap) is still up for debate. Requiring a machine to be watched seems like a pretty easy-to-pass regulation.
Current traffic laws are written for human drivers. If there are robotic drivers on the road other traffic laws will be passed for those.
Requiring a human to watch implies a means for the human to intervene and take over. Having a human second-guess the machine will increase accidents. And having the controls available for the human to do so will increase complexity and decrease reliability.
Driverless cars will probably not be magic pods that whisk you around. It's still a vehicle that needs to navigate terrain. And roads are not perfect everywhere.
Yes. I regularly fly in planes, which I have no control over, and which spend most of their time on autopilot. I also regularly deal with machines that do their jobs far better than I could, and I feel no desire to take over and do those jobs worse. Why should that answer change when the stakes get higher and the cost of a mistake goes up?
(That doesn't mean I want to beta-test an experimental driverless car; it does mean I'm eager for a non-experimental one.)
> But people will still want to intervene when it doing something dumb like driving into a pond, or gets stuck on a median and cannot figure out how to get off.
A vehicle that did any of those things would be considered broken in a deadly way. The solution isn't to hand people broken vehicles that they sometimes need to take over from; the solution is to not call a car driverless until it handles those situations (generally by not getting into such situations in the first place).
> Driverless cars will probably not be magic pods that whisk you around.
Yet.
Those planes with their auto-pilot system still have a means for the pilots to intervene. That's not quite the same as being in a vehicle for which no human has the possibility of intervening. (It's also a bit disingenuous to imply that it is.)
Some accidents also occur specifically when pilots ignore/override the automatic systems; I'd be interested to see statistics on that, too, but I haven't found any.
"What's it doing now?" is a common question in the industry, and the subject of this excellent American Airlines training seminar video: https://www.youtube.com/watch?v=pN41LvuSz10&t=21m41s
(The whole video is good, but that's the specific automation confusion question.)
Aircraft operate in essentially empty space, and barring major mechanical failure the pilots typically have tens of seconds up to many minutes to act to avoid disaster. In a car you often have less than a second to react, and certainly never more than 4-5.
Aircraft hardware and software is tested, retested, tested again, and certified. Auto hardware and software is pushed out the door with reckless disregard for reliability.
There is really no comparison.
Yes, it would almost definitely be safer than a lot of drivers I've been in the car with, if not all of them. And it's be far less nerve-wracking than with some drivers.
Do you ever ride in taxis? Or as a passenger in any car? How is that situation any different?
edit: source that I haven't read, but there are numerous sources from a simple web-search: http://www.illinoisherald.com/articles/2014/q4/chicago-red-l...
They also save pedestrian and motorist lives.
Also, as the other commenter said, the laws will adapt. The purpose of traffic laws is to maintain $X level of revenue, so if revenue starts to drop, local governments will increase the number and complexity of traffic laws until revenue is back to the expected level.
Even if local governments tried to increase the complexity of traffic laws, the fleet owners would increase spending on fighting tickets; this would result in an arms race which would be costly for the local government. It's much easier to extract rent from the little guys.
The worry I have is of increased enforcement of local non-traffic laws to make up revenue.
If the car is already driving, why should a a passenger know which rule the car was following at the time an officer said a moving violation occurred.
The concierge could access the car's driving records on the fly and provide specific reference to traffic laws at that specific jurisdiction. The officer and the concierge could hash out the entire interaction roadside and it could recorded.
Meanwhile, the passenger/"driver" would be sitting there mouth shut, hands on wheel, and hopefully not attracting any attention beyond the moving violation.
creating a competitive advantage for least ticketed cars.
why wouldnt google just constantly update the software to comply with all applicable laws at all times? or Ford or Tesla
certainly Uber would have an interest in software that would follow all applicable laws, given the impression your robot driver getting pulled over would give to a passenger.
We're already to the point where if your commute is less than 8 miles or so, using Uber daily is cheaper than the cost of ownership on a $30k vehicle. Just imagine what self-driving cars will do to that equation.
The true line right now (where car ownership becomes more expensive than Uber) based on my experience is probably closer to an 8-mile commute and a $15k car. That line gets much lower when you add in things like financing, overpriced insurance, and leasing, which do affect a majority of the population.
I should actually do a writeup about this. I have access to all my numbers on it but I've only ever done rough estimates (which were clear enough that choosing Uber/Lyft was obvious). Now I'm curious to see exactly how the costs compared.
Which brings up the question: why the hell would anyone buy a $30k vehicle for 16 miles of commuting?! You can get a perfectly reliable car that's even reasonably safe and comfortable for regional road trips @ well under $10k, without even looking for sales or deals.
Until true driverless (no driver in vehicle, no insurance policy needed) happens, ownership will always be cheaper than daily taxi rides.
I did it because I wanted an electric car, and specifically a 2014 or later and there were very few 2014s for sale and those that were for sale were overpriced, IMO (in some cases, more than the net price of a new one).
Our other car is indeed a sub-$10K 2005 CR-V with 180+K miles on it.
Getting rid of drivers is a high priority for that industry. Human drivers are expensive and they can only drive 70 hours a week. [1]
Oh, and Uber is dying to get rid of all its drivers too. [2]
1. https://www.transportation.gov/briefing-room/new-hours-servi...
2. http://sanfrancisco.cbslocal.com/2015/01/27/how-ubers-autono...
Now, let's talk about this again when someone makes a decent R2 unit.
There are numerous tasks shipboard which aren't readily automated, and once you have one person aboard, you tend to need more (cooks, maintenance, multiple shifts, mechanics, etc.).
The reduction in employment in shipping since the 1950s, particularly relative to cargo handled, is already immense, much of that from containerisation though.
First of all, the article states that premiums will go down -- a reasonable, but not proven thesis. We don't know what will happen to insurance volume or prices, both of which go into calculating total premiums.
Secondly, the article doesn't really describe to readers how insurers make money -- almost no auto insurers make money directly on premiums. They make money on the float they get from premiums. Competition prevents most from making money on premiums directly, with some exceptions (GEICO, with the low cost sales model comes to mind). A reasonable assumption is that float will go down (again not proven), but we're also in an extremely low-interest-rate world right now -- something that's tough on insurers anyway.
But almost neither of these points matter.
Auto insurance is a required by most states (some states allow you to have a bond instead of insurance). It's mandated. These laws have to be repealed, and likely will remain intact for years while the transition to driverless cars happens. Similarly, liability and insurance will be required for malfunctions, tampering, and bugs.
IMO, P&C insurance, and specifically auto insurance's, imminent death has been greatly exaggerated.
Sure, some parts of the industry (Lloyds reinsurance syndicates underwriting the portion of the manufacturers' liability they're not willing to self-insure, which is probably the idiosyncratic risk of a negligence claim over software updates) still exist, but all those B2C players are fighting for a much smaller share of the pie which continues to decline as more people switch to exclusively driverless cars and they don't really get stolen any more.
[1]I think this is a very big if in the foreseeable future, but it seems to be assumed by the article.
[2]there's still a market for insurance against vandalism, fires not caused by the car itself and [to a much more limited than before extent] theft, but that's probably not compulsory in most jurisdictions and so a much tougher sell for the insurance companies.
[3] they could even build in the annual policy renewal fee for the design life of the vehicle into the purchase price if they really wanted to. I'm also assuming here that there's no legal impediment to individuals' motor liabilities being underwritten by a division of the vehicle's manufacturers in most jurisdictions.
The average insurance company only pays out about 50% of its income as loss (heavily dependent on sector, but for auto it's about right). For auto, they all use more or less the same ISO policy docs. They mostly all use the same call centers. Their adjustors are usually shared. Honestly, the only thing that really changes is the marketing.
Which is why 30%+ of every dollar you pay them goes to marketing. For auto, they are in this weird local maxima where 40% is loss, 30% is marketing, and 30% is profit. They expect to keep a customer for about 2-3 years, and then have to repeat the whole process. It is really sad.
just like universal unbreakable glass might hurt glaziers.
just like getting people to commit less crimes might hurt for profit prisons.
just like people not getting attacked might hurt self-defense courses.
I realize this is perfect-world absolutist thinking but industries that exist because of something wrong in the world shouldn't have a right to exist when that wrong is removed.
Naw, they just lobby for new reasons to lock people up.