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Self-driving Cars a Sure Bet — Just Ask Insurance Companies

Self-driving Cars a Sure Bet — Just Ask Insurance Companies

In this Jan. 12, 2017, photo, the Navya Arma autonomous vehicle drives down a street in Las Vegas. The driverless electric shuttle has begun carrying passengers in a test program in a downtown Las Vegas entertainment district. (AP Photo/John Locher)

By    |   Tuesday, 17 January 2017 02:08 PM EST

There are very few sure things in the tech world, but the self-driving car is a slam-dunk certainty. We know that every automaker is working on it, but it was really driven home to me (no pun intended) recently while talking to a colleague at one of the largest insurance companies in the country. They’re scrambling for ways to uncover new revenue sources unrelated to cars. Why?

"All our planning is wrapped around automobile-related revenues being down by 50 percent at the end of ten years," he said. "The self-driving car is going to eat us alive: Fewer people will be buying insurance, and those that do will be paying smaller premiums."

Are they overreacting? Are their actuaries fantasizing a Buck Rogers future full of personal jet packs and food synthesizers?

If you know any actuaries, you know that these are serious people not given to flights of fancy. They’ve taken a hard, sober look at the technology and the industry and come to the conclusion that autonomous cars will be a reality well ahead of what had been predicted a scant five years ago.

What makes them so sure? I don’t know for sure — they tend to play their prognostications pretty close to the chest, for competitive reasons — but here’s what I think:

• The implications for safety are enormous. In 1972, nearly as many Americans were killed in traffic accidents (55,000) than died during the entire Vietnam War (58,000). By 2014, the number had plummeted to fewer than 33,000, despite vastly larger numbers of vehicles on the road and total miles driven. The reasons were many, including safer cars, improvements in traffic control technology, and a crackdown on drunk driving. Still, that’s 90 Americans dying on our roads every single day. (Lose that many in a single airplane crash and it’s news for a week, but we don’t pay much attention to traffic deaths.) Personal grief aside, and including the hundreds of thousands who survive but are maimed, the economic cost comes precipitously close to a trillion dollars annually.

Now imagine that number dropping to near zero. That alone makes the autonomous car irresistible. And if that’s still not enough to convince you, consider that traffic fatalities have risen dramatically over the last two years, owing to increasing drug usage and "distracted driving" (i.e., jacka**** who text while driving and virtual non-enforcement of those infractions).

• How you feel about safety doesn’t matter: You may think you’ve got a lot of personal freedom when it comes to your car, but you no longer get to make your own decisions about safety. The days of people sitting defiantly (and stupidly) on top of their seatbelts are over. You don’t get to decide about motorcycle helmets, either, or air bags, or collapsible steering wheels, or any of a hundred other safety features that are mandated by the federal government. If you want to kill yourself by being stupid, fine. But you shouldn’t be allowed to kill your passengers, and if you end up as the mental equivalent of a rutabaga after going through your windshield, it’s the rest of us who are probably going to foot the bill. That’s why your opinion doesn’t count. Traffic deaths didn’t drop by 40 percent because of voluntary decisions about safety, and if the autonomous car can reduce the number even further, you’re not going to have much of a choice about that, either, because the insurance for a traditional car is going to be unaffordable — probably far more expensive than the car itself.

• Reduced oil consumption: Mitigating our dependency on foreign fossil fuels is not only good economic policy; it’s also crucial to national security. The interplay between oil and homeland security is a complex one, but the basic idea is that this dependence forces us to be friends with people we really shouldn’t be friendly with. Cars that drive themselves are not only going to do it more economically, they’re going to lead to fewer privately owned cars. Imagine a million self-driving Uber cars on the road, with a typical "time to arrive" of 5-7 minutes. Sound like an expensive proposition for users? Let’s say you finance a $20,000 car for five years, put 500 gallons a year into the tank, pay $1,000 a year for insurance, and another $1,000 a year for general maintenance after the warranty expires. Not owning that car will give you about $170 a week to spend on driverless taxi rides, which makes the trade-off a no-brainer.

That last bit is why the insurance companies are running so scared. Even if you want the "freedom" of owning a car, or having one for longer trips, you can have just one in the family instead of two or three. Or rent one, which will probably be driverless, too.

The federal government recently announced a draft set of regulations concerning self-driving cars, the first sign that Washington is betting seriously on this technology. (Here is TechCrunch’s take on the fed’s proposed guidelines.) There is no surer indication that something is real than the government wanting to regulate it.

Like I said: Best get used to. You’re either on the (driverless) bus, or you’re nowhere.

Lee Gruenfeld is a Principal with the TechPar Group in New York, a boutique consulting firm consisting exclusively of former C-level executives and "Big Four" partners. He was Vice President of Strategic Initiatives for, Senior Vice President and General Manager of a SaaS division he created for a technology company in Las Vegas, national head of professional services for computing pioneer Tymshare, and a Partner in the management consulting practice of Deloitte in New York and Los Angeles. Lee is also the award-winning author of fourteen critically-acclaimed, best-selling works of fiction and non-fiction. For more of his reports — Click Here Now.

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There are very few sure things in the tech world, but the self-driving car is a slam-dunk certainty.
self driving car, autonomous vehicle, insurance, safety
Tuesday, 17 January 2017 02:08 PM
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