Berkshire Hathaway Chairman, CEO and all-around insurance mogul Warren Buffett isn’t confident in the future of GEICO and other auto insurers if self-driving cars hit the road.
During an appearance on CNBC Monday morning, Buffett spoke about the future of autonomous driving and its impact on the insurance industry. When asked if auto carriers would be in trouble in the advent of driverless cars, he had this to say:
“I think the answer is yes. There’s no question. Anything that makes cars safer is very pro-social, and it’s bad for the auto insurance industry…if there are no accidents, then no need for insurance. And I think there will be a big reduction in accidents over a longer period of time. And of course, there already has – cars have been made way, way safer, but now when you start making the driver safer, that would be a big, big jump, and that will happen someday, and when it happens there will be a lot less auto insurance written.”
Buffett has made similar comments in the past, most notably at Berkshire’s annual meeting in 2014. He did make one caveat, though: he doesn’t think self-driving cars will be on the road any time soon.
“I think it’s a long way off,” he said.
And judging by the number of crashes Google cars and other self-driving vehicles have recorded, he may be right. In January, Google said drivers had to intervene to stop the cars from crashing on California roads 13 times between September 2013 and November 2015.
A similar report from Nissan shows drivers had to intervene 106 times in 1,485 miles of test, and Volkswagen reported that drivers intervened 260 times in 14,945 miles.
Until these kinks are worked out, it is unlikely that driverless cars will be on the road in large enough numbers to disrupt the auto insurance industry.
Still, transportation is evolving and Buffett is hardly the only industry leader to foresee the consequences of autonomous driving.
In February, Allstate addressed the phenomenon and admitted it doesn’t know how it would survive a widespread proliferation of driverless cars.
“Driverless cars or technologies that facilitate ride or home sharing, could disrupt the demand for our products from current customers, create coverage issues or impact the frequency or severity of losses, and we may not be able to respond effectively,” the company said in its 2015 report.
Indeed, few carriers have taken action on the potential disruption, according to a survey from KPMG. That’s not because they doubt the possible ramifications, though – like Buffett, they believe the change will happen far into the future, if at all.
The survey found that 84% of executives don’t expect autonomous vehicles to have a significant impact on their businesses until 2025 while 42% expect a significant impact in 6-10 years.
Many executives also believed the government would slow the introduction of autonomous vehicles, which KPMG says may explain why the insurance executives see a more distant effect on their business.
However, the views were not in line with KPMG’s own stance, with the report’s authors stating that change would happen faster than most in the insurance industry think.
“No one has a crystal ball that can predict the future, but we are convinced that a period of unprecedented change has begun,” Jerry Albright, principal in KPMG’s Actuarial and Insurance Risk practice said.
“The disruption of autonomous vehicles to the entire automotive ecosystem will be profound.”