Influential council predicts car manufacturers will decimate auto insurance commissions

A member of the influential Forbes Technology Council has made a bold prediction: self-driving car manufacturers (SDCMs) will take the auto insurance industry by storm.

Bernard Fraenkel, practice lead for the enterprise business of Silicon Valley Software Group and a member of the Technology Council, published an opinion piece on Forbes that foresees SDCMs taking a more active role in providing insurance to their customers.

According to Fraenkel, SDCMs have a number of good incentives to join the auto insurance market

They are primarily motivated to remove one of the biggest barriers to adopting self-driving cars – the cost and availability of auto insurance. Traditional car insurers cannot simply offer insurance for self-driving cars without proper accident/fatality statistics, and even those companies brave enough to offer such a product might set high initial costs, Fraenkel explained.

On the other hand, SDCMs are well-positioned to provide auto insurance to their customers, since they already have the data at hand.

“SDCMs have data centers full of data not only about accidents but also about near misses,” Fraenkel said. “This means they can generate accurate statistics about accidents of their own cars as often as they want and thus estimate the cost to insure their cars.”

Other factors Fraenkel mentioned in his Forbes piece that could motivate SDCMs to offer insurance include:

• SDCMs offering their own insurance will project confidence in their product, which could be a major selling point for customers.
• Manufacturers can eliminate “one painful step” in the car purchase process by including car insurance with their self-driving vehicles.
• Pricing for self-driving cars will be “greatly simplified,” since there will no longer be a human variable in the equation. This means the price of insurance will be determined solely on the hardware and software of the car, regardless of the human passenger’s driving history.
• SDCMs offering their own insurance could “radically drive down the cost of car insurance and make car ownership more affordable,” expanding the market further.
• Each time an SDCM updates its autonomous driving system to be much safer, the cost of its insurance offering could drop as well.

While Fraenkel believes in a bright future for SDCM-provided car insurance, he does not think traditional auto insurance will be gone for good.

“Auto insurance will not disappear, because self-driving cars, won’t eliminate all accidents,” he remarked, adding that liability will no longer be in the hands of consumers but in “robot-taxi” companies or SDCMs instead.

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