More autonomous vehicles are hitting the road, and it’s leading to a reassessment of insurance costs and coverage, as well as who is to blame for fender benders and crashes. The $432 billion insurance industry must adapt to more self-driving cars ostensibly leading to fewer human-caused accidents, according to a Goldman Sachs analyst note sent to investors on Monday.
“Autonomy has the potential to significantly reduce accident frequency longer-term and reshape the underlying claim cost distribution and legal liability for accidents,” analyst Mark Delaney and colleagues said in the note.
Goldman Sachs estimates the ride-share market of autonomous vehicles will reach $7 billion—about 8% of the market—by 2030, while trucks with virtual drivers will grow to a $5 billion industry in the same time frame. While there may be increased ubiquity of self-driving cars as ride-share vehicles, Goldman Sachs does not expect to see a significant increase in autonomous vehicles as personal cars in the near future, but said it expects costs associated with the vehicles to fall.
Goldman Sachs predicts insurance costs will decrease more than 50% over the next 15 years, from around $0.50 per mile in 2025 to $0.23 in 2040.
But Scott Holeman, director of media relations at the Insurance Information Institute, warns that just because insurance costs are cut doesn’t mean consumers will be padding their wallets.
“While there could be lower cost on insurance products, this technology costs money, so there’s a shift in where you pay the money,” Holeman told Fortune.
Because of the potential for fewer accidents, Goldman Sachs predicts, auto insurance will shift insurance products to being more focused on severity of an accident and less about accident frequency. The shift also raises questions of who is liable for accidents.
“It’s possible that the legal liability of accidents may shift, potentially changing the underlying claim costs distributions between physical damage and liability coverages as well,” the note said.
Analysts suggested an increased focus from the insurance pool on product liability and cyber coverage. Instead of human error causing most car accidents, technology woes may be responsible for crashes as a result of data or security breaches. That shifts the onus from the driver to the manufacturer or the technology company partnering with the manufacturer.
“There’s more and more concern for cyber threats or security risks that someone could manipulate vehicles—bad actors,” Holeman said.
“Just like any commercial entity, we have insurance coverage in place that covers the Waymo driver over the course of the driving task,” Gode said. “Essentially, there’s a shift from human being drivers to the autonomous system being the driver—Waymo is the driver.”
