Will Self-Driving Cars Actually Lower Your Auto Insurance Premium?

Self-driving cars could lower your car insurance premiums by making it easier to file an accident claim. At least that’s the theory being advanced by Casey P. Mulligan, an economics professor at the University of Chicago in The New York Times’ Economix Blog.

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Mulligan’s theory is that robot cars, such as those being tested by Google, don’t get tired, distracted, or drunk, the three biggest causes of auto accidents. If he’s right, the more self-driving vehicles on the road, the fewer accidents there will be.

It’ll also be easier to file and settle insurance claims involving robotic cars. All adjustors and courts would need to do to learn the cause of an accident is to check the computer in the car. They will be able to determine the speed, driving conditions, maintenance, and other factors that might lead to a crash.

Even if the computer is destroyed, it might feed that information onto the cloud via WiFi. Telematics devices already do about the same thing, and they can already lower drivers’ premiums. Real information about accidents and driving habits could become available, which makes it easier for insurers to give good drivers a break.

This might be bad news for personal injury attorneys who make their money off the inability to determine what really happened in an accident. Such lawyers love it when two or three witnesses argue about what really happened in an accident.

A big advantage to self-driving vehicles is that they could be equipped with digital cameras to record what happens on the road. That, of course, raises serious privacy concerns, which will scare many people, even if it makes the job of traffic cops and insurance adjustors much easier.

Will Self Driving Cars Really be Safer?

There are some interesting problems with self-driving cars, some of which Mulligan points out. He believes that the superior safety and performance of self-driving cars could lead states to raise the speed limit, which could lead to more accidents.


There are also serious liability issues involved. If the electronics in a self-driving car fails, who’s at fault? Is it the driver, the automaker, the company that made the software, or the electronics company?

Nor is superior safety guaranteed. The number of recalls of automobiles for defects has been increasing in recent years. Companies like General Motors and Toyota have shown they cannot make things like floormats and ignition systems that are safe. Will they be able to make a complex electronics system that operates properly?

We must also remember that self-driving cars have only been around for a few years. The real world tests on them have actually been quite limited. We really don’t know if such vehicles will perform in real world conditions of extreme weather, lousy roads, and bad driving.

Nor do we do know what their long-term performance will be. Many people don’t maintain their cars, change the oil, or buy new tires until they get a flat, and they drive around in heavily damaged vehicles.

A self-driving car might give a flawless performance when it leaves the showroom. How will it operate after a few years on roads full of potholes?

My guess is that there are still a lot of bugs to be worked out of self-driving cars before they deliver a flawless performance, increase safety, and lower insurance premiums that people like Mulligan are promising. It took 20 years to get Hybrids to a point where they are a viable alternative for average people.

Therefore, we probably won’t see the biggest benefits from self-driving cars for 15-20 years. There will be increasing numbers of them on the roads, but it will take years to learn their limitations and capabilities.