00:02 Allie
The average cost of auto insurance in the US tops $2,600 a year according to Bankrate.
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One thing that could eventually bring those costs down, self-driving cars.
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The Insurance Information Institute says if autonomous technology cuts the number and severity of accidents, premiums will likely follow.
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Right now, driverless robotaxis operate in five US cities, and many new vehicles already come with features like automatic emergency braking and lane centering assistance.
00:37 Allie
Insurance does cover vehicles with partial automation, like Tesla’s autopilot, while robotaxis fall under commercial insurance.
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But there still aren’t any fully autonomous cars available to consumers, and experts say it could take decades before most vehicles on the road are driverless.
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In fact, only about 4% of new personal cars sold by 2035 are expected to be autonomous.
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Research backs up the safety case. The Insurance Institute for Highway Safety finds that automatic emergency braking reduces rear-end crashes by nearly 50%.
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Fewer severe accidents mean fewer costly claims. But the IIHS also warns that partially automated systems, combining adaptive cruise control with lane centering for hands-free driving, haven’t yet delivered clear safety benefits and raise concerns about drivers over-relying on them.
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That said, progress is happening. Waymo reports its robotaxis had 78% fewer injury crashes and 79% fewer airbag deployment crashes than the average human driver in the same cities.
02:00 Allie
Goldman Sachs analysts call those numbers encouraging, projecting commercial insurance costs for robotaxis could drop from 50 cents a mile today to about 23 cents by 2040.
02:14 Allie
And you can scan the QR code below to learn more about self-driving and insurance.
02:22 Allie
So, with safety features advancing and robotaxis already on the roads in several cities, what does all of this mean for the future of your insurance bill and the timeline for real change?
02:35 Allie
Joining me now is Michelle Leonard, Insurance Information Institute Chief Economist. So Michelle, everyday drivers are worried about rising premiums. Beyond some of that long-term automation, what’s the near-term outlook here for auto insurance costs?
02:54 Michelle Leonard
Well, the first thing to know, hi, Allie, by the way. It’s nice to be here. Thanks for having me. The first thing to know is that we’ve had multiple years of increases in uh personal auto insurance. And those that was mostly driven by the rising cost, especially during the pandemic, of labor and now with tariffs of parts as well.
03:20 Michelle Leonard
So that’s that’s been where how we got here. Now, if we’re looking forward, uh those multiple year after year increases are expected to stabilize. So that’s the first good news that in terms of where we’ve come from, consumers, homeowners, household should not expect to continue to have the same multi-year increases.
03:52 Allie
Now, consumers, many of them out there don’t trust self-driving tech yet. So could that lack of adoption force these premiums to go higher?
04:06 Michelle Leonard
Well, that’s a very good point. The issue with self-driving and assisted driving is that we’re all learning about it. I took my car driving up to Canada and, uh, it was new and I I was waiting for it. I just got a new car and I’m still not comfortable with it. So, indeed, what our sister organization, for example, IIHS has determined is that a lot of these these cases, one can be distracted and they can cause accident.
04:36 Michelle Leonard
But, Allie, we need to think about once we’ve gotten through this learning period, we’re going to be indeed in that much safer environment and those statistics that you’ve mentioned in terms of reduction of accidents, collisions, and so forth, are going to start kicking in.
04:50 Allie
So let’s talk about those types of accidents. What what categories of accidents could nearly disappear if we do see real improvements on that side of autonomous tech driving?
05:05 Michelle Leonard
Well, regretfully, I don’t think we’re talking about categories entirely disappearing. Uh, what we’re going to be seeing though is a shift of some of these collisions and so forth. Not only that will there be a reduction, but they’re going to shift from personal lines to commercial lines. You know, Allie, the these fully auten auten these fully automated vehicles are going to be the private jets of the auto industry, and regular consumers, households won’t necessarily be able to afford them at least for the foreseeable future.
05:43 Michelle Leonard
So what again, we’re seeing is that the way personal policy policy holders will benefit is that a lot of those claims collision are going to move to the commercial side.
05:50 Allie
And would premiums drop right away or would we need years and years of accident data in order to factor into the costs that consumers pay?
06:01 Michelle Leonard
Well, you know, our our premium and our ability to to change those premium is highly regulated, and and that’s a good thing. And they’re regulated at the state level. So the first thing to say is that it’s going to vary depending on the state and the regulators in those states’ comfort with the data. We need more data. You were mentioning that fully automated vehicles are available uh in different cities. I drove a Waymo car uh recently in Arizona and it was quite an experience, I have to say. I definitely wasn’t ready for that.
06:33 Michelle Leonard
Uh, but the the we need to demonstrate, as you’re pointing out, Allie, as you’re discussing, Allie, multi-year trends in that regard. And and that is what it is. It’s going to take a little while before we get to that point.
06:50 Allie
Yeah, I’ve yet to drive in a Waymo or any other self-driving vehicle, but I am curious to see what that experience would be like. But I have been thinking, if you do have an accident, who ultimately pays for that? Is it the driver? Is it the software? Where does that liability fall?
07:12 Michelle Leonard
Well, the first thing that your audience must know is that it’s not the passenger. So they don’t have to worry about getting into one of those cars. Uh, it will be on most likely a commercial policy and it will be the owner of the car, the entity, the corporate probably entity that owns the cars that will be responsible for that.
07:31 Allie
And how about on the legislation side? What are regulators thinking and and have there been any movements on that in D.C.?
07:44 Michelle Leonard
Well, remember, we’re regulated at the state level. Uh, of course, we work closely with federal regulators, but our our as opposed to banks, for example, we’re regulated at the state level, and regulators are really partners in this. You know, many years ago when these these uh concepts were first discussed, insurance could have said, hey, we’re not comfortable with that at all, even though the data says this said that there are improvements and regulators could have been very uncomfortable with it. And I think what we’ve seen is a a partnership between carriers, insurers, and regulators to make sure that prudently we’re able to explore these opportunities.
08:18 Michelle Leonard
And what’s key here is that insurance working again in tandem with its regulators are very supportive of innovation. And that’s something we’ve always been in the insurance industry.
08:23 Allie
All right, Michelle, we’ll see what the future holds. Thank you so much.
08:27 Michelle Leonard
Indeed. Take care, Allie.
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