By now, the question for driverless cars is when, not if. For Warren Buffett, CEO of Berkshire Hathaway (BRK.A, BRK.B), which owns Geico, that prompts the question: what does this mean for car insurance?
In an interview with Yahoo Finance, Buffett mused that this technological revolution would likely mean less auto insurance required.
“Driverless cars will reduce — perhaps dramatically — the need for auto insurance if they’re safer,” said the legendary investor and CEO. “If driverless cars are successful and people don’t hack into ’em, that will reduce auto insurance premiums — and perhaps drastically reduce them.”
But even if premiums are lowered, that’s not necessarily bad for business. Car insurance will likely remain — the government mandates a degree of it in many states — and added safety doesn’t just mean cheap premiums, it means cheap payouts.
“You want safer cars. Safer cars mean lower insurance. Safer driving means lower insurance costs,” said Buffett.
Of course, the 87-year-old Nebraskan noted that the timeline, to date, is marred with uncertainty, meaning that the insurance business is under little pressure to change. Currently, incidents with Uber and Tesla have pumped the brakes on what had been a surging pace of technological development.
“How fast that comes or anything, I don’t know,” he said. “I think it’s a long time off.”
Even if were tomorrow, however, the changing dynamics of risk and premiums the insurance world make the business fairly flexible. Car insurance, after all, is bought on a six-month basis.