Driverless Cars – Impact on the Insurance Industry and just about eveything else

shane genziuk readingHi Folks. So besides writing about how amazing coffee grounds are for your garden, and about chooks and quail, car tire ponds and earthworms, I also write research papers both related to my profession, and academically through the Doctor of Business Administration course at Deakin University.

The following piece is from my submission for the Aon Benfield Scholarship 2014. While I and many others missed out, an actuary won, which is both welcomed and in-line with the natural order of things. If you have ever worked or spoken with an actuary for any length of time you’ll know what I mean.

Now you see how I have all these links above, wait until you get to the Footnotes and Bibliography section! Plus this being the Interwebs and all, there is some additional content for you like videos and images that could not be included in the original submission.

The article is approximately 2500 words, and I truly hope you enjoy the read and am looking forward to hearing your feedback to help improve our shared understanding of this rapidly approaching reality.

Will the future of autonomous transport lead to some of the scenarios I’ve suggested, and what else can you see happening from this disruptive technology?  


Will the Google car end Automobile Insurance as we know it?



You are travelling to work. Warm refrigerated air is blowing over the window closest to you, a sensor having noticed a fog build-up and notified the on board computer to activate the air condition system. You are shopping for a new pair of shoes, explaining to your assistant that you need a half size smaller on your left foot. You are slightly annoyed that you need to explain this at all, but you just upgraded your assistance’s software and for some reason she is forgetting things – you ask her to lodge an issue with the app maker.

Sensing your annoyance via sound pattern and heart rate monitors, the assistant lowers the cabin’s heat and starts to play recorded sounds from your last trip to the beach, just as you confirm your shoe purchase. Congratulations!

Getting closer to the city now, there is unusually heavy traffic ahead. Navigation systems had already readjusted the route following an accident warning automatically being issued by the vehicles involved. You will later learn that the car responsible was hacked into by trouble makers and driven manually, with an old style video game controller. So typical of kids these days…

You look outside and through the rain can see hundreds of vehicles of every size, some on wheels, some hovering, but moving in all directions with perfect synchronicity, communicating with each other in real time and without human intervention. The vehicle’s outer shells are collecting sunlight to help power hybrid engines, while the inner shells are used as monitors. You see flashing hues of red and green bleed through the cabins, as occupants watch movies, work in virtual offices, chat to friends and family, and sometimes all of these at once.

You notice that many of the vehicles are empty of passengers, so are either on their way to pick-up casual travellers like yourself or are carrying freight and other goods. That reminds you that those shoes you just ordered are probably already on the way, having just been fabricated with a 3D printer on demand, and will arrive at the office a little after you get there. You notice some strange new looking vehicles on the road – one of them is a robotic horse carrying a boy in a raincoat, trotting along with the rest of the traffic. The other looks like a man’s body melted into a mechanical walking frame – one of ‘those types’ into cybernetic augmentation, but now tied into the transport network, the machine part of him handling navigation, the human part of him smiling as people like you gawk and wonder. You start to joke with your work colleagues about the good old days, when you knew man from machine by the number of batteries he needed to get up in the morning, but that was so last year. Welcome to 2035.

What’s a Googlemobile?

Thinking of the story above, if you had that time in a vehicle but no longer needed to drive it, you will be more likely to consume products and digital services, and one of the dominant players likely in this market is Google. Those billions of hours returned to drivers will result in an unparalleled surge in digital consumerism, and Google need the ‘dashboard’ of tomorrow just like they do the ‘desktop’ today – and as they are agnostic with Android and mobile phone manufacturers, so they will remain with the auto manufacturers.

What’s the ‘dashboard’? Revolutionary materials such as Graphene are already being trialled for building the next generation of automobiles – by providing a frame that could act as a solar panel on the outside, and one large or many smaller display monitors (i.e. dashboards) on the inside[1].

It is not just Google investing in this future state; traditional auto manufacturers such as Mercedes Benz, Toyota, and BMW are rushing to test their new creations under real world conditions, in preparation for reaching the mass market, which means ‘Google has a lot of competition’[2].

Threats and opportunities

We don’t need to wait and see the impacts of driverless cars to understand the impact that new technologies have on an existing line of business.

For example, the introduction of Electronic Stability Control (ESC) already removes some control from the driver in certain situations, and has been credited with saving an estimated 2000 lives in the US between 2008-10[3], with this number set to leap ahead due to the technology being mandated on all new cars sold in the US (and in Australia from 2013). ESC, in conjunction with new forms of passive and active driver systems, are continuing to help in reducing traffic crashes and resulting injuries[4][5].

So what’s the bottom Line?

As for how the widespread adoption of driverless technologies will result in reduced revenue via premium reductions, it is too early to assume a negative impact for insurers. For example a recent study into Californian and Nevada legislation called into question the attribution of liability when there is no longer a human driver, and queries the link (if any) between reduced accidents and lower premiums – in fact ‘…if the cost per collision is much higher even though the number of collisions drops, there is uncertainty over whether autonomous vehicles will save money…’. Ultimately, the challenge for insurers is how their actuaries can estimate future losses with an inadequate understanding of the implications of the technology[6][7][8].

But accidents will still happen, teenagers will still stand on bridges and throw rocks at passing traffic, software and sensors will fail, they will be hacked, tires will blow out and animals will run onto roads and into cars, hail will still fall from the sky. Let’s assume from what we’ve already covered that for several years, driverless cars will integrate very slowly into the mainstream, and countries like the US will implement well ahead of others. For insurers, having the opportunity to examine test and then real world data will assist somewhat in pricing, and the book size will at first be small and should result in minimal solvency issues. If anything, the uncertainty created in this new age of automated transport will increase the desirability of insurance, peace of mind for the majority of people still coming to terms with disruptive change.

Insurers and worry

When untested social changes of this magnitude occur, what’s not to worry about? There is more at stake than the humble car going the way of the horse and cart. Let’s look at the possible effect of automated transport across a broad range of industries (and possible opportunities for insurers in developing new top line revenue streams), with a tool to explore the future state – scenario planning. Renowned futurist Peter Schwartz explains, ‘Scenarios are not about predicting the future, rather they are about perceiving futures in the present[9], or in other words, ‘the future is built upon the past when creating something entirely new.’[10]

  • Car park operators – In our opening scenario, those vehicles didn’t have owners. You booked the trip through an app like you would a taxi[11], the car turns up, drops you off, and continues on to the next passenger. As vehicles would no longer need to be parked all day waiting for their owners, car parks will become a thing of the past[12].
  • Warehousing and Transport – Computer controlled robots can already swarm, form like ants to build a bridge, they can join as modules to form new objects[13]. We are not far from the point where armies of autonomous vehicles will be used in sync to transport almost everything. A vehicle could enter a warehouse, pick up a specific package for a customer, and drive automatically to deliver it. The system will know which vehicles can carry what combination of packages, load them up like a jigsaw and away they go. While we sleep, an army of autonomous vehicles will be transporting everything from food to furniture, chemical supplies, our mail. When a new car is offloaded at the wharves, it could drive itself to the dealer for inspection, or even directly to the new owner[14].
  • Medical Services –There were 1310 road related deaths in 2012, and approximately 30,000 serious injuries, costing the Australian economy over $27B each year[15][16]. A world without road death and injury will lead to a significant reduction in demand for intensive health services such as rehabilitation, brain injury, and psychiatric care, allowing for the diversion of those resources into preventable health care; increased beds for the chronically ill, improvements to disability services, areas which are desperate for attention today.
  • Government Impact – The Victorian state government collected $293M from speeding tickets in FY13[17]. Over the same period the local City of Melbourne received revenues of $43M[18]. In a world of automated transportation, car don’t speed or need to park, so how will all levels of government respond to this loss of income? One option may be to repurpose the current road network in the face of lower demand due to the efficiencies of autonomous vehicles, expected to reduce road congestion by 40% or more[19], and which have no conventional parking needs. It has been estimated that in some cities, 50% or more of the total CBD area is paved over for the needs of the car[20]. How much could Australian governments earn by selling off some of the 800,000+ Kilometre road network? What would a 50 meter stretch of a single lane road in the Melbourne CBD be worth? The $26B that Australian governments invest each year in expanding and maintaining the road network could in part be redirected to more productive infrastructure projects[21].
  • Urban Agriculture – Hydroponics may be an answer to world hunger[22], allowing food to grow suspended in fertilised water, and sometimes in combination with raising fish stocks. A recent Sixty Minutes report showed warehouses of plants being grown safely away from insects and the elements, under the pail of red and blue violet LEDs, the optimal spectrum for them to thrive[23]. Imagine kilometres of repurposed roads, encased in metal sheds, with enough food growing to help feed a city – fresh produce, biomass, seafood.
  • Leisure and Work – The act of driving precludes you from many of the things you would rather be doing, as seen by today’s drivers using their smart phones in epidemic proportions[24]. It is understandable that some people do not like being ‘disconnected’ from the global network for any length of time, and are perhaps looking for a more productive use of their time also, given that for example, the average British motorist spends three full years of their life driving[25].

Thinking big, no, BIGGER

This 2014 topic asks us to consider how a future society might operate and what this means for our industry. It is a challenging task for good reason – humans have a tendency to discount the implications of disruptive change, as futurist Alvin Toffler stated, ‘Again and again the human brain… has blinded itself to the novel possibilities of the future… only to be rudely shaken by the accelerative thrust.’[27]

The first insurance policy for a satellite was unwritten by Lloyds of London in 1965[28]. Imagine that only twenty years from the horrors of a world war, that rocket propelled man-made objects were forced into a geocentric orbit around the Earth, and that there was a financial instrument available to cover the risk. We went from the Kitty Hawk to the Moon’s surface in 66 years[29], from splitting the atom to detonating an atomic bomb in 28 years[30]. We know that technological advances only further advance the rate of change (i.e. are exponential by nature), and that humans have a tendency to discount the rate at which disruptive changes occur[31].

So by that measure, what might one bold option be for insurers to replace their automobile premiums with? Today, astronomers are busy discovering Earth like plants in other solar systems[32], but they have also been looking much closer – to quantities of material that dwarf anything available on this planet – these are known as Near Earth Objects (NEOs), mostly rocks that range in size from pebbles to as large as cities. To put the ‘wealth’ of these objects into context, the mineral value of the asteroid belt between Mars and Jupiter is equivalent to USD$100B for every person on Earth, yet is but a small fraction of the number of objects floating in relative proximity to our planet[33].

This practically limitless resource will enable our colonisation of the solar system, providing the ore and water to build and house the living and exploratory super structures of the late 21st century. It is so magnificent in scope, so audacious a challenge, hugely expensive, and yet ‘this is not as crazy as it sounds.’

The commercialisation of space has been building momentum for many years, with Richard Branson one of the most public and as yet unsuccessful[34]. Google billionaires Larry Page and Eric Schmidt are now investing in space mining projects[35], which is indicative of the entrepreneurial and venture capital forces driving this fledgling industry.

There is more at stake for the industry than covering commercial space ventures; this also maintains hegemony for insurers into the next phase of human advancement. If we consider the current situation with satellite insurance, only 20 underwriters are in the business today, in part due to government/military restrictions and in part due to the high cost of entry into the sector. And to understand the importance of satellite insurance is simple – ‘Without satellite insurance, it would be difficult to obtain financing for purchases and launches of satellites.’[36]

The recent introduction of a new launch platform by upstart SpaceX has unsettled an otherwise staid market, which is both welcome by diversifying risk, yet presents a challenge for underwriters in accessing risk due to an ‘unproven flight heritage’[37]. Adaptation to the rate of chance must improve here also, given that specialised brokers handle this line of business and often deal with many underwriters across multiple tiers of insurance and reinsurance[38].

While the phases of satellite insurance are understood (i.e. Pre-launch, in-orbit, service interruption, liability), space mining insurance will introduce new levels of technical complexity, global regulatory coordination, and risk, ensuring cooperation across multiple industries over an extended period of time to come. For late comers outside this cooperative, the barriers to entry will be significant.

When in doubt – be brave

In this age of wonders, the insurance industry has a critical role to play in providing a level of certainty against a backdrop of unprecedented, disruptive change. As one of the most important institutions of a modern functioning civilisation, insurers will be called upon to help manage risks of which there will be little precedent and ability to predict, all the while maintaining commercial interests and enabling the common good.

In conclusion, when it comes to big thinking my question of you is this – in the reality in which we print human organs, mine celestial bodies, rely exclusively on machines for travel, and master the very forces of gravity, how important is revenue at all?


Footnotes and Bibliography

1– Graphene is being heralded as a wonder material that will revolutionise the electronics industry. 200 times stronger than steel, Graphene is not only cheap to manufacture; it is transparent, electrically conductive, and extremely flexible — all at the same time. You can even make graphene yourself, with a graphite pencil!

2– Ryan, C 2012, ‘Nevada issues Google first license for self-driving car’, Las Vegas Sun, May 7.

3 – November 2012, Estimating Lives Saved by Electronic Stability Control 2008–2010, NHTSA Report, US Department of Transportation.

4 – A 2004 report by the World Health Organisation (WHO), lists the following technologies as being key in further reducing road fatalities and injury: Audible seat-belt reminders, Speed adaptation (i.e. having the ability for the vehicle to link active cruise with stated speed restrictions, thus not allowing the driver to exceed the speed limit), Alcohol interlocks, and ESC.

5 – From a 2011 US Department of Transportation report into Motor Vehicle Crashes, ‘In 2011, 32,367 people died in motor vehicle traffic crashes in the United States—the lowest number of fatalities since 1949’ – or 1 death per 1 Million Vehicle Miles Travelled. Injury rates show similar relative declines, mostly attributable to improved safety technology.

6 – Pinto, C. (2012). How autonomous vehicle policy in California and Nevada addresses technological and non-technological liabilities. Intersect: The Stanford Journal of Science, Technology and Society5.

7 – Peterson, R. W. (2012). New Technology-Old Law: Autonomous Vehicles and California’s Insurance Framework. Santa Clara L. Rev.52, 1341.

8 – Consider the daily routine at my house each weekday. At 7.15am the four of us leave the house in a single car. Our Kia SUV weighs 1490 kilos and uses 10.9 litres of diesel for each 100km of city driving. The four of us weigh about 250 kilos, which is a car to passenger weight of 6:1 when we are all together. This means that for every 6 litres of fuel we use, 5 litres of it is for transporting the car and 1 litre is for transporting the passengers.

Here is what happens:

Time Trip For From To No. Passengers Car/Passenger Weight Ratio
7.20am Son 1 Home School 4 (250KG) 6:1
7.25am Son 2 School Kinder 3 (200KG) 7.45:1
7.35am Me Kinder Train Station 2 (180KG) 8.2:1
8.05am Wife Train Station Work – Melbourne Suburbs 1 (80KG) 18.6:1
5.05pm Wife Work – Melbourne Suburbs School 1 (80KG) 18.6:1
5.35pm Son 1 School Kinder 2 (180KG) 8.2:1
5.45pm Son 2 Kinder Train Station 3 (200KG) 7.45:1
5.55pm Me Train Station Home 4 (250KG) 6:1


There are several problems and resulting observations with the daily routine.

  • A 1.5 tonne car carries a maximum passenger load of 250 kilos.
  • The car is driven for 45 minutes in the morning, and 50 minutes in the evening. That is 95 minutes in-use, or 6.6% of the whole day, which for the most part is idle in a car park, and yet I’m paying for exclusive use of the car for 24 hours each day.
  • In economic terms, I am achieving less than 10% of the full utility of the vehicle, which would suggest that there is a better way of doing things. In fact, if the car is no longer tethered to a driver, why does it need to be sitting idle at all? Consider a fleet of driverless cars acting as an improved taxi service, owned and operated by fleet companies, transport operators, private business (possibly for exclusive use by their staff), government departments, ETC.

9 – Schwartz, P. (1996). The art of the long view: planning for the future in a uncertain world. New York: Currency. Page 36.

10 – Besides the quote offered by Ian Gonsher and Deb Mills-Scofield, in the HBR article ‘Great Innovators Think Laterally’, the authors speak at length about the innovation process and how lateral thinking can lead to breakthrough moments. They offer this additional and valuable advice which I believe is particularly relevant – ‘Many of us are so entrenched in our industries that we don’t know how to think laterally or horizontally. We usually go a mile deep but only an inch wide. We haven’t given our people and ourselves the time and opportunities to explore other industries, cultures designs, ways of being and doing, and other adjacent possibilities.’

11 – Booking a taxi has definitely entered the 21st century. I worried for 10 minutes the first time I booked one via an iPhone app that this new fancy technology wasn’t going to work, so called their operator just in case. She understood the concern; seems that heaps of first timers were worried also, but not the second time, or the third…

12 – Burns, L. D. (2013). Sustainable mobility: A vision of our transport future. Nature497(7448), 181-182.

13 – A remarkable TED presentation that is well worth watching. As the introduction states, ‘Vijay Kumar and his team build flying quadrotors, small, agile robots that swarm, sense each other, and form ad hoc teams — for construction, surveying disasters and far more.’. Amazing!

14 – David Kiley, Jun 2013, AOL Autos, ‘Self Driving Cars Are Coming Soon To Dealers Near You’.

15 – Road Deaths Australia, 2012 Statistical Summary, Department of Infrastructure and Transport.

16 – Report on Road Safety 2012, ‘Upgrading our National Highway Network’, Australian Automobile Association.

17 –Zielinski, C & Butt, C 2013, ‘Higher fines rake in $293m’, The Age, September 16.

18 – White, A 2013, ‘Worst time for parking fines revealed, according to Melbourne City Council’, The Herald Sun, December 4.

19 – Cheney, P 2013, ‘How self-driving cars will ease traffic congestion’, The Globe and Mail, Dec 12.

20 – A fascinating study which seeks to quantify exactly how much volume within cities are devoted to the needs of the automobile, with some surprising findings that highlight previously flawed assumptions within both academia and the general public. No matter how the numbers end up, a large part of city life revolves around the automobile, and removing traffic congestion and parking needs will result in a reimagining of the purpose of cities and our daily lives within them.

Manville, M., & Shoup, D. (2005). Parking, people, and cities. Journal of Urban Planning and Development131(4), 233-245.

21 – As the former treasurer Peter Costello recently commented about Australia’s current infrastructure investment compared to Asian countries following a trip to Hong Kong – ‘The East is pouring its money into investment and infrastructure. The West is pouring its money into consumption. It means that China is massively industrialising and narrowing the gap on living standards. It means that citizens — particularly the poor — are getting much better services in the West.’

22 – Bradley, P., & Marulanda, C. (2000, May). Simplified hydroponics to reduce global hunger. In World Congress on Soilless Culture: Agriculture in the Coming Millennium 554 (pp. 289-296).

23 – Hydroponics is one of my pet hobbies, having installed a working and productive system on my own property in suburban Melbourne. Aquaponics is the combination of growing fish and plants in unison, with one system feeding and filtering the other – Murray Hallam is a pioneer of aquaponics and features in the Sixty Minutes report. Having seen the efficiency of my own home designed system, I have no doubt that this technology has a big role to play in the future of agriculture.

24 – Watkins, M. L., Amaya, I. A., Keller, P. E., Hughes, M. A., & Beck, E. D. (2011, October). Autonomous detection of distracted driving by cell phone. In Intelligent Transportation Systems (ITSC), 2011 14th International IEEE Conference on (pp. 1960-1965).IEEE.

25 – 2011, ‘Britons spend more time driving than socialising’, The Telegraph, 28 Jan.

27 – Toffler provides an interesting borrowed quote within his seminal work of human change and adaptation – ‘Well informed people know that it is impossible to transmit the voice over wires and that, were it possible to do so, the thing would be of no practical value.’ – Boston Newspaper 1865.

Toffler, A. (1970). Future shock. Amereon Ltd., New York.

28 –

29 – The Kitty Hawk was the world’s first successfully powered aircraft and manned aircraft, as designed by the Wright brothers in North Carolina. The first manned landing of the Moon was in July 1969 by astronauts Neil Armstrong and Buzz Aldrin on Apollo 11.;

30 – From the first splitting of the atom in 1917, to patenting the workings of a nuclear reactor by Leo Szilard in 1934, to describing the process for the production of radioactive substances by Fermi Enrico in 1935, leading inexorably to Robert Oppenheimer’s borrowed quote, ‘Now I am become Death, the destroyer of worlds’, as witness to the first atomic bomb detonation in 1945.

31 – Driverless cars won’t become the majority tomorrow, but they are already with us, in fact, several states in the US already have the legislation, and the road authorities’ willingness, to get those cars on the road. The exponential rate at which driverless technologies become the dominant form of transport will be felt by others outside of the Insurance industry, as Futurist Ray Kurzweil puts it, there is a law of accelerating returns, in which a positive advancement of a technology feeds back faster into the next advancement, furthering the rate at which the technology develops.

  • Autonomous cars have been conceptualised for many decades with some of the first realistic attempts successfully undertaken by Mercedes Benz in the 80’s.Specifically on this topic, I am reminded of a story in a Mad Magazine from the 50’s, that described a future where society had become so dependent on technology (including driverless carts), that when the machines stopped working, everyone just died.

  • The US state of Nevada issued the first licence for a self-driven car in 2012, the vehicle being a Toyota Primus with Google Chauffer technology installed. The current system requires a human to be present to override the system if required.

  • Ray Kurzweil is one of the world’s leading and most influential futurists, popularised the term ‘Singularity’ and provided evidence over many years to suggest it is real, and that the implications of ‘it’ occurring are almost beyond the comprehension of our species. It is perhaps unsurprising then, that Google have employed him as a Director of Engineering, along with (i.e. Tim Berners-Lee, credited with ‘inventing’ the Internet), on the payroll.

32 – Geoff Marcy is a professor of Astronomy at the University of California, and pioneer in exoplanet discovery. His studies suggest that most of the 200 billion stars in the Milky Way have an Earth-size planet orbiting them. Wow!

33 – Lewis, J. S. (1996). Mining the sky: untold riches from the asteroids, comets, and planets. Reading, Mass.: Addison-Wesley Pub. Co., c1996., 1.

34 – Sir Richard Branson has been promising commercial space flight for several years, and has been finding technical and regulatory hurdles at every step. Indeed, some industry experts believe that Branson will never achieve the ambitions of Virgin Galactic in his own lifetime.

35 – “Companies plan to mine precious metals in space“. CNN News, 24 April 2012.

36 – For an excellent analysis of the Satellite Insurance Market and Underwriting Cycles, I would recommend this paper written by Weiss and Manikowski (2007) for presentation to the American Risk and Insurance Association. The satellite insurance industry was chosen as the candidate for an underwriting cycle study due to it being considered a relatively new, volatile, international, and important insurance line.

37 – Bill Kenealy, December 29, 2013, SpaceX rocket brings new underwriting challenges to satellite insurance market.

38 – ‘Specialized insurance brokers handle the placement of insurance with multiple underwriters often involving multiple tiers of insurance and reinsurance….’

Defense Trade Advisory Group – Brokering , Part 129 Working Group Comments to DDTC Proposed Rule), December 4, 2009. Download for Powerpoint:


6 thoughts on “Driverless Cars – Impact on the Insurance Industry and just about eveything else

    • Yeah that’s a good one Sam. So no you won’t need traffic lights in a fully automated transport network. Either pedestrians of the future just cross the road like they do in many Asian cities, and the drivers just move out of their way, or there will be panels / carts that slide across the road with the pedestrians on them, either way the traffic will move around them or slow down to allow them to pass. There may even be a vertical crossing using a transport device that is currently not available.
      Or just shoot people out of a cannon, or a big rubber band…


    • Hi Foster, am sure there will be hackers out there that take pride in stealing driverless cars, however it will not be for the money. Most ‘cars’ of the future will be smaller, cheaper, and mostly owned by fleet companies. Once reported stolen, it will be reported by the owner and remotely shut down or banned from driving on the road network, so very little you could actually do with it.
      Am sure some will be used for criminal purposes or even terrorism, but there won’t be many.


  1. Greetings Shane. I loved this article although I found printing it out made for better reading!
    An issue with this is what happens to all the cars on the road that can’t be converted to driverless – what does that do to the resale value of a new non driverless car you might buy in 5 years, just ahead of the onslaught of computer controlled cars?
    Wondering you opinion on that.

    Kind regards. Steve.


    • Hi Steve. I’d suggest that human drivers will be banned from driving at some point in the near future (say 15 years), and any car that has a steering wheel and brake pedals will only be allowed to drive on a racing track – or some other road network that remains separated from the autonomous transport ones. So in my view, any car you buy in 5 years that is not driverless is going to be a total loss a few years afterwards.
      Thanks for writing in and if you have any follow-up questions please let me know.


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