The Berkshire Hathaway CEO’s predictions are in direct opposition to previous thoughts on the subject.
While most of the auto insurance industry predictions about self-driving cars have had to do with reduced rates, Warren Buffett has taken a different perspective. Instead, the Berkshire Hathaway CEO believes it should be considered a significant threat.
The billionaire investor revealed that he feels the launch of the technology will negatively impact car insurers.
The reasoning behind Buffett’s prediction is that if autonomous cars are actually safer than traditional vehicles, premiums will tumble. Charging less for coverage means a reduced opportunity for profit. He also explained that once self-driving cars become the most common form of vehicle, auto insurance companies will need to be prepared for a rough time.
Buffett is including some of his own companies in this statement as Berkshire Hathaway Homestate Companies sell commercial auto insurance. “If they’re safer, there’s less in the way of insurance costs, [and] that brings down premium buy significantly,” he said.
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That said, Buffett also pointed out that this shift in the auto insurance industry will be a gradual one.
Both the switch to self-driving cars and the disruption they may have to the insurance industry are events that will require some time. The market will require many years to be able to adopt driverless cars on a broad scale. This, despite the fact that tech firms have been pouring a very large amount of money into the development of those vehicles, said Buffett.
“If I had to take the over and under [bet] 10 years from now on whether 10 percent of the cars on the road would be self-driving, I would take the under, but I could very easily be wrong,” said the billionaire investor. He went on to state that this is an area in which “billions and billions and billions” are being spent. Moreover, there are tremendous minds collaborating to develop the field.
As a result, Buffett has conceded that the self-driving car technology could reach mainstream use sooner than he predicts. Should that be the case, he feels that this will not be beneficial to the auto insurance industry.