- As more Waymos and self-driving Teslas hit U.S. roads, insurance companies must reassess how to cover these autonomous vehicles. Goldman Sachs predicts insurance costs will be cut in half as there are fewer human-caused accidents. But liability may switch to car manufacturers, whose tech may malfunction or experience security breaches.
More autonomous vehicles are hitting the road, and it’s leading to a reassessment of insurance costs and coverage, as well as who is to blame for fender benders and crashes. The $432 billion insurance industry must adapt to more self-driving cars ostensibly leading to fewer human-caused accidents, according to a Goldman Sachs analyst note sent to investors on Monday.
“Autonomy has the potential to significantly reduce accident frequency longer-term and reshape the underlying claim cost distribution and legal liability for accidents,” analyst Mark Delaney and colleagues said in the note.
Tech companies are already pouring money into self-driving tech investment. Alphabet has raised $11 billion in funding for Waymo, including $5.6 billion in its latest funding round in October 2024. Tesla CEO Elon Musk said in May he expects his autonomous robotaxis to drive on the streets of Austin this month.
Goldman Sachs estimates the ride-share market of autonomous vehicles will reach $7 billion—about 8% of the market—by 2030, while trucks with virtual drivers will grow to a $5 billion industry in the same time frame. While there may be increased ubiquity of self-driving cars as ride-share vehicles, Goldman Sachs does not expect to see a significant increase in autonomous vehicles as personal cars in the near future, but said it expects costs associated with the vehicles to fall.
Early evidence suggests the technology is effective at improving road safety by mitigating crashes, potentially contributing to lower insurance costs. A December 2024 study from insurance company Swiss Re commissioned by Waymo found in a liability claims analysis a 92% reduction in bodily injury claims and 88% reduction in property damage claims compared to human-operated cars.
Goldman Sachs predicts insurance costs will decrease more than 50% over the next 15 years, from around $0.50 per mile in 2025 to $0.23 in 2040.
But Scott Holeman, director of media relations at the Insurance Information Institute, warns that just because insurance costs are cut doesn’t mean consumers will be padding their wallets.
“While there could be lower cost on insurance products, this technology costs money, so there’s a shift in where you pay the money,” Holeman told Fortune.
Who’s behind the wheel?
Because of the potential for fewer accidents, Goldman Sachs predicts, auto insurance will shift insurance products to being more focused on severity of an accident and less about accident frequency. The shift also raises questions of who is liable for accidents.
“It’s possible that the legal liability of accidents may shift, potentially changing the underlying claim costs distributions between physical damage and liability coverages as well,” the note said.
Analysts suggested an increased focus from the insurance pool on product liability and cyber coverage. Instead of human error causing most car accidents, technology woes may be responsible for crashes as a result of data or security breaches. That shifts the onus from the driver to the manufacturer or the technology company partnering with the manufacturer.
“There’s more and more concern for cyber threats or security risks that someone could manipulate vehicles—bad actors,” Holeman said.
Though automated technologies appear to reduce accidents, they are still not perfect, and accidents could also be caused by technological shortcomings. In October 2024, the National Highway Traffic Safety Administration (NHTSA) opened a probe on Tesla after the EV company reported four accidents caused by Tesla’s “Full Self-Driving” system coming into contact with sun glare, fog, and airborne dust.
The vehicles still face differing levels of regulation, depending on the state in which they operate. Transportation Secretary Sean Duffy announced in April intentions to create federal standards for autonomous vehicles.
Waymo has offered some indication of what the future of insurance would look like with more of its cars on the road. Tilia Gode, Waymo’s head of risk and insurance, told MarketWatch last year the company’s insurance for its Level 4 vehicles—those that are self-driving, but only in designated areas—are similar to a taxi company’s model of fleet insurance where vehicles are insured as a group, not individually.
“Just like any commercial entity, we have insurance coverage in place that covers the Waymo driver over the course of the driving task,” Gode said. “Essentially, there’s a shift from human being drivers to the autonomous system being the driver—Waymo is the driver.”
