Why Insurance Companies Are So Worried About Driverless Cars

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1st Gear: For When The Robots Come For You

Specifically, The Wall Street Journal reports that three major insurance suppliers (and one auto parts maker) included the introduction of driverless cars as a long term risk factor in their annual financial filings:

Cincinnati Financial Corp. , an Ohio-based insurer generating nearly a quarter of its premiums from commercial and consumer auto policies, warned in the annual report it filed Friday that its forecasts could be flawed because of, among other things, “Disruption of the insurance market caused by technology innovations such as driverless cars that could decrease consumer demand for insurance products.”

Mercury General Corp. , an auto insurer issuing most of its coverage in California, said in its annual report that “the advent of driverless cars and usage-based insurance could materially alter the way that automobile insurance is marketed, priced, and underwritten."


Car companies don't want you to crash, because they don't want to pay to fix anything, but they need you to worry about crashing or else their product is simply less valuable. Getting mauled by a bear would suck serious ass, but it's such an infrequent occasion that few people purchase "bear mauling insurance."

To be fair to these companies, the "Risk Factors" sections of securities filings are always full of threats that usually don't pan out so they should be read as concerns and not predictions.


Have no fear, the rollout of driverless cars will probably be slow and governments and insurance companies and car companies will probably figure out a way to make money off of you.

2nd Gear: Why F-150 Sales Are Down


February sales weren't as strong as expected for most automakers, due in part to the weather, but there's a serious issue with Ford. The company saw truck sales drop in a growing truck market, which brought the entire company's sales down.

What's going on? They can't build them fast enough, which is a better problem than the opposite but is still a problem.


From the Freep:

Ford's inventory issues may be causing it to miss out during this strong truck sales period, but LaNeve is unfazed.

"Early customer demand is really exceptional," said LaNeve, pointing out that retail sales were up 7% in February when fleet and corporate sales are taken out.

Only 21% of February F-150 sales were the new model but they are only staying on dealer lots an average of 18 days. The top trim levels, the King Ranch and Platinum, are being sold in 16 days and 12 days, respectively, LaNeve said.

Because inventories are tight, Ford has been restricting fleet sales and not going crazy on incentives to get rid of the outgoing 2014 models which is an oft-used practice in the industry to clear out old stock for new models.


If Ford could go back in time and see what was happening with gas prices I think they'd have probably found a way to get trucks out the door sooner, but even then I'm not sure how possible that is.

Will demand wane when the trucks come online in full this summer? Is this just covering up the fact that other truckmakers are finally building trucks as good as Ford's offerings? A lot of questions, not a lot of answers.


3rd Gear: Toyota Decides It Shouldn't Be Run By Just Old Japanese Men


Global car companies need global leaders, and it's refreshing to see Toyota acknowledge this fact in their latest round of executive appointments.

Per Reuters:

Toyota also named Julie Hamp, a senior official at Toyota Motor North America, as a managing officer, making the American the company's first female executive. Christopher Reynolds, an African-American general counsel in North America, will also become a managing officer.

Hamp's promotion marks a step in Japan's drive to narrow the gender gap in the workplace. Prime Minister Shinzo Abe has called on corporate Japan to appoint women to 30 percent of top jobs by 2020 - a target widely seen as unattainable and opposed by the country's biggest business lobby.

Women currently account for 11 percent of mid-to-senior level management in Japan and 1 percent of executive committee members, according to researcher McKinsey.


It's been a long time coming, Toyota.

4th Gear: China Wants Internet Companies In The Electric Car Business


As tech companies like Apple and Uber redefine the automotive space (or at least plan to), China is taking note and trying to encourage Internet businesses to get into the electric car game. Part of this is a desire to create a new model for car production that's different from their current, failed system of producing electric cars.

Bloomberg underlines one of the problems:

The biggest hurdle for non-automakers entering the industry had been a stipulation that companies had to possess vehicle production capacity, in addition to experience in product research and development and vehicle design.

They also needed at least 15 sample EVs that met national technical standards, according to the draft of the policy posted on the website of the National Development and Reform Commission in November for public feedback.


It is a little disconcerting that they'd look to people who don't have experience in vehicle design, but the old way isn't working so they've gotta try something.

5th Gear: Did Cash For Clunkers Actually Work?


If you're a nerd you should definitely read this David Shepardson piece on the Federal Reserve talking about the auto industry back in 2009. If you're not a nerd, here's what interested me:

The Federal Reserve said at an August 2009 meeting that the $3 billion “cash for clunkers” was simply shifting some sales ahead, quoting auto companies.

Ford “had an interesting story about which future sales were being stolen by the program. A substantial segment of the clunker trade-ins have been well-maintained SUVs that are about ten years old and whose owners have good FICO scores, above 650. This leads Ford to think that, without the program, these people would have driven their clunkers for another couple of years. So perhaps we are stealing sales from 2010 or beyond, not just the fourth quarter. But GM suggested that the payback would be sooner. Also, any uncertain extensions of this program could freeze potential buyers,” said Evans.

Pianalto praised “cash for clunkers” at a September meeting. “This increased production in autos and industries related to autos was critical to the stabilization in” output.


Even in hindsight I'm not sure how definitively we can judge cash for clunkers in terms of consumer behavior, although for the environment it was definitely a disaster.

Reverse: Buick Is A Scottish Name?

On this day in 1929, David Dunbar Buick, the founder of the Buick Motor Company, dies in relative obscurity and meager circumstances at the age of 74. In 1908, Buick’s company became the foundation for the General Motors Corporation; however, by that time David Buick had sold his interest in the company.



Neutral: Are You Worried About Driverless Cars? What about when the strong ones come for your medicine?


Photo Credit: Getty Images

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