Mentioned Companies: ALL, CB, GOOG, MET, PGR, TRV

Google Won’t Let Liability Concerns Halt the Rollout of Autonomous Cars

October 09, 2014
3 min read
By: Tasha Keeney, CFA

As fully autonomous vehicles are released within the next six years, concerns linger about fault and liability in the event of an accident. Luckily, those worries will not stop driverless vehicles from becoming a reality.

Google [GOOG] says it plans to assume full liability for the company’s driverless cars, even if it decides to partner with an auto original equipment manufacturer (OEM). Some auto manufacturers argue that, although Google plans to take the fall, a judge and jury would ultimately decide who is liable. Existing product liability laws support Google as the liable party, as the company owns the technology and the data that control motion.

Google’s willingness to take on the liability seems like less of a risk considering that autonomous vehicles will be in fewer accidents. Human error causes 90% of the accidents, 5.6 million annually in the United States alone, each costing roughly $21,000, for a total of $120 billion. If Google were to offer a shared autonomous car service, the company could pay 90% less than the average auto owner’s insurance premium, or up to $12 billion, and could spread much of the risk over reinsurance contracts with private investors or other parties. Anticipating historical liability tables as the transition to autonomous cars takes place, insurance companies like Allstate [ALL], Travelers [TRV], Metlife [MET], Chubb [CB], and Progressive[PRG] could enjoy a windfall in the form of much lower claims.

Still, Google is facing significant political risk. The first death in an autonomous car will be widely publicized and spur a heated discussion about safety and fault. Google’s willingness to accept this risk is a measure of its conviction that it will be successful, and that society will be better off with autonomous vehicles.

Google is working closely with lawmakers to ensure that autonomous vehicles become a reality and change the way we live. In fact, Nevada, Florida, California, and Michigan already have passed laws to allow autonomous car testing on state roads.

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