Answer: Not a very bright one as the frequency of accidents is expected to drop significantly.

Here’s a good way to lead off your auto insurance lesson..change is coming down the pike (pun intended).

From Marketplace.org audio interview (4 minutes) with WSJ reporter Leslie Scism:

Car insurance right now largely exists to pay out for wrecks. So if driverless cars live up to their potential, and there are many fewer wrecks, then a lot of the reason for being is gone for the car insurance companies. A lot of people assume that if accident frequency drops tremendously, that the car insurance would still be needed to pay for some damage to the cars. The issue arises: what if these driverless cars malfunction, or what if the software is hacked? The thought is that you would still need some kind of insurance. Would it be paid by the driver or would the car companies and the other gearmakers have to take on more product liability insurance to cover those events.

This would appear to have the makings for a debate. Have one section of the class take the side that car companies and gear makers have to take on all the liability and the other section say that the car owner (can’t call them drivers anymore) should be responsible.

Here are some great follow-up questions to ask your students about this resource:

1. If a driverless car ends up in an accident due to a malfunction or hacked software, who do you think should pay for the insurance? The car owner? The car company? The gear or part maker? Why?

2. Do you think it is good or bad that auto insurance companies will likely decline if driverless cars become more popular? Why?

3. What kind of insurance do you think will become available if driverless cars become more popular?

4. What kind of insurance issues do you foresee in a situation where there is an accident involving one driverless car and one regular car with a driver?

Want this resource and questions in slide format to use in class? Click here!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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