From time to time, somebody considering the world with lots of self-driving cars suggests that human driving will become discouraged, “because insurance rates will go through the roof.” They imagine that if the self-driving cars are much safer than humans (which is true by definition because they won’t see wide deployment until they are) that human drivers will be so poor in comparison that it will cost too much to insure them.
This goes against the normal rules of insurance. Normally, insurance is priced by taking a collection of drivers, and looking at the total cost of accidents by drivers in that pool and dividing it by the number of drivers. A bit more is added to cover expenses. Most auto insurers don’t actually make a profit here, instead they make their profit because