Billionaire investor Chamath Palihapitiya is predicting a significant shift in the auto insurance industry, driven by the growing penetration of Alphabet Inc.’s (NASDAQ:GOOG) Waymo and Tesla Inc.’s (NASDAQ:TSLA) Cybercab in the U.S. domestic mobility market.
‘Massive Value Destruction’ For Insurers
On Sunday, in a post on X, Palihapitiya said, “car insurance becomes a highly profitable but massively sub-scale business” in a world where robotaxis are the norm.
This refers to plummeting demand for personal car insurance, as human driving becomes optional, alongside lower risks and liabilities for insurers, since autonomous vehicles will make the roads safer.
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According to Palihapitiya, the economics of driving will be fundamentally transformed. Insurance that allows people to personally operate a vehicle “will become a very expensive luxury good and be priced as such.” As such, “most people won't bother,” he said, noting that the market will only cater to “rich enthusiasts” who can afford it.
This, Palihapitiya said, will lead to “massive value destruction of incumbent insurers over time,” as their business models currently center around pricing risk based on human error, which will become obsolete with machine-driven vehicles.
Billions In Revenue And Market Cap At Risk
If Palihapitiya’s predictions unfold just as he said, it stands to have major ramifications for the $470 billion U.S. auto insurance industry.
| Stocks | Auto Premiums Written (2024) | Market Capitalization |
| Progressive Corp. (NYSE:PGR) | $60.0 Billion | $128.47 Billion |
| Berkshire Hathaway Inc. (GEICO) (NYSE:BRK) (NYSE:BRK) | $41.7 Billion | $1.06 Trillion |
| AllState Corp. (NYSE:ALL) | $36.6 Billion | $51.35 Billion |
| USAA Insurance Group | $22.1 Billion | $29.15 Billion |
| Travelers Companies Inc. (NYSE:TRV) | $7.2 Billion | $60.2 Billion |
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