06/02/2017
How to Reduce Your Budget for Auto Insurance to Near $0
I have always been interested in cars. I bought my first car just prior to my 16th birthday. In the mid 2000’s, while working at a large local credit union, my interest and awareness of sustainability grew and started to influence my purchasing behaviour.
By 2014, I decided I would do what I could to reduce my consumption of gasoline, and purchased the electric car that I could afford – a used, high mileage, 2012 Chevy Volt. The economics worked for me. The total payment was $350 per month over 5 years from the bank of Mom and Dad. However, I saved about $200 per month in fuel so the net increase in cost was $150. I got a 2 year old car for a net increase in my costs of $150 per month. Awesome.
I really enjoy driving my Volt. It costs about $1.20 of electricity to drive it an average of 50 km per day. That’s about 2.4 cents per km (c/km). The gasoline car I replaced was fairly efficient at 8L/100 KM or about 10 c/km. Looking at the Toyota Canada Website, the Prius C gets about 4.5 to 4.7 L/100 KM - that is still 5.875 c/km. Clearly my electric vehicle (EV) has been less expensive to drive.
The additional benefit of owning electric has been reduced maintenance costs. Savings on oil changes, and less wear on brakes due to regenerative braking, makes it even cheaper to operate.
Last month I heard Tony Seba explain how the auto industry will look radically different by 2030 due to the convergence of 4 key technologies – solar power, electric vehicles, battery technology and autonomous driving. (watch it here: https://tonyseba.com/)
To summarize what he talks about, battery costs in EVs are a key component of the cost of an electric vehicle. The cost of batteries has dropped from $599 per KWh in 2013 to about $190 per KWh by 2018. That takes a 85 kwh battery for a Tesla Model S from $50,915 to $16,150.
Further, the computing power keeps accelerating and the costs keep declining. The vast majority of the autonomous driving costs were in the computing power and related hardware technologies. These continue to drop. For example, early LIDAR systems cost $70,000 each. Now he says you can get them for $100.
Solar has already become less expensive than new nuclear, coal or natural gas fired power plants in most areas of the world. Economics will drive the change to renewables. Hooray!
He says that autonomous driving vehicles will get wide scale approval in the US around 2020. The lower costs per KM of electric vehicles, combined with autonomous driving will lead to 95% of U.S. passenger miles being completed in autonomous driving cars by 2030. This will make individual car ownership obsolete for the average family. It will also reduce transportation costs for the average family by $5,600 per year.
This is how by about 2030, your household budget line for auto insurance will be reduced to near $0. Instead, a driverless car will pick you up and take you where you want to go for about a tenth of what you pay today. In fact, these cars will so seldom have collisions, that car insurance will be nearly obsolete.
Jeff Myers is an insurance broker in Vancouver and can be reached at [email protected]
